NAHB has developed a model to estimate these local economic benefits. To date, the model has been used to generate over 500 studies on the impacts of residential construction in specific metropolitan areas, non-metropolitan counties, and states across the U.S. In addition to these customized studies, NAHB produces a report on the impact of multifamily construction in a typical U.S. metropolitan area, primarily by setting key inputs (market value, raw land, and construction-related fees) equal to national averages.   

The initial “typical metro” study was produced in 2005, and has just been updated for 2009. The 2009 version shows local income, jobs, and estimates generated by building 100 rental apartments, and separate estimates for the impacts generated by building 100 multifamily condominiums. 

The New Numbers

The estimated one-year impacts of building 100 rental apartments in a typical metro area include:

• $7.9 million in local income,
• $827,000 in taxes and other revenue for local governments, and
• 122 local jobs.

The one-year impacts of building 100 multifamily condominiums in a typical metro area include:

• $20.9 million in local income,
• $2.2 million  in taxes and other revenue for local governments, and
• 319 local jobs.

These are local impacts, representing income and jobs for residents of the typical metro area, and taxes (and other sources of revenue, including permit fees) for all local jurisdictions within the area. The one-year impacts are driven largely by the value of construction per unit, which tends to be considerably higher for condominiums.

The additional, annually recurring impacts of building 100 rental apartments include:

• $2.3 million in local income,
• $395,000 in taxes and other revenue for local governments,
• and 32 local jobs.

The equivalent, ongoing annual impacts of building 100 multifamily condominiums include:

• $2.9 million in local income,
• $705,000 in taxes and other revenue for local governments,
• and 49 local jobs.

These are ongoing, annual local impacts of increased property taxes and the multifamily units becoming occupied, and the occupants paying taxes and otherwise participating in the local economy year after year. The condo-rental differences are smaller for the ongoing effects (driven largely by the income and spending tendencies of the occupants) than for the one-time effects. Although the estimated income for renters is considerably lower than it is for condo buyers, this is offset by a tendency of renters to spend more of their incomes locally. This is partly due to the tendency of lower-income households to spend a greater fraction of their incomes on necessities, but also due to rental payments that go to a local owner, or owner employing a management company with a local presence. The equivalent housing expense for buyers of multifamily condominiums would be mortgage payments—which are typically paid to non-local owners of mortgages through non-local servicers.

These impacts are shown in slightly more detail in Figures 1 (for rental apartments) and 2 (multifamily condos). Additional details—including impacts on income and employment in 17 industries (including local government) and breakdowns of taxes and fees—are contained in the full study available from NAHB Multifamily.

The key assumptions underlying the estimates for multifamily rental apartments are an average market value of $120,000 per apartment; average raw land value of $12,000; require the builder and developer to pay an average of $3,043 in impact, permit, and other fees per unit to local governments; and an average annual property tax of $1,200 per unit.   

The key assumptions underlying the estimates for multifamily condominiums are an average market value of $308,000 per unit; average raw land value of $33,000; require the builder and developer to pay an average of $7,574 in impact, permit, and other fees per unit to local governments; and an average annual property tax of $3,080 per unit. 

The characteristics of multifamily units described above are similar to the ones employed in the September Multifamily Market Outlook, to analyze the national impact of a drop in multifamily production.

A Caveat

NAHB produces estimates of the impacts of multifamily construction at both the local and national levels. There are many important differences between the national and local impact estimates. For example, the national estimates do not include any equivalent of Phase II (ripple effect), or Phase III (ongoing effects). On the other hand, the national estimates do include impacts in all U.S. industries—including industries in the manufacturing sector. The local impact estimates reported here exclude almost all of the manufacturing (as well as many other industries) on the grounds that markets for most manufactured goods are at least regional—if not national or international—in nature.

To avoid potential confusion, it is recommended that users of NAHB Impact of Multifamily Construction estimates first decide if they are interested in impacts at the local or national level, and then choose whichever set of estimates is appropriate and use it consistently.

Figure 1. Impact of Building 100 Rental Apartments in a Typical Metro Area

Total One-Year Impact:  Sum of Phase I and Phase II:

Local Income	Local Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$7,889,000	$2,300,800	$5,587,900	$826,800	122

                               

Phase I: Direct and Indirect Impact of Construction Activity:

Local Income	Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$5,317,500	$1,450,500	$3,866,700	$501,800	80

Phase II: Induced (Ripple) Effect of Spending the Income and Taxes from Phase I:

Local Income	Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$2,571,500	$850,300	$1,721,200	$325,000	42

Phase III:  Ongoing, Annual Effect that Occurs When New Homes are Occupied:

Local Income	Local Business Owners’ Income	Local Wages and Salaries	Local Taxes1	Local Jobs Supported
$2,273,900	$972,400	$1,301,700	$395,000	32

Figure 2. Impact of Building 100 Multifamily Condominiums in a Typical Metro Area

Total One-Year Impact:  Sum of Phase I and Phase II:

Local Income	Local Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$20,852,300	$6,265,600	$14,587,000	$2,158,100	319

 Phase I: Direct and Indirect Impact of Construction Activity:

Local Income	Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$14,066,500	$4,018.600	$10,048,100	$1,299,100	209

Phase II: Induced (Ripple) Effect of Spending the Income and Taxes from Phase I:

Local Income	Business Owners’ Income	Local Wages and Salaries	Local Taxes	Local Jobs Supported
$6,785,800	$2,2477,000	$4,538,900	$859,000	110

Phase III:  Ongoing, Annual Effect that Occurs When New Homes are Occupied:

Local Income	Local Business Owners’ Income	Local Wages and Salaries	Local Taxes1	Local Jobs Supported
$2,853,800	$836,000	$2,018,000	$705,000	49

[ return to top ]