Why housing is good for the economy, the country and all of us…

By Mark Radelow, Sudberry Properties, Member BIA Board of Directors
We live in interesting times. Despite a continued housing crisis in our state where we cannot build the housing stock needed, people continue to vilify our industry and those of us that participate in it. Despite this, I believe we need to be proud of what we do and what we provide for this country. What we do every day impacts the economy, helps fund the operations of the government, and drives stability in people’s everyday lives.

 

Despite the fact that companies like Tesla, Apple, Google and Amazon dominate the media, Real estate, and housing specifically, continues to be a major driver of the economy. According to the Bureau of Economic Analysis the US GDP in 2018 was slightly over $18 trillion. Housing and related activities contributed $2.76 trillion or approximately 15% of total GDP. For comparison the ENTIRE retail industry only contributes $905 billion or 6% of total GDP.

 

Real Estate not only is a big contributor to the overall economic engine of the country it is also a major driver of revenues to Federal, State and Local governments; enabling them to provide the services they are responsible for.  Revenues from Real Estate find their way to government coffers in a variety of ways.  There are property taxes, Mello Roos, other bonds,  development impact fees, plan check fees, water fees, sewer fees, traffic fees, park fees, school fees, police fees, fire fees, plan check fees, grading fees, affordable fees… the list goes on and on.  Let’s look at just ONE of those fees, Property Taxes.  According to the Tax Policy Center, in 2016 Property Taxes contributed $503 billion in State & Local tax revenue or 17% of all General Revenue that year.  More than Sales Tax, Individual Income Tax or Corporate Income Tax.

The final and perhaps most important piece of the puzzle is how housing impacts individual personal finances.  In addition to the more qualitative impacts on housing such as the security it provides there are meaningful quantitative impacts as well.  There are many studies out there that outline that home ownership is an efficient way to build long term wealth but this can be distilled down to a much simpler point.  Owning a house is a forced savings plan.  By owning that house and making those monthly payments you are building equity that one day can be unlocked when you retire and downsize.  Those funds that occur from the building of equity from paying the mortgage plus the long term appreciation of the home can help fund a vast majority of people’s retirement needs.  If we look at the long term unfunded liabilities of the Social Security System we can see that other sources will need to play a much bigger role.

Despite all the rhetoric in today’s world that vilifies our industry and the people in it we must remember all of the benefits that what we do provides.  Every day we go out and build shelter for people.  For families.  For friends.  When you look at that plus the economic impact we make on the country it becomes obvious how important what we do is and why we need to fight for it.