RCAC Home Page >
News and Publications >
Self-Help Builder News October 2012 Volume 5, Issue #3 >
The economic impact of home building in Washington State
Reprinted with permission from the Olympia Master Builders Highlight New Home Advantages
When residential construction occurs, it generates substantial economic activity in the state where it takes place. The economic activity generated includes income and jobs for state residents, as well as revenue for state and local governments. It also typically imposes costs on state and local governments—such as the costs of providing primary and secondary education, police and fire protection, and water and sewer service. Not only do these services require annual expenditures for items such as teacher salaries, they typically also require capital investment in buildings, other structures, and equipment that state and local governments within the state own and maintain.
The National Association of Home Builders (NAHB) has developed a model that captures the effect of the construction activity itself, the ripple impact that occurs when income earned from construction activity is spent and recycled in the state. The model also estimates the ongoing impact that results from the homes becoming occupied by residents who pay taxes and buy goods and services produced in the state.
NAHB recently compiled information based on the 13,825 single-family homes built in Washington in 2011. The estimated one-year economic impacts of building these homes include:
- $3.1 billion in income for Washington residents,
- $728.8 million in taxes and other revenue for the state and local governments in this state, and
- 41,018 jobs in Washington.
The additional, annually recurring impacts of building these homes includes:
- $448.6 million in income for Washington residents,
- $198.5 million in taxes and other revenue for the state and local governments in the state, and
- 7,231 jobs in Washington.
These are the ongoing, annual local impacts that result from the new homes being occupied and the occupants paying taxes and otherwise participating in the state economy year after year. The ongoing impacts also include the effect of increased property taxes, assuming that raw land would be taxed at the same rate as the completed housing unit.
These homes resulted in an estimated $728.8 million in tax and other revenue for the state government as well as local governments in the state, $96.4 million in current expenditures by the state and local governments to provide public services to the net new households at current levels, and $176.4 million in capital investment for new structures and equipment undertaken by the state and local governments.
The analysis assumes that state and local governments finance the capital investment by borrowing at the current rate of 4.62 percent on tax-exempt bonds.
In a typical year after the first, the single-family homes result in $198.5 million in tax and other revenue for the state and local governments, and $192.8 million in state and local government expenditures needed to continue providing services at current levels.
The difference between government revenue and current expenditures is defined as an “operating surplus.” In this case, the first-year operating surplus is large enough so that all debt incurred by investing in structures and equipment at the beginning of the first year can be serviced and paid off by the end of the first year. After that, the operating surpluses will be available to finance other projects or reduce taxes. After 15 years, the homes will generate a cumulative $3,606.8 million in revenue compared to $2,983.9 million in costs, including annual current expenses, capital investment, and interest on debt.
NAHB’s analysis of the economic impact of the single-family homes built in Washington State reaffirms the role the home building industry plays in generating jobs and tax revenue in this state.
Olympia Master Builders is a professional trade association representing nearly 600 member companies in Thurston, Lewis, Grays Harbor, Pacific and Mason Counties. The primary goal of OMB is to provide affordable housing for all segments of society. This is achieved by improving the construction industry and the business climate in which it operates. OMB members are committed to building strong communities, one home at a time.