Community Booster
Models show that tax-credit housing helps neighborhoods.
Apparently, tax-credit housing isn’t such a bad thing–or at least that’s what a recent study by the National Association of Home Builders says. The study claims not only that tax credit developments create more benefits than costs, but also that they don’t have an adverse effect on nearby properties.
The NAHB researchers used data from 19 projects to develop a model for the typical low-income housing tax credit property. The model captures data from both high-cost and low-cost areas in several regions of the country, but the typical project is assumed to be located in a typical metropolitan area with taxes and other sources of local government revenue set equal to national averages.
The study found that after the tax-credit residents move in, they spend money–even if they don’t have as much as their more affluent neighbors. “They have somewhat lower incomes, but what partially compensates for it is that they will spend that income locally,” says Paul Emrath, assistant staff vice president of housing policy research for the NAHB. “They will spend a higher share of their income on groceries and things than higher-income people.”
Studies like this one could help affordable housing developers sell tax credit projects in the future, says Patrick Clancy, president and CEO of The Community Builders in Boston. “Most times the hot-button issues revolve around who’s going to live there, but cooler heads providing those kinds of studies can be quite helpful,” he says.
–Les Shaver
Steady Performance
Monthly construction pace yields 309,000 starts in 2005.
When it comes to multifamily construction activity, more of the same is just fine. Multifamily housing starts for structures of five units or more increased slightly from 2004, up 2 percent from 303,000 units to 309,000, according to figures from the U.S. Census. The latest figures are not far behind the peak of 315,000 in 2003.
“2005 was just a great year for the construction business,” says Frank Nothaft, vice president and chief economist at Freddie Mac.
A combination of continuing low interest rates and strong economic growth, at about 3.5 percent, kept 2005 construction humming. “The economic expansion is strong enough to generate jobs and raise family incomes, and that translates into demand for housing,” Nothaft says.
This year Nothaft predicts starts may slow to just a shade below 300,000, primarily due to increases in mortgage rates. He expects 30-year fixed rates to hit 6.5 percent in the fourth quarter.
But that’s not necessarily bad news, according to Judd Bobilin, executive vice president at Atlanta-based Novare Group, a high-rise condominium developer. “Slowing has a connotation of being negative,” he says. “I would say it will stabilize.”
Bobilin sees 2006 as being a very strong year for his company’s product type: urban-area high-rises. In fact, condominiums’ share of the multifamily market has grown to about 20 percent, compared to 15 percent 10 years ago.
–Nichola Zaklan