New study puts economy on growth’s shoulders

People who crunch numbers for a living are an interesting breed, especially if they are in a bowtie on stage, energetic and talking about Clallam County’s housing market.

Dr. Elliott Eisenberg, senior economist with the National Association of Home Builders, spoke at a Feb. 2 Clallam Economic Development Council dinner about the impact of home building in Clallam County, comparing costs to revenue for local governments.

“People systematically ignore the ripple effects of homebuilding in their communities,” Eisenberg said into a microphone at the 7 Cedars Casino. “Because the homes go in one or two at a time, or a subdivision here and a short plat there, people often don’t realize the cumulative effects — add it all up and you have mucho dinero.”

Eisenberg did add it all up. He put Clallam County’s numbers into a model he uses to study the impact of housing on individual communities nationwide. The study was commissioned by the North Peninsula Building Association and the Realtors’ associations of Sequim and Port Angeles in partnership with the Economic Development Council.

From center stage to the sides of dinner tables, Eisenberg’s presentation covered the economic benefits on new homes in three ways: the construction phase, the ripple effect and the occupancy rate.

The construction phase most people understand, he said. The necessary labor, materials and ancillary service jobs associated with building a home bring general revenue to an area. For instance, building 100 homes in Clallam County in 2006 would create $14 million in income, $1.7 million in taxes and 356 jobs, according to Eisenberg.

“Then the ripple effect of that income being spent, creating income for others and creating jobs in other sectors, is about 40 percent as big as the construction phase,” he said. “Then once those homes, which aren’t cheap, are occupied, those fairly well-to-do residents continue the trend of investing their dollars locally. As long as money is spent locally, it keeps paying forward for several years.”

After about a decade, the residents of the 100 homes produce $54 million in general income, $11 million in taxes and 604 jobs, about 100 of which are permanent, according to Eisenberg.

Where do the millions go?

The millions either go into the local economy or leave the area and do little to service the county, other than state taxes. The taxes, assuming they are spent well, are invested in the local infrastructure and economy as well, paying for schools, sewers and other long-lasting services.

“The question that brings me here is ‘Does housing pay for itself?’” he said. “I can tell you, it does.”

While Eisenberg didn’t account for all government expenses and their associated rising costs, he also left out intergovernmental transfers, or state supplemental funding for certain mandated activities.

Eisenberg figures each of the 100 new homes would need $6,000 in government services a year and $11,000 worth of public infrastructure.

“The operating surplus is large enough that it can be used to service and pay off all debt incurred by investing in structures and equipment at the beginning of the first year by the end of the first year,” Eisenberg’s study reads. “After 15 years, the homes will generate a cumulative $16 million in revenue compared to only $9.6 million in costs, including annual current expenses, capital investment and interest on debt.”

Boiled down, that means a new house pays for itself within one year in Clallam County and for every year after that it pays for future needs. But, what happens if no one purchases the newly constructed house or if the owners leave it unoccupied?

Ailing market

Eisenberg said when the time it takes for a new home to pay for itself is a small number, like one year for Clallam County, it raises a red flag in his mind.

“When the number of years for payback on a house is small, it means prices on homes are high and that’s a symptom of an ailing market,” he said. “It’s something to be concerned about.”

While the purchase and occupancy of one home pays for that one home within a year, other empty houses will affect the overall payback of new construction. Eisenberg referred to his hometown, where each home sells for more than $1 million, then looked at its opposite.

“Look at a place without construction; Shouldn’t Clallam Bay or Detroit be doing great if new construction is bad?” Eisenberg asks. “In contrast, look at Atlanta, where the city is building 50,000 homes a year with an average price of $200,000, nearly half of (Sequim). Clearly growth isn’t the evil thing it’s reputed to be.”

Eisenberg listed other benefits associated with homeownership. Sociologically, homeowners raise less troubled children. Financially, a home acts as an economic buffer against sudden financial emergencies. Economically, the pay back from a new home to a local community creates an enhanced service base and infrastructure.

For more information about the contributing agencies, visit:

• The Economic Development Council at

• The National Association of Homebuilders at

• The North Peninsula Builders Association at

• The Sequim Association of Realtors at

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