Facilitating the availability of affordable housing appearspays big dividends to local communities as well as to homeowners according to a study released today by the National Housing Center and the Center for Housing Policy.  The Role of Affordable Housing in Creating Jobs and Stimulating Local Economic Development was authored by KeithWardrip, Laura Williams, and Suzanne Hague under a MacArthur Foundation Grant.

The authors found virtually no negatives to policies encouraging affordable housing which can include tax credits for building or rehabilitating housing, providing low cost loans for down payment or closing cost assistance, subsidies to lower the cost of housing to affordable levels, or providing sound underwriting for loans in under-served areas.

Building or rehabbing housing not only creates construction jobs but the construction related money buys materials and supplies from local dealers and worker wages ripple through the economy, supporting businesses from grocery and clothing stores to dry cleaners, restaurants, and health care.   The National Association of Home Builders (NAHB) estimates that building 100 new low-income housing units will generate more than 120 construction jobs and, when construction is complete, the new residents of those units will support roughly 30 jobs in a wide variety of industries.

Employers often report that a lack of affordable housing affects their ability to hire and retain employees and there is evidence that its availability plays some role in the decision to picking a location for the company.  Employees apparently feel the same way.  Studies showed that, during the run-up in home prices in the first half of the last decade, 23 of the 35 highest-cost metro areas lost population while most moderately priced housing markets grew.  Research suggest that workers with choices might move away from high cost areas to pursue job opportunities in more affordable places.

When affordable homes are built or rehabbed there can be substantial benefits to state and local government.  Fees are collected for permitting, zoning, and utilities; addition sales and property taxes are generated.  The NAHB study estimates that 100 Low-Income Housing Tax Credit units occupied by families generate roughly $827,000 in local revenue immediately, with more than half coming from permit/impact fees and utility user fees.  Where a well designed development replaces a less aesthetic use of the land, higher property values can translate into higher property tax revenues.

The authors found that homebuyers who participate in an Affordable Homeownership Program appear less likely to undergo foreclosure than those who do not.  Many of these programs reduce the use of subprime loans which tend to be foreclosure prone.  However, one Massachusetts study found that participants in a program that provided low-interest loans to help with down payment costs were only half as likely to be in foreclosure as homeowners with prime fixed-price loans.

Foreclosures are costly to local governments which have to absorb many direct costs such as increased police and social services for impacted neighborhoods as well as loss of property taxes and utility revenues.  "Municipal costs for a single foreclosure can easily total in the thousands of dollars and exceed $30,000 in extreme cases.  In addition, foreclosures can lower nearly property values, further reducing tax revenues," the study says.

When families have affordable housing they have more funds available to spend in the local community and studies have found that low- and moderate-income families are more likely than other groups to spend that excess income rather than save it.  Working families earning between $20,000 and $35,000 spend 54 percent less on housing and transportation costs if they can find affordable housing in urban areas compared to those who live outside of city centers; again providing them with more funds to spend in the community.