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Multifamily Construction Pays for Itself, NAHB Economic Impact Model Demonstrates

New multifamily construction pays for itself, according to a new version of NAHB’s Local Economic Impact Model.

The model has been used in more than 280 areas around the country to assess the financial benefits that multifamily housing development brings to local communities, including new jobs and tax revenues. But previous versions of the model were unable to assess the local benefits of multifamily construction — including income, jobs and government revenue — compared to its costs on local governments for education, police and fire protection, and water and sewer systems.

The revised NAHB model concludes that multifamily housing typically pays for itself within a few years as ongoing benefits accumulate faster than ongoing costs. Typical apartments generate more than enough revenue to pay for current government expenses in a given year. The surplus accumulates so quickly that governments undertaking capital investment before any units are built can pay off the debt entirely by the end of the fourth year.

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Benefits in a Typical Metropolitan Area

The one-year local economic benefits of building 100 multifamily units include:

• $5.3 million in local income
• $630,000 in taxes and other revenue for local governments
• 112 local jobs

This includes both the direct and indirect impact of the construction activity itself, and the impact of local residents who earn money from the construction activity and spend part of that income within the local economy.
 
The 100 new apartments also generate additional, annually-recurring local economic benefits including:

• $2.2 million in local income
• $384,000 in taxes and other revenue for local governments
• 47 local jobs

These are ongoing, annual benefits resulting from the new multifamily units becoming occupied, and the occupants paying taxes and otherwise participating in the local economy year after year.

More detail, including the characteristics of the multifamily units built (average value, property taxes and construction-related fees) are available in the NAHB report, "The Local Impact of Home Building in Average City, USA."

With local information on average values of housing units, land values and construction-related fees, the model can be customized to a particular local area and used to analyze the impact of building on any reasonable scale, including a single project.

NAHB models can also handle any combination of single-family and multifamily construction. Reports customized to particular areas often analyze the mix of housing types that most places require to accommodate residents of different income levels, different occupations and at different stages in their lives and careers.

For additional information about the models, questions about applying them to a particular local area and the cost of conducting this research, e-mail or phone one of the following staff members in NAHB’s Housing Policy Department:

• David Crowe, senior staff vice president, 800-368-5242 x8383
• Paul Emrath, assistant staff vice president, x8449
• Elliot Eisenberg, housing policy economist, x8398

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