State's Job Loss Heightens Need for Housing Opportunity Fund in New Budget

NEW YORK, NY (03/27/2008)(readMedia)-- As the nation's economic downturn worsens, news that New York state lost 6,800 private sector jobs in February highlights the urgency of creating the new $400-million Housing Opportunity Fund in the budget that is being deliberated in Albany according to the advocacy organization Housing First!.

The state's department of labor reported the job loss in its monthly report yesterday March 27th.

The new fund can expeditiously stimulate the state's economy and create jobs while simultaneously addressing the essential housing needs of families and communities, concludes a Housing First Briefing Paper.

The $400-million fund would leverage an estimated $1.15 billion in construction spending to produce some 10,065 affordable homes and apartments for low-, moderate-, and middle-income families.

During construction, Housing First! estimates that this would generate nearly 14,000 local jobs and $656 million in wages and business income as well as, depending on local property tax exemptions, some $98 to $139 million in revenues for state and local governments.

Yearly thereafter, spending by residents of these affordable units would sustain approximately 5,100 local jobs and $233 million in wages and business income as well as, depending on local property tax exemptions, some $61 to $73 million in revenues for state and local governments.

The Housing Opportunity Fund is a timely and powerful tool for stimulating and sustaining the state's economic growth.

Excerpts from the Briefing Paper follow.

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HOUSING FIRST! Briefing Paper The Housing Opportunity Fund's Economic Stimulus

Housing First! has testified in support of the establishment of, and full funding for, the Executive Budget's proposed $400-million Housing Opportunity Fund (HOF) this year as an addition to the existing line-item appropriations for the existing housing programs. Regardless of the HOF's other sources of funding, Housing First! supports SONYMA's annual allocation of Mortgage Insurance Funds to the HOF.

Housing First! has also testified that the HOF is especially timely and critical now – with the nation's plummeting economic downturn – to stimulate the state's economy and create jobs while simultaneously addressing the state's substantial housing needs.

Because the HOF will have the authority to transfer funds to other state agencies to expand their capital programs, inclusion of the full $400-million HOF in the enacted budget provides the dual opportunity both to establish the HOF as an annual operating entity and also to provide the agencies with funds to move forward expeditiously with their backlogs of unfunded developments. These concurrent benefits make the HOF preferable to line-item add-ons to appropriations proposed for the existing housing capital programs.

The backlog of AHC, HFA, DHCR, and HHAP developments unfunded in 2007 is estimated to require $307.6 million in gap-to-full financing to produce approximately 7,740 units of housing. (This backlog does not include projects at OMH, OMRDD and OASAS.) Assuming the HOF's remaining $92.4 million were allocated to single- and multi-family units on average and in proportion to those in the backlog, it could finance an additional 2,325 units, for a total of 10,065.

This paper amplifies Housing First!'s testimony and estimates the potential magnitude of the HOF's economic benefits assuming the above portfolio and using the National Association of Home Builders 2001 input-output model for assessing housing's economic impact on the average American community (methodology below). Because the NAHB model uses national averages of local housing prices, costs, spending patterns and taxes in 2001, the dollar estimates in this paper are illustrative and may be understated. Because the model also requires a distinction between single- and multi-family units, we assume that the AHC units are single-family and the other programs' are multi-family.

During the period of construction, the economic impacts of the HOF are estimated on the basis of $1.15 billion in total construction spending for 10,065 units. Based on the $208,000 average price of a single family home in the NAHB model, the 1,950 single-family homes financed by the HOF would have a total construction cost of $405 million. Based on the $92,000 average price of a multi-family unit in the NAHB model, the 8,115 multi-family units financed by the HOF would have a total construction cost of $746 million. In sum, based on the model's numbers, the 10,065 units would have a total construction cost of $1.15 billion. And, HOF's $400 million would leverage a total of $750 million in financing from other private and public sources.

Production of the 10,065 housing units could be responsible for:

Immediate impact -- during the period of construction

• creating nearly 14,000 local jobs, half of which would be in construction
• generating $656 million in local wages and business income
• producing between $98 to $139 million in taxes and other revenues for government including: $ 61 million for state government and between $37 to $78 million for local governments (depending on the extent of property tax exemptions)

Plus, the continuing impacts of residents during each year of occupancy

• sustaining nearly 5,100 local jobs
• generating $233 million in local wages and business income
• producing between $61 to $73 million in taxes and other revenues for government including: $32 million for state government and between $29 to $41 million for local governments (depending on the extent of property tax exemptions)

For, a subtotal of impacts from occupancy during the term of the financing (40 years for multi-family; 30, for single-family)

• 190,000 local jobs
• $8.8 billion in local wages and business income
• between $2.3 to $2.7 billion in taxes and other revenues for government including: $ 1.2 billion for state government and between $1.1 to $1.5 billion for local governments (depending on the extent of property tax exemptions)

Yielding a cumulative impact from construction plus occupancy for the term of the financing

• 204,000 local jobs
• $9.4 billion in local wages and business income
• between $2.4 to $2.9 billion in taxes and other revenues for government including: $1.26 billion for state government and between $1.13 to $1.6 billion for local governments (depending on the extent of property tax exemptions)

The potential economic benefits from the Housing Opportunity Fund's first-wave of activities clearly demonstrate its capacity to stimulate, grow, and sustain the state's economy and job base while simultaneously meeting the essential housing needs of families and communities. The HOF is a powerful and absolutely necessary addition to the state's housing and economic development toolbox.

METHODOLOGY

The National Association of Home Builders 2001 input-output model provides "rules of thumb" for estimating housing's economic impact on the average American community. The NAHB model uses national averages of local housing prices, spending patterns and taxes. The price of a single family home in the model is $208,000; the cost of a multi-family apartment in the model is $92,000. So, it may underestimate the dollar impacts in NY state, but not jobs.

"Residential construction stimulates the economy directly by generating jobs, wages and tax revenues and indirectly as the demand for goods and services created by the construction of new homes ‘ripples' through the economy." During the year of construction, impacts include "the direct and indirect impacts of the construction activity itself, and the impact of local residents who earn money from the construction activity spending part of it within (the local area)." Each year thereafter, as occupants of the new units participate in their local economies, impacts are "ongoing, annual local impacts that result from the new homes being occupied, and the occupants paying taxes and otherwise participating in the local economy year after year."

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

• 250 jobs in the average American community's local economy, of which 51% (128) are in construction;
• $2.8 million in local wages and income;
• $1.4 million in taxes and revenues for local government; and,
• $1.09 million in taxes and revenues for New York State's government (estimate derived by Housing First!)

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

• 112 local jobs, of which 51% (57) are in construction;
• $2.2 million in local wages and income;
• $0.63 million in taxes and revenues for local government; and,
• $0.49 million in taxes and revenues for New York State's government (estimate derived by Housing First!).

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

• 65 jobs in a local economy;
• $2.8 million in local wages and income;
• $0.498 million in taxes and revenues for local government; and,
• $0.39 million in taxes and revenues for the state government (estimate derived by Housing First!)

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

• 47 local jobs;
• $2.2 million in local wages and income;
• $0.384 million in taxes and revenues for local government; and,
• $0.30 million in taxes and revenues for the state government (estimate derived by Housing First!)

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 Thursday March 27, 2008 at 11:32 pm by Housing First!