January 2003

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Guest Commentary 

Harry C. Elliott III, president of Elliott Homes, Inc., in Folsom, is president of the California Building Industry Association. He wrote this article for Cal-Tax Digest. The report on the economic impact of homebuilding is available at www.cbia.org.

A recently released economic report reveals that home construction produces substantial benefits to the economy and the state’s fiscal health.  That’s good news as California’s pending fiscal crisis demands a robust revival of the state’s economy.

The report, entitled The Economic Benefits of California’s Housing Industry, found that new housing construction generates profound “multiplier” effects and has a great influence on other sectors of our economy. Specifically, the study, by the prestigious Sacramento Regional Research Institute, quantifies the economic and job-creating benefits of new housing construction on the California economy, including these multiplier effects. For example, the study found that new housing construction:

• produces nearly $40 billion in economic activity per year;

• generates more than 359,000 jobs each year, and

• generates $1.95 in economic activity for every dollar spent.

These numbers are particularly impressive given, again, they are based on production levels that are less than 60 percent of the homes the California Department of Finance estimates we need each year.

Those of us in the homebuilding industry have always known that housing was a staple to local, state and national economies. We’ve long recognized that the benefits of our industry range far beyond the bricks and mortar you see at a job site or the employees you see skillfully crafting and building someone’s future home. True, the homebuilding industry benefits hundreds of thousands of individuals directly under our employ, but when all of the employees who work in supporting industries are taken into account and all of the economic activity involved is considered, the results are astounding.

Three years ago, California homebuilders joined the California Taxpayers’ Association, the California Chamber of Commerce, the Western Center on Law and Poverty and others to form the Job-Center Housing Coalition – dedicated to pursuing state policies to increase the state’s supply of housing.  Indeed, the imperative at the time – recognized by the diverse group of business leaders, community organizations, housing advocates, labor groups and other members of the coalition – was created by the need to affordably house a growing California workforce and replace unfriendly state policies with those to encourage necessary private housing production.

Yet, even after some notable legislative successes, the Job-Center Housing Coalition’s work is not done. Again, California continues to produce barely half its annual housing need and is home to 18 of the nation’s 25 least affordable housing markets, including nine of the worst 10.

But, in addition to the very clear imperative for more housing – that was affirmed with the advent of the Job-Center Housing Coalition in 2000 – a new one is emerging as California lawmakers face a daunting fiscal challenge and a sagging economy.

Indeed, this newly released report on the importance of housing to the state’s economy underscores the message delivered for years from the Job-Center Housing Coalition to policy-makers: Smart housing policies are good for California, and without reforms to remove barriers to housing production, the state will continue to under-produce the housing – and the economic growth – it needs.

California homebuilders are grateful for the strong support they’ve received from the California Taxpayers’ Association and the broader Job-Center Housing Coalition to achieve our shared goal of increasing the supply of housing in California. We’ve united behind the belief that a decent, affordable home is foundational to the quality of life for all Californians. And, thanks to this recent report, we are reminded that homebuilding is foundational to the state’s economy.