Housing First! on Executive Budget for Affordable Housing

NEW YORK, NY (12/16/2008)(readMedia)--

In the past nine months, the Paterson Administration has accomplished the Herculean task of preserving and producing record numbers of affordable homes and apartments using last year's budget's historic $200 million increase in the state's affordable housing programs.

The proposed FY09-10 Executive Budget misses another historic opportunity to use the state's capital programs for affordable housing as a highly cost-effective investment strategy to save and create thousands of jobs for New Yorkers within a balanced state budget. (Estimates of job creation are appended.)

With our state and nation confronting a period of protracted economic duress, these capital funds are more important now than ever to save and create jobs -- at a minimal budget impact -- while simultaneously addressing the worsening needs of the state's residents and communities for affordable residential infrastructure.

There are several reasons why.

First, capital funding for affordable housing is a highly cost-effective job creator compared with spending on other essential infrastructure and economic development projects.

Second, the capital funds will be bonded so the principal amount will not depend on the state's receipts of taxes and other revenues and will not have a proportional impact on the state's cash-flow needs; and, the annual debt service costs will be offset - in part and, perhaps, in whole - by taxes and revenues the state will receive during construction and residency of these units.

Third, projects are ready-to-go. In 2008, the affordable housing community's requests for $429 million in capital funds exceeded the funds available by $125 million. The executive budget's proposed $91 million in funding for the Housing Trust Fund, Affordable Housing Corporation, Homes for Working Families, and Homeless Housing Assistance Program cannot even satisfy 2008's unmet demand for project funding, not to mention the estimated $60 million shortfall in equity facing projects in 2009 due to lower prices for tax credits.

Fourth, the state's housing agencies and affordable housing community have the leadership, capacity and experience to get the job done.

For these reasons, we welcome the Administration's openness to suggestions and advice. And, we ask the executive and the legislature to reconsider, to increase capital funding for affordable housing next year, and to make this investment the centerpiece of a balanced Enacted Budget that gives priority to saving and creating jobs for New Yorkers.

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APPENDIX

COST-EFFECTIVE JOB CREATION VIA STATE CAPITAL INVESTMENT IN AFFORDABLE RESIDENTIAL INFRASTRUCTURE

With the Executive Budget's proposed cutbacks to $91 million in capital funding for the Housing Trust Fund, Affordable Housing Corporation, Homes for Working Families, and the Homeless Housing Assistance Program, we estimate that the state could leverage approximately $326 million from private investors, the federal government and other sources to fund production of about 1,725 new units at a total construction cost of about $417 million. We estimate that production of these 1,725 units could:

• create 3,160 local jobs in construction and supporting businesses during the construction period at a direct cost of $28,800 state capital per job
• sustain nearly 760 local jobs annually, or 27,800 local jobs over the term of the financing, due to consumer spending by residents of the completed developments
• yield a cumulative impact from construction plus residency during the term of the financing of 30,900 local jobs at a direct cost of $2,900 state capital per job

By comparison, if the FY09-10 Enacted Budget that's approved later this year were to provide $365 million for investment through the state's primary capital programs, we estimate the state could leverage about $1 billion more from other sources to produce about 5,175 more housing units involving about $1.2 billion more in total construction spending. This additional production would create about 9,140 more jobs during construction and about 90,400 more jobs cumulatively from construction plus residency through the term of financing.

As to cost-effectiveness, every $1 billion in infrastructure spending on maintenance and repair of public schools creates an estimated 12,500 construction jobs at a direct cost of $80,000 public dollars per job; every $1 billion for replacement of dangerous bridges, 14,000 construction jobs at a direct cost of $71,400 public dollars per job; and, every $1 billion for other transportation infrastructure, up to 47,000 construction jobs at a direct cost of $21,300 public dollars per job. (Source: Economic Policy Institute (EPI) Briefing Papers, "Investing in US Infrastructure," April 29, 2008, & " Strategy for Economic Rebound," January 11, 2008). Also, New York State's $650 million funding for Saratoga's $3.2 billion computer chip factory will create an estimated 5,514 jobs in construction, plant operations, supporting businesses and local services at a direct cost of $117,800 state dollars per job (Source: Larry Rulison, "Study Touts Impact of Chip Fab," Albany Times-Union, April 2, 2008).

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Note: The above estimates of housing units and jobs created are derived using data from the state's 2008 capital commitments and a methodology from the National Association of Home Builders. NAHB provides the following "rules of thumb" for estimating housing's economic impact in the typical American metropolitan area. (NAHB, Economic and Housing Data, Housing's Direct Economic Impact, www.nahb.org/facts/economics/houdir.html)

During construction, the production of 100 single family homes generates:

• 284 jobs in the average American community's local economy, of which 46% (130) are in construction;
• $16.0 million in local wages and business income;
• $1.8 million in taxes and revenues for local government.

During construction, the production of 100 multi-family tax-credit units generates:

• 151 local jobs, of which 67% (102) are in construction;
• $7.3 million in local wages and business income;
• $0.78 million in taxes and revenues for local government

Annually thereafter, occupancy of the 100 single family homes generates:

• 63 jobs in a local economy;
• $3.2 million in local wages and business income;
• $0.648 million in taxes and revenues for local government

Annually thereafter, occupancy of the 100 multi-family tax-credit units generates:

• 38 local jobs;
• $2.2 million in local wages and business income;
• $0.372 million in taxes and revenues for local government

The annual benefits may be calculated for the term of the financing, assuming multi-family developments with 40-years' financing and single-family homes with 30-years' mortgages.

Posted Tuesday December 16, 2008 at 05:42 pm by Housing First!