New Study Shows Cities Reap Fiscal Rewards From Housing

July 26, 2007

The fiscal benefits from new home construction generate solid revenue streams for state and local municipalities, according to a study by the California Homebuilding Foundation (formerly the California Building Industry Foundation).
"The Housing Bottom Line: Fiscal Impact of New Home Construction on California Governments," challenges frequent claims that new home construction costs state and local governments more in services than it generates in tax revenue. The study shows new median-priced homes provide a strong one-time fiscal benefit upon completion and continue to generate ongoing revenue thereafter.

The study said that a city nets on average $3,017 in one-time benefits for each new median home built, ranging from $2,353 in the San Diego area to roughly $6,800 in portions of the San Francisco Bay Area, while county governments net averages of $1,706 in one-time benefits, and the state recognizes a windfall $15,858 through corporate and sales tax revenue.

"Although many consulting firms and university researchers have looked at the fiscal effects of a specific development project on one city or one county, no previous study that examines the overall fiscal effects of housing at the state level or looks at multiple cities or counties has been found," said Mathew Newman, one of the authors of the study. "This analysis seeks to fill the gap in the existing literature with respect to the statewide fiscal impact of new housing, focusing on whether new housing does in fact ‘pay its own way."

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