Impacts of Home Building On Local Governments and Economy

An analysis of the economic impacts of home building in the Region and a comparison of costs to revenue for County and local governments associated with the development of new housing was conducted as part of the housing planning process by the National Association of Home Builders (NAHB) at the request of SEWRPC.  The NAHB conducted separate analyses of home building in the four-county Milwaukee metropolitan area, which includes Milwaukee, Ozaukee, Washington, and Waukesha Counties; Racine County; and Walworth County.  An analysis of impacts in Kenosha County could not be conducted because the data necessary to conduct the analysis was combined with data for Lake County, Illinois, and could not be isolated for only Kenosha County.

Each analysis included two major parts.  The first was an analysis of the costs for County and local governments, including school districts and other special-purpose units of government such as utility districts, to provide facilities and services to new housing development, compared to the revenue generated by the new development through taxes and fees.  The second analysis estimated the overall economic impact of new housing development in the metro area or county concerned, including the impacts of spending in the metro area or county by new residents. 

In part, the analysis was conducted to address a common perception that multi-family housing carries a substantially higher community cost burden, borne by property taxes, than single-family development.  The analysis determined that both single- and multi-family development have positive impacts on local economies.  The analysis found that the break-even point when taxes generated by multi-family development are sufficient to pay back capital improvements and other costs for services provided by local governments is six years, in comparison to about one year for single-family development.  In the long term both multi- and single-family development were found to generate more in tax revenues than they consume for government facilities and services.  Although the intent was to analyze the impacts from both single- and multi-family development throughout the Region, there was an insufficient amount of market-rate multi-family residential construction during 2010 to provide enough data for an analysis of multi-family development outside the Milwaukee metro area.

NAHB Reports Comparing Revenue Generated to the Costs of New Housing Development to Local Governments:

The findings of the reports are summarized on pages 304 through 313 of the Regional Housing Plan.

Economic Impacts of Home Building

Home building generates local economic activity, including jobs and income generated by construction workers and new residents, and additional property taxes and other revenue for local governments. The NAHB has developed a model to estimate these economic benefits, which captures the effect of the construction activity itself, the secondary or “ripple” effects when income earned from construction activity is spent and recycles in the local economy, and the ongoing impact that results from new homes becoming occupied by residents who pay taxes and buy locally produced goods and services.

As part of the housing planning study, the NAHB conducted analyses of the impact of home building activities in the four-county Milwaukee metro area, Racine County, and Walworth County.  Separate data was not available to permit an analysis for Kenosha County.  The NAHB model requires that the local area over which the benefits are spread be large enough to include the places where construction workers live and spend their money, as well as the places where the new home occupants are likely to work, shop, and go for recreation. NAHB has determined that a metro area, or a county outside of a designated metro area, will usually satisfy this criterion.

The NAHB analysis of economic impacts is divided into three phases.  Phase I captures the effects that result directly from the construction activity and the local industries that contribute to it, including local construction and related jobs, such as truck drivers, developers, bankers, architects, and engineers. Phase II captures the effects that occur as a result of the wages and profits from Phase I being spent in the local (county or metro) economy. Phases I and II are one-time effects.  Phase III is an ongoing, annual effect that includes property tax payments and local spending by the occupants of the new housing units.

NAHB Reports on the Economic Impacts of New Housing Development:

The findings of the reports are summarized on pages 304 through 313 of the Regional Housing Plan.



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Southeastern Wisconsin Regional Planning Commission

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Waukesha, WI 53187-1607

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