New Housing Pays Its Way, CA Homebuilding Study Reveals
Despite frequent claims that new housing costs state and local governments more in services than it generates in tax revenue, a new study concludes that housing does pay its own way – and then some.
The report, funded by the California Homebuilding Foundation (formerly the California Building Industry Foundation), the research and education center for California's homebuilding and construction industries, is the first to analyze the overall fiscal effects of housing on a statewide basis. The study was prepared by the Blue Sky Consulting Group and its principals Tim Gage, a former state Finance Director, and Matthew Newman, an expert in state and local government fiscal policies.
The study, The Housing Bottom Line: Fiscal Impact of New Home Construction on California Governments, found that new median-priced homes provide a strong one-time fiscal benefit when built and a net ongoing revenue stream as well. It also concluded that new homes provide a much bigger fiscal benefit than existing homes. At the state level, that difference totals $4,129 a year.
Newman and Gage found that the average city nets $3,017 in one-time benefits, ranging from $2,353 in the San Diego area to almost $6,800 in the central part of the Bay Area. County governments net an average of $1,706 in one-time benefits, and the state reaps an average windfall of $15,858 in corporate and sales tax revenue from the sale of each median-priced new home.
On an ongoing basis, new homes provide a net ongoing revenue stream of $771 to cities, ranging from $287 in Orange County to $1,107 in the Central Valley. County governments net a weighted average of $190 a year, and the state nets almost $3,500 a year for each new home, the report found.
Finally, the study found that while the net ongoing impact for new homes at the state level was $3,498, the state actually spent $631 per year more than it received from existing homes – a difference of $4,129.
Kile Morgan, chairman of Ponderosa Homes, a Bay Area homebuilding company, and also chairman of the CHF, said the report may help promote more new housing in a state that hasn’t kept pace with the demand for new housing for nearly 20 years.