Highlights:
- Homebuidlng economic report released.
- Report finds homebuilding a $5 billion-plus industry.
- Report suggests ways to address affordable housing shortage
Economist Elliott Eisenberg prepared a 78-report that details the $5 billion home building industry in Colorado.
Homebuilding had a $5.15 billion economic impact on Colorado’s economy, according to a report by a prominent economist.
Housing construction activity, including new single-family homes and apartments, also created more than 81,000 jobs in 2013, according to the report released on Monday.
“The benefits of new residential construction and the impacts of residential rehabilitation activity are significant,” according to Elliott Eisenberg, the former senior economists with the National Association of Home Builders.
Eisenberg recently has been a keynote speaker at an economic development conference sponsored by Coldwell Banker Residential Brokerage in Colorado and another by the Denver Metro Association of Realtors.
Eisenberg’s 78-page report titled, Driving a Vibrant Economy: Housing’s Role in Colorado’s Economic Success, found that the economic impact of home building represented 1.7 percent of the gross state product in Colorado in 2013.
New home building and rehabilitation construction created 81,375 full-time equivalent jobs, nearly three percent (2.9 percent) of the entire Colorado labor force;
New home construction and rehabilitation construction resulted in new revenues to state and local governments totaling $1.29 billion;
The one year combined state and local economic impact of building 823 rent-subsidized multifamily homes in Colorado include:
- $113.1 million in local income.
- $20.9 million in taxes and other revenues for all local governments, and
- 1,657 full-time equivalent jobs
New home construction has always been a critical part of the overall health of the Denver metro region and broader Colorado economy, according to the Home Builders Association of Metro Denver.
That became apparent with the recession that began in January 2008.
“With the housing market collapse in 2008 and subsequent Great Recession, we saw undeniably the impact of housing —as its own, distinct sector — has on the overall economy,” Sara Reynolds, executive director of the nonprofit Housing Colorado, wrote in the report.
“In the years since 2008, we have marveled at the rebound of the economy and the steady improvement of the housing market as well,” Reynolds said.
Homebuilding in Colorado is a $5 billion economic force. However, there is a shortage of affordable homes.
However, the report sheds light on dynamics of the market, such as forces that drive supply and demand and the importance of affordable housing, she noted.
“…There is more to this story that doesn’t always make the news headlines – and understanding the economic dynamics that shape the housing marketed and assigning tangible impacts to those dynamics helps policy makers make informed choices about the programs and policies that promote or discourage housing development,” according to Reynolds.
Home prices in Colorado are up about 7 percent from their pre-recession levels, according to the report.
“All types of housing have a tremendous immediate and long-term impact — thousands of jobs supported, millions in income generated, and reinvestment to create thriving communities,” said Jeff Whiton, executive vice president and CEO of the HBA of Metro Denver.
“Whether it is through renovation, market-rate single-family or multi-family homes or an affordable product, this data confirms that housing development and rehabilitation is a good ROI (return on investment) for Denver and the state of Colorado at large,” Whiton added.
Meanwhile, affordable housing is a critical component to healthy, stable communities and a major focus for the HBA, according to the report.
Housing Shortages
The report found there are shortages of certain type of housing.
Statewide, there is a shortage of 64,619 rental homes for those earnings between $10,000 and $19,999.
In the Denver area, there is a shortage of 35,381 rental homes for those in that income range.
For those earning $20,000 to $74,999, there is a surplus of 103,001 units in the Denver and a surplus of 180,733 statewide, according to the report.
“Among the wealthiest renters – those with household incomes greater than $75,000 – there appears again (to) be an acute shortage of rental homes,” according to the report.
“To be precise, there is a shortage of 77,604 homes that rent for more than $1,875 in Colorado, and a shortage of 44,424 of such homes in the Denver metro region,” according to the report.
However, that shortage lacks the gravitas of the shortage of housing for low-income residents.
“Wealthy households can choose a home that rents for less than $1,875 a month and solve their problem that way,” the report notes. “Regrettably, among those with the lowest incomes, ‘renting down’ is not a viable strategy.”
The report also did not address that an unprecedented number of apartment communities aimed at high-income individuals either recently opened or are under construction in Denver.
Affordable housing developments, meanwhile, often are opposed by homeowners in established neighborhoods, the report notes.
“NIMBy-ism (Not In My Backyard) can apply in many aspects of development, including housing, and communities all too often make it hard for new affordable units to be built and in some case actually prevent them from being built altogether,” according to the report.
The report offered strategies to provide much-needed affordable housing.
They include:
- Small or experimental overlay districts. The districts may offer tax and funding advantages.
- Dynamic zoning, which would allow for zoning to change over time. Residential densities would rise over time to accommodate rising land values.
- Deed restrictions, which limits the amount of equity the owner may retain at the time of sale.
- Increased community involvement in the planning stages. This could alleviate misperceptions, fears and concerns about decreased public safety and higher taxes. A “well-designed and transparent planning process…includes good two-way communication.”
- Accessory dwelling units. “Allowing existing home owners to rent out in-law apartments, or granny flats is a simple way to increase supply without public funding,”
- Permit and encourage manufactured and modular communities. “Manufactured housing communities can be an outstanding source of affordable housing and should be encouraged to grow and expand.”
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.
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