Affordable housing investment strengthens local spending and employment and provides an important revenue source for local governments, according to a literature review released this month by the Center for Housing Policy.
The review, The Role of Affordable Housing in Creating Jobs and Stimulating Development, summarizes the ways that affordable housing production and programs can impact economic growth, employment and communities’ fiscal health. Its authors examined three strands of the literature, the first two encompassing more traditional analyses of housing impacts and the third dealing with the effects of affordable home ownership programs on reduced foreclosure rates.
The first strand concerns the direct, indirect and induced effects of building additional housing or providing tenant assistance; this research uses models of national or local economies. Direct effects result from spending on materials and wages. Indirect ones occur when suppliers increase spending as a result of a construction project. Induced effects happen when local laborers and workers increase their own spending as a result of better employment or wages. The National Association of Home Builders’ assessment of the LIHTC program is the primary source for this section, though the review cites several other local studies.
The second strand in the traditional literature concerns fiscal impact analysis, a frequently used decision making tool that estimates the costs and revenues that local governments experience as a result of new development – in this case, affordable housing development. Contrary to popular expectations, the literature finds that affordable housing enhances local tax revenue. Another area concerns the costs of serving additional low and moderate income homes, and other fiscal impacts like increased spending and sales taxes. This is an important consideration as low income residents that spend less on housing are likely to spend more on needed goods and services.
Following the first two sections, the review summarized less cited impacts, including those that affordable home ownership programs have on reduced foreclosure rates – thus reducing municipal costs associated with foreclosures – and those that housing affordability has on a locality’s economic competitiveness.
The reviewers conclude that this issue warrants further research on the “spillover” effects of affordable housing, which are additional investments in surrounding properties spurred by the investment in housing itself.
To read The Role of Affordable Housing in Creating Jobs and Stimulating Development and an accompanying research brief, go to http://www.nhcopenhouse.org/2011/01/role-of-affordable-housing-in-creating.html