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The Economic & Fiscal Benefits of Affordable Housing

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When communities take a moment to consider their most important assets, the candidates that are often mentioned include high-quality schools, access to parks and open space, a strong job base, a vibrant arts scene, and even a winning sports franchise.

How often have you heard an ample supply of affordable housing mentioned as an asset? Instead, conversations about affordable housing usually focus on the cost to taxpayers and rarely take into account the fiscal and economic benefits that accrue when communities encourage the development of affordable homes.

As cities and counties across the country try to bring their revenues and expenditures in-line and prioritize how to spend scarce resources, policymakers and planners should understand the benefits of well-designed affordable housing programs. Such programs are important now more than ever, as research demonstrates that housing affordability has worsened significantly in recent years.

While the provision of affordable housing involves important social and civic values, our focus in this article is aimed at “clearing the air” about affordable housing’s economic and fiscal impacts and highlighting some local strategies for addressing the challenge of providing housing for all. Sidebar, Affordable Housing versus Workforce Housing.

Part I: The Economic & Fiscal Benefits of Affordable Housing

1. One-Time and Ongoing Job Creation and Spending:

It stands to reason that building or rehabilitating affordable housing creates jobs in the construction field. Research by the National Association of Home Builders (NAHB) estimates that building 100 affordable housing units for families through the Low-Income Housing Tax Credit program can lead to the creation of more than 120 jobs, on average, during a project’s construction phase.

Even more importantly, long after the homes are occupied, the ripple effect from residents of these new units can support as many as 30 new jobs in a wide array of industries, including retail, healthcare, and local government. These employment effects are on-par with building comparable market-rate units.

2. Positive Fiscal Impacts for State and Local Governments:

When affordable homes are built or rehabbed, the funds flowing to cities and states can be considerable. Revenues can take the form of fees for permitting, zoning, and utilities, or they can reflect sales, income, or property taxes generated by construction-related economic activity. The NAHB estimates that 100 units of affordable housing for families generates the same amount of one-time revenue for jurisdictions as does a comparable market-rate property — roughly $827,000, on average — with more than half coming from permit/impact fees and utility user fees.

Additionally, research findings summarized in a report by the Center for Housing Policy (CHP) show that the impact of a new affordable housing development on nearby property values is more likely to be neutral or positive than negative. As the CHP report notes, the quality of the properties’ design, management, and maintenance are important factors. Moreover, when affordable housing replaces a vacant lot or a dilapidated building, local governments will benefit from increased property tax revenues. Sidebar, Impact of Affordable Housing on Nearby Property Values.

One persistent concern raised about affordable housing development is that it will flood local schools with children, increasing the demand for school facilities and educational services. Putting aside the need for our society to provide a solid education to all children, do lower-income households actually have significantly more children than upper-income ones? The answer is no. Today there is only a small difference in the average number of children per household when comparing income levels.

The much more important trend, and one that carries across all income levels, is the dramatic reduction in the average number of children per household.

… article continues with sections on:

3. Reducing Foreclosure Risks and Associated Costs
4. Improving Worker and Employer Attraction and Retention
5. Increasing the Buying Power of Residents


Part II: Low- or No-Cost Strategies for Increasing the Availability of Affordable Homes

1. Expand Development Opportunities
2. Reduce Red Tape
3. Capitalize on Market Activity
4. Generate Capital
5. Preserve and Recycle Resources

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