The Housing Bottom Line Fiscal Impact of New Home Construction on California Governments

This study examines the fiscal impact of new housing on California governments. Specifically, we looked at both one-time and new ongoing revenues and expenditures at the city, county, and state levels. We estimated costs and revenues using an average, per-household-based approach in which the total costs or revenues associated with current residents were divided by the number of current households to arrive at an average per-household cost or revenue calculation. The per-household figure for current households was applied to new households to estimate future revenues and costs. In certain cases, we adjusted this per-household method to incorporate differences between new and current residents based on socioeconomic characteristics of a typical new household, such as the likelihood that a new household has a school-age child, the projected spending of the new household members on taxable goods, and the probability of utilizing government-supported social service or health programs. Ultimately, we found that for a new, median-priced house, the ongoing fiscal impact is positive, at $771, $190, and $3,498 at the city, county, and state levels, respectively. In addition, one-time net revenues are on average positive, producing an additional $3,017, $1,706, and $15,858 for cities, counties, and the state, respectively, each year. In sum, new housing construction has a substantial net fiscal benefit to the state and local governments in California. JuNe 2007 executive Summary The purpose of this analysis is to estimate the fiscal impact of new housing in California. Specifically, our analysis seeks to answer the question: What is the fiscal impact on city, county, and state government budgets when a new house is built? This analysis examines both the one-time costs and revenues associated with the construction of a new, occupied dwelling, as well as the ongoing service costs and revenue effects of new housing, Housing has long been recognized as a significant component of the state's economy. Numerous studies and experts have documented the impact of new housing on job creation and overall economic growth. The fiscal impact of housing, however, has been the subject of far less analytical examination. Although many consulting firms and university researchers have looked at the fiscal effects of a specific development project on one city or one county, we found no previous study that examines the overall fiscal effects of housing at the state level or looks at multiple cities or counties (let alone all the municipalities in California, as we have in …