Home building immediately stimulates the economy. In addition to providing jobs to workers in the construction industry, funds flow to a variety of local service and goods providers and to local governments in the form of fees and taxes. These funds then ripple through the economy as workers spend their wages in local businesses and businesses replenish their stock.
Increasing the number of homes also provides lasting, recurring economic benefit in a typical community. Each year, the local economy benefits from the activity generated by residents, such as revenue in local stores frequented by residents and additional local government taxes and fees collected. Even if the new occupant of a newly-built unit is someone who already lived in the community, their prior home may very well become occupied by someone from new to the area. It is also possible that the newly-built unit helps the community retain a household who would otherwise move out of the area.
Building 100 new apartments with the Low-Income Housing Tax Credit is likely to create $8.7 million in local income and government revenue and 122 full-time jobs during the initial construction phase, according to estimates from the National Home Builders Association. After residents move in, the apartments are likely to create $2.8 million in local income and government revenue and 30 local jobs each year.
Estimated economic benefits of building 100 family apartments with the Low-Income Housing Tax Credit*
1-year impacts (during construction phase):
- $7.9 million in local income
- $827,000 in taxes and other local government revenue
- 122 local jobs
Annual, recurring impacts:
- $2.4 million in local income
- $441,000 in taxes and other local government revenue
- 30 local jobs
These estimates assume that the new units have an average market value of $120,000, raw land cost of $12,000, local government impact, permit, and other fees of $3,043, and annual property taxes of $1,200. Since economic benefits are directly proportional to the number of units created, the results shown above can be used to estimate the effects of other tax credit developments. For example, a 20-unit project is likely to have impacts equal to 20% of the impacts shown in the table, since the table’s benefits apply to a 100-unit project, assuming average project costs, fees, and taxes.
*Source: National Association of Home Builders, “The Local Impact of Typical Housing Tax Credit Developments”, March 2010. Estimates for elderly housing are also available. Although similar to the family estimates, they are slightly lower since elderly units are likely to be slightly smaller and with slightly lower household incomes.