Study: Growth has ripple effect

Builders praise report that says new homes have positive impact

Study: Growth has ripple effectBUILDERS IN BEAUFORT COUNTY have sometimes found themselves maligned as public boogey monsters, blamed for contributing to over-development and adding too much burden on the area’s fragile roads.

But this summer, builders are arming themselves with a new report that aims to dispel some of the myths of new home construction, and give the county’s home builders data that show the exact impact they have on the area’s economy.

The Hilton Head Area Home Builders Association commissioned a study earlier this year from an economist at the National Association of Home Builders to look at exactly how much impact fees, tax revenue, jobs and ripple-effect impact is created by each new home that’s built in Beaufort County in one year.

The answer, according to the study: A new house pumps enough cash into the local economy to pay for itself in less than one year. After that, the homes generate a total $990,000 in net revenue every year for 10 years.

The average time for a house to pay for itself in other communities across the country is two to three years, said Elliot Eisenberg, the author of the report and a senior economist for the Washington D.C.-based National Association of Home Builders.

That amount should be enough to pay for police, fire, sewers, teachers’ salaries and maintenance of roads and parks, as well as building new roads, schools and other infrastructure. Over 15 years, the homes built in a single year will generate $100.4 million in revenue for the local governments, and be responsible for only $79.9 million in costs, according to the report.

Home builders are happy with the numbers because the homes built are paying their way by generating permit fees, impact fees and jobs.

So, they say the question now becomes: If builders are contributing their fair share, why is there still a perceived lack of services and infrastructure in Beaufort County?

That is the conversation home builders now want to begin with residents and elected o cials. “It seems like we’ve kind of been hit in recent years actually with that shaking finger, saying ‘You’re not paying your way,’ ” said Ashley Feaster, executive o cer of the Hilton Head Area Home Builders Association. “Hopefully, this will help us lead and open up more discussion. Housing is not a big bad bully that’s coming in here. Our members are not massive producers of homes that can’t keep up with sewer lines. Home building here is actually a major economic provider.”

Feaster said her organization has already been in touch with state and local legislators about using the study’s findings to change the debate over funding for schools.

Local politicians have long bemoaned the state’s education formula that sends only a small portion of state funding back to Beaufort County because of the average wealth of residents. That causes the school district to rely heavily on tax dollars and impact fees, Feaster said.

“We shouldn’t expect builders that are going in to build houses for retired people to have to pay for the education system,” she said. “That’s where we see disparities. You’re going after the wrong people.”

Method

The study uses as its base the number of homes constructed in the county in 2008, which was 890. It then split the impact into three phases. The first looked at the direct and indirect impact of construction activity through jobs created, income to suppliers and builders, taxes and impact fees. Phase two looked at the ripple effect of spending that other local businesses profit from.

The third phase looked at the ongoing annual effect from taxes and spending when the homes are occupied.

The study then puts a number on the burdens associated with new housing by factoring in the average number of vehicle trips generated per home, the average number of school-age children and the average number of gallons of water consumed per day.

Added onto that are construction costs needed for infrastructure: new schools, courthouses, sewer lines and roads to meet the increased demand of new residents.

All of the research shows that housing is paying its way, even if it takes several years to pay off major public investments like new schools, Eisenberg said.

“They’re still fantastically fast” in paying off the debt, he said. “The notion that housing doesn’t pay its way, and doesn’t contribute enough, is completely wrong.”

The formula used for the study is one the national association has used for more than 600 different communities over 13 years. Most of those reports show housing paying for itself in a few years.

Occasionally, a few studies do show the housing not paying its own way. He wouldn’t say which communities specifically had that problem.

“If the customer doesn’t release the report, I can’t tell you,” he said. He quantified the amount as “a few percent of the time.” That problem usually arises when a community has low or no impact fees and a weak real estate market, he said.

Reaction?

Builders are looking at the report as ammunition to defend themselves. But it remains to be seen if critics will relent.

Other similar studies in recent county history have met with mixed reaction.

An economic impact study conducted by the state Division of Aeronautics for the Hilton Head Island Airport in 2006 was cheered by airport supporters and cited frequently by local offcials. The study’s finding that the airport pumped $81 million into the local economy became part of the public dialogue about the facility’s future.

But a public opinion poll conducted by an independent island resident in 2007 was largely written off as biased. That study showed a majority of island residents supported expanding the airport. It was arranged and paid for by a private pilot, and critics called many of the questions unfair or unbalanced.

Both Feaster and Eisenberg are from organizations that represent the interests of home builders, but both said they stand by the credibility of the housing study.

They said the model has been used hundreds of times over the years as an integral part of public debate. The method is used in universities and other research around the country, Eisenberg said.

“If the reports weren’t doing any good or weren’t getting any traction, we wouldn’t be getting any business, which must mean people are paying attention to us,” he said. “We’ll give our technical documentation to whoever wants it. The full monty is open and for display.”