Presented by: David Crowe – Chief Economist

October 25, 2013Lee County, Florida

Home Building Impact in Lee County, Florida

Why do this?

• Some say housing doesn’t pay for itself.

• What are the true costs and benefits?

• Is there an objective approach?

What Does NAHB Offer?

• A model-based approach

• Full look at economic benefits

• Accurate accounting of fiscal costs

• In nearly all cases, housing does pay for itself

LOCAL ECONOMIC IMPACTConstruction phase

• Jobs• Materials• Local fees, taxes, contributions

Ripple or feed-back from construction• Wages spent in local economy

Occupancy phase• Earnings spent in local economy

• Typical relationship is that more jobs require more homes

• But, also true that more homes produce more jobs………

Phase I CONSTRUCTION

Value of Construction+

Services Provided at Closing+

Permit / Hook-up / Impact Fees

Value of Construction+

Services Provided at Closing+

Permit / Hook-up / Impact Fees

Model of the Local EconomyModel of the Local Economy

Local Income and TaxesLocal Income and Taxes

Phase II RIPPLE

Spending on Locally Produced

Goods and Services

Spending on Locally Produced

Goods and Services

Model of the Local EconomyModel of the Local Economy

Local Income and TaxesLocal Income and Taxes

Local Income and Taxes

from Phase I

Local Income and Taxes

from Phase I

Phase III OCCUPANCY

Spending on Locally ProducedGoods and Services

Spending on Locally ProducedGoods and Services

Model of the Local EconomyModel of the Local Economy

Local Income and TaxesLocal Income and Taxes

Income of Occupant in New Housing Unit

+Increased Property Taxes

Income of Occupant in New Housing Unit

+Increased Property Taxes

Cape Coral – Fort Myers MSALee County, Florida

Assumptions of the Model

Inputs To Model Single-family MultifamilyAverage house price: $326,040 $195,164

Average raw lot cost: $11,826 $9,391Permits/Infrastructure: $2,492 $1,446 Annual property taxes: $4,314

$2,909

Economic Impact of Single-family & Multifamily Home

Building 1st - Construction phase

2nd - Ripple effect from construction phase

3rd - Occupancy phase

FIRST YEAR IMPACT: Single-family Construction - Every 100 Homes

INCLUDING:

192 Jobs in Construction42 Jobs in Wholesale and Retail Trade22 Jobs in Business and Professional Services

* One job represents enough work to keep one worker employed full-time for a year.

Local Income Local TaxesLocal Jobs Supported

$15,837,000 $1,175,000 278

FIRST YEAR IMPACT: Multifamily Construction - Every 100 Homes

INCLUDING:

113 Jobs in Construction24 Jobs in Wholesale and Retail Trade13 Jobs in Business and Professional Services

* One job represents enough work to keep one worker employed full-time for a year.

Local Income Local TaxesLocal Jobs Supported

$9,209,000 $674,100 162

FIRST YEAR IMPACT: Single-family Ripple

INCLUDING:

37 Jobs in Wholesale and Retail Trade19 Jobs in Eating and Drinking Places17 Jobs in Health, Education and Social Services 14 Jobs in Local Government

Local Income Local TaxesLocal Jobs Supported

$7,328,800 $1,459,700 137

FIRST YEAR IMPACT: Multifamily Ripple

INCLUDING:

22 Jobs in Wholesale and Retail Trade11 Jobs in Eating and Drinking Places10 Jobs in Health, Education and Social Services 8 Jobs in Local Government

Local Income Local TaxesLocal Jobs Supported

$4,256,000 $848,300 80

Total Single-family Impact: First Year

Construction & Ripple

Local Income Local TaxesLocal Jobs Supported

$23,165,800 $2,634,700 415

Total Multifamily Impact: First Year

Construction & Ripple

Local Income Local TaxesLocal Jobs Supported

$13,465,000 $1,522,400 242

ONGOING Single-family ANNUAL EFFECT

INCLUDING:

16 Jobs in Wholesale and Retail Trade 8 Jobs in Eating and Drinking Places 8 Jobs in Local Government 7 Jobs in Health, Education and Social Services

Local Income Local TaxesLocal Jobs Supported

$3,044,300 $1,037,700 61

42% from real estate tax

ONGOING Multifamily ANNUAL EFFECT

INCLUDING:

14 Jobs in Wholesale and Retail Trade 7 Jobs in Eating and Drinking Places 6 Jobs in Local Government 5 Jobs in Health, Education and Social Services

Local Income Local TaxesLocal Jobs Supported

$2,832,000 $781,800 49

37% from real estate tax

NEW HOMES REQUIRE:

• Fire and police protection• Garbage collection• Parks and recreational opportunities

• Roads• Correctional facilities• Primary and secondary education • Etc.

INFRASTRUCTURE

Where’s Data/Facts?

• Local government budgets

• Federal government surveys

• Model estimating relationships

Required Current Expenses per Unit in Lee County

Function Single-family Multifamily

Education $1,290 $774

Police Protection $481 $364

Fire Protection $411 $311

Corrections $139 $105

Streets and Highw ays $151 $116

Water Supply $132 $69

Sew erage $109 $57

Health Services $1,730 $1,310

Recreation and Culture $410 $310

Other General Government $747 $566

Total $5,600 $3,983

Required Capital per UnitIn Lee County

Function Single-family Multifamily

Schools $3,640 $2,183

Hospitals $284 $215

Other Buildings $365 $277

Highw ays and Streets $1,966 $1,505

Conservation & Development $1 $1

Sew er Systems $2,243 $1,174

Water Supply $194 $102

Other Structures $1,326 $1,004

Equipment $293 $222

Total $10,313 $6,682

Does new construction pay for itself?

The benefits of construction

&

The costs of construction

Now that we know:

For each single-family unit -- • By the end of the 1st year economic impacts offset fiscal

costs.• By the end of the 1st the debt is fully paid off• In the 1st year, net is $1,803,800 and is $477,700

thereafter

Yes it does!

YearCurrent

Expenses RevenueOperating Surplus

Capital Invest. Start of Year

Interest On Debt Income

1 280,000 3,153,500 2,873,500 1,031,200 38,500 1,803,800 2 560,000 1,037,700 477,700 0 0 477,700 3 560,000 1,037,700 477,700 0 0 477,700 4 560,000 1,037,700 477,700 0 0 477,700 5 560,000 1,037,700 477,700 0 0 477,700 6 560,000 1,037,700 477,700 0 0 477,700 7 560,000 1,037,700 477,700 0 0 477,700 8 560,000 1,037,700 477,700 0 0 477,700 9 560,000 1,037,700 477,700 0 0 477,700

10 560,000 1,037,700 477,700 0 0 477,700

Over 15 years, every 100 Single-family units generate a cumulative $17.7 million in revenue for local governments—but only $9.2 million in costs

$8.5 million

0

2

4

6

8

10

12

14

16

18

20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

$Million

Year

Costs Compared to Revenue: Single Family

Cumulative Cost

Cumulative Revenue

For each multifamily unit -- • By the end of the 1st year economic impacts offset fiscal

costs.• By the end of the 1st the debt is fully paid off• In the 1st year, net is $1,021,000 and is $383,600

thereafter

Yes it does!

YearCurrent

Expenses RevenueOperating Surplus

Capital Invest. Start of Year

Interest On Debt Income

1 199,100 1,913,300 1,714,200 668,300 24,900 1,021,000 2 398,200 781,800 383,600 0 0 383,600 3 398,200 781,800 383,600 0 0 383,600 4 398,200 781,800 383,600 0 0 383,600 5 398,200 781,800 383,600 0 0 383,600 6 398,200 781,800 383,600 0 0 383,600 7 398,200 781,800 383,600 0 0 383,600 8 398,200 781,800 383,600 0 0 383,600 9 398,200 781,800 383,600 0 0 383,600

10 398,200 781,800 383,600 0 0 383,600

Over 15 years, every 100 Multifamily units generate a cumulative $12.9 million in revenue for local governments—but only $6.5 million in costs

$6.4 million

0

2

4

6

8

10

12

14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

$Million

Year

Costs Compared to Revenue: Multifamily

Cumulative Cost

Cumulative Revenue

David Crowe

The Lee County Impact of Home Building