NAHB Updates Its Estimates of the Local Benefits of Tax Credit Development
NAHB has developed a model that estimates the local economic benefits — in terms of jobs, income, and tax and other forms of government revenue — generated by residential development. Periodically, NAHB has used the model to produce reports on the impact of typical developments financed by the Low-Income Housing Tax Credit (hereafter, simply tax credit) program.
NAHB produced the last such local impact study for a typical elderly tax credit development in 2008. The last such study for a typical non-elderly, or family, tax credit development was produced in 2007. Benefits estimates from both studies have recently been updated in a single 2010 report, titled The Local Economic Impact of Typical Housing Tax Credit Developments.
In the 2010 report, the inputs (the property’s construction value, fees, and taxes) for a typical 100-unit family tax credit development were assumed to be the same as for a market-rate rental property. This is consistent with NAHB’s past experience in conducting surveys of specific tax credit properties, as well as with the presumption that the housing tax credit program produces apartments of market-rate quality at below market-rate rents.
Inputs for the typical elderly development are based on the inputs for the family tax credit development, adjusted for differences in apartment size and construction cost per square foot. Data on apartment size are available in the 2007 American Housing Survey (U.S. Census Bureau and HUD). Information on cost differences per square foot of apartment space was provided by NAHB members who develop both elderly and family tax credit projects in the same state. These costs were expected to be higher in the elderly project, because elderly developments tend to need more and different elevators, and more space for support staff.
The key results are summarized below. For more detail — including income and employment in 16 private industries plus local government, as well as a breakdown of tax and other government revenue — request the full study from NAHB Multifamily.
Typical Family Tax Credit Development
The estimated one-year local impacts of building 100 apartments in a typical family tax credit development include:
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$7.9 million in local income,
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$827,000 in taxes and other revenue for local governments, and
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122 local jobs.
These are local impacts, representing income and jobs for local residents, and taxes (and other sources of revenue, including permit fees) for all local jurisdictions within the area. Local jobs are measured in full time equivalents — i.e., one reported job represents enough work to keep one worker employed full-time for a year, based on average hours worked per week by full-time employees in the industry.
The additional, annually recurring impacts of building 100 apartments in a typical family tax credit development include:
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$2.4 million in local income,
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$441,000 in taxes and other revenue for local governments, and
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30 local jobs.
These 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. In order to fully appreciate the positive impact the development has on a community, it’s important to include these ongoing benefits.
Typical Elderly Tax Credit Development
The estimated one-year local impacts of building 100 apartments in a typical elderly tax credit development include:
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$7.3 million in local income,
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$768,000 in taxes and other revenue for local governments, and
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113 local jobs.
These are local impacts, representing income and jobs for local residents, and taxes (and other sources of revenue, including permit fees) for all local jurisdictions within the area. They include both the direct and indirect impact of the construction activity itself, and the impact of local residents who earn money from the construction activity spending part of it within the area’s local economy.
The additional, annually recurring impacts of building 100 apartments in a typical elderly tax credit development include:
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$2.3 million in local income,
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$395,000 in taxes and other revenue for local governments, and
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32 local jobs.
These 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 every year.
Customized Reports
The above results assumed the development took place in a standard metropolitan area with national average characteristics (wage rates, taxes, etc.). Variations on the NAHB model can be used to estimate the local economic benefits of any combination of market-rate rental apartments, condos, family tax credit, or elderly tax credit construction.
Although the benefits estimated by the model are spread over a market area, the construction analyzed can be constrained to a specific jurisdiction or individual project. To date, the model has been used to generate more than 600 studies on the benefits impacts of residential construction in specific metropolitan areas, non-metropolitan counties, and states across the U.S.
For more information about applying the NAHB model and obtaining a customized report for a particular area, contact either Paul Emrath (202-266-8449) or Elliot Eisenberg (202- 266-8398) in NAHB’s Economics and Housing Policy Group.
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