The health of housing is key for the overall state of the U.S. economy and housing stands poised to serve as an engine of job growth with the right policies in place, the National Association of Home Builders (NAHB) told Congress.
Testifying before the Senate Banking Committee's Subcommittee on Economic Policy during a hearing examining the drivers of job creation, NAHB economist Robert Dietz said that home building and remodeling have generated 274,000 jobs over the past 2 ½ years.
"This expansion has direct economic benefits," said Dietz. "Housing provides the momentum behind an economic recovery because home building and associated businesses employ such a wide range of workers."
Employment from new home construction and remodeling has a wide ripple effect. About half the jobs created by building new homes are in construction. They include framers, electricians, plumbers and carpenters. Other jobs are spread over other sectors of the economy, including manufacturing, retail, wholesale and business services.
NAHB analysis of the broad impact of new construction shows that building 1,000 average single-family homes generates:
2,970 full-time jobs
• $162 million in wages
• $118 million in business income
• $111 million in taxes and revenue for state, local and federal governments
Similarly, construction of 1,000 rental apartments, including units developed under the Low Income Housing Tax Credit, generates 1,130 jobs while $100 million in remodeling expenditures creates 890 jobs.
Currently, housing comprises about 15.5% of GDP but Dietz said the industry still has room to grow.
"Typically, housing represents 17 to 18% of the GDP," he said. "With a growing population and an aging housing stock, NAHB forecasts that single-family construction will increase 22% in 2014 to 760,000 units and multifamily production will rise 6% to 326,000 units."
Noting that 2014 should be the first year since 2007 in which total housing starts exceed 1 million homes, Dietz said this expansion will produce jobs. "In April alone, home builders and remodelers added 13,100 jobs," he said.
NAHB estimates that total housing construction over the next few years should return to just under 1.7 million combined single-family and multifamily starts on an annual basis.
Homeownership also represents the most important investment and source of savings for most middle class households.
The latest economic data show that the primary residence represents 62% of the median home owner's total assets and 42% of their wealth. Moreover, almost two-thirds of all U.S. households own a home, while just 50% possess a retirement account and only 16% own stocks and bonds.
Though homeownership remains a cherished American ideal, access to safe and decent affordable rental housing is needed for those households for whom renting is the best choice. The Low Income Housing Tax Credit, the nation's only affordable housing production program, serves a critical role in this regard. Since its inception, the tax credit has produced and financed more than 2 million affordable rental apartments.
Industry Faces Several Challenges
While home construction is poised to continue to expand and add jobs, builders continue to face persistent headwinds. These include access to building lots, rising building material prices, access to builder loans and worker shortages in some markets.
Additional challenges are the lack of policy certainty in areas connected to housing. To help the industry play its traditional role as a job creator, Dietz called on Congress to ensure that undue regulatory burdens do not hinder economic and job growth. "Regulations imposed by the government at all levels account for 25% of the final price of a new single-family home built for sale," he said.
On the tax front, Dietz urged lawmakers to protect the mortgage interest deduction and Low Income Housing Tax Credit, which are critical to ensuring the growth of the middle class and access to affordable housing, and to enact a tax extenders bill that would retroactively extend expired tax rules such as the minimum 9% credit rate for the Low Income Housing Tax Credit and residential energy efficient tax credits for new construction and for retrofitting existing homes.
Passing comprehensive housing finance reform that includes a federal backstop to ensure the availability of the 30-year mortgage, increase private capital in the marketplace and protect the American taxpayer would be a net positive for job creation, he added.