Friday, May 07, 2004

Housing Is Economic Foundation

by Broderick Perkins

Housing isn't just a roof over your head, equity money in the bank, and tax deductions -- though that's plenty -- it's also an economic cornerstone with benefits that go far beyond those enjoyed by the individual homeowner.

New-home construction, by itself, is a major part of the economy, but the housing industry as a whole (including expenditures on existing housing) contributes $218 billion to California's economy, supports almost 1 million jobs and accounts for approximately 10 percent of all statewide economic activity.

Also, every dollar invested in new housing activity generates almost two dollars in total economic activity, and the industry is a major force in every region of the state, according to "The Economic Benefits Of Housing In California," produced by the Sacramento Regional Research Institute (SRRI), a joint effort between California's Sacramento Area Commerce and Trade Organization and California State University-Sacramento.

This isn't the first time statistics show housing can be an economic linchpin.

The SRRI report updates the original "Economic Benefits of Housing" released in late 2002 and it comes on the heels of "Housing Supply and Affordability: Do Affordable Housing Mandates Work?" by the Reason Public Policy Institute, a Los Angeles-based public policy research firm.

Together, the reports reveal overwhelming evidence that California isn't priming the economic pump as well as it could.

"The report's calculations are based on the 188,000 housing starts recorded in 2003, but according to the state Department of Finance, the statewide annual housing need is far greater, about 230,000 homes and apartments each year," said California Building Industries Association president Sherman D. Harmer Jr., a San Diego home builder.

"If the industry were producing enough homes to meet the need, the economic impact for the state and for regional economies would be significantly greater," Harmer added.

The report examined the impact of new-home construction; the overall impact of the housing industry as a whole, including economic activity generated by existing homes; and the regional benefits in 25 of California's metropolitan areas.

It also tracked the growth of home building's impact on the economy from 2001 through 2003 and found that home building generated a total of $45.5 billion for California's economy in 2001, $51.67 billion in 2002, and $59.35 billion in 2003. Total employment generated by home building rose from 403,600 in 2001 to 456,600 in 2002 and to approximately 526,000 in 2003, the report found, even as employment roles dipped overall during California's technology down turn.

The figures include economic activity and employment directly related to building homes; indirect activity from businesses doing business with home builders such as suppliers, consultants, transportation firms, and financiers; and all the purchases and expenditures that the employees of these companies then are able to make.

When expenditures on existing housing and other related factors were considered, housing contributes $218 billion to the economy, 1 million jobs and 10 percent of economic activity statewide.

"This report should be required reading for every state legislator and every city council member and planning commissioner around California. Housing drives our state’s economy, and this report proves that point, but too many decision-makers haven't connected the dots yet. The sooner our state and local officials understand how critically important housing is, the better off California's economy and California's families will be," Harmer said.

Published: May 7, 2004

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