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Growth is Good and Homes Can Pay For Themselves: 
February 25, 2003

Despite often heard statements to the contrary, denying residential development is often not fiscally sound.  New homes can more than pay for themselves.  Claims that new homes do not pay for themselves come from a limited review of property tax receipts from and expenses allocated to service homes.  A report that has become the bible of the no growth movement and NIMBYs everywhere, published in 1995 by the Southern New England Forest Consortium, Inc., called "Cost of Community Services in Southern New England" ("COCS"), as are similar studies, are severely flawed for several reasons:

  • The COCS report’s "fall back ratios" used to allocate municipal expenses to the three categories of land uses studied (i.e., residential, commercial/ industrial, and open spaces) are admitted in the report as based on relationships that have "not been established or widely accepted - and may not even exist."  Has this incredible disclaimer been lost on people?
  • The COCS data is a snapshot in time - using only 1993 data.  But significant increases have taken place in the state’s average education cost sharing grant to municipalities since then.  There are wide differences among towns in the amount of ECS grant funds received from the state but that is an issue of the fairness of the ECS formula, not of the total revenues governments at all levels receive from homes.
  • The only accurate comparison of property taxes to municipal expenses must include a life cycle analysis of a home and the services it requires over time rather than a year’s snapshot in time (e.g., a home continues to pay property taxes before and after children are in the public schools).  Looked at another way, even using a snapshot in time remember that not every home has school age children, yet all homes are producing tax revenues.  In fact, the number of school age children in Connecticut homes averages about 0.5 children.
  • The revenue side of these fiscal "studies" do not consider the value of open space taken by local governments during the subdivision process, which can be thousands to tens of thousands of dollars per home.
  • The revenue side of the COCS report and other studies 1) do not consider the income taxes and sales taxes generated by residential development (i.e., every 1,000 new homes generates $79 million in wages, and $42 million in combined federal, state and local revenues, 2) do not consistently consider the conveyance tax paid per home lot (sometimes more than once – i.e., when land is sold from the landowner to the developer, again when a developer sells it to a builder and again when a builder sells it to the buyer), 3) do not consider the 245 full-time jobs created per 100 new homes constructed, or the $9,000+ on average spent by each new home owner in the local community in the first year alone to furnish, decorate and landscape the home, 4) may not consider many other fees or approval conditions associated with new home construction, amounting to thousands of dollars paid to the government or for the public’s benefit, and 5) generally do not consider the direct connection between the construction of new homes and the growth in commercial real estate.

Policies relating to growth management must have a full understanding of the realities of fiscal impact analysis.  For example, spread out development is not always more costly than compact development.  While, generally, lower density development generates greater capital infrastructure costs, this type of development usually translates into higher market values and more revenues on a per unit basis.  Also, with infill or redevelopment, the cost of upgrading infrastructure and acquiring utility easements may be much higher than placing new infrastructure on the suburban fringe.  The bottom line is that every project is unique and must be fiscally analyzed using accurate and appropriate data.  When such studies are done, many more residential projects than not are shown to be fiscally positive for municipalities.

At the end of the analysis, if there are net costs associated with housing in a particular project, then so be it.  Towns and cities are local governments.  It’s their job to provide services to and educate the children of local residents.  Moreover, the revenues produced by new homes are greater than the revenues produced from the existing housing stock (i.e., where growth objectors live).  Thus, it rings disingenuous to builders when objectors say that towns cannot afford more new homes – because, frankly, to use the objector’s fiscal arguments, towns cannot afford objectors either.  As aptly stated by former HUD Secretary Andrew Cuomo, Feb. 1999:  "It’s not an option to stop building.  It would be economic death."

Antigrowth, managed growth and environmental advocates have thrown about the term "urban sprawl" so much to label anything about land use they don't like that the term has developed negative connotations in the public's mind.  Sprawl is actually un-definable and the vast majority of people who will readily admit that they are against sprawl also live in it and have contributed to it by their own housing choices.  As stated in the New Republic in a recent land use study, "urban sprawl is caused by affluence and population growth.  Which, precisely, do we propose to eliminate?"

New Homes & Home Ownership Should Be Widely Supported

Denying residential development is never socially sound.  While anti-growth and managed growth advocates usually tout the intangible benefits to society and individuals of having quality open spaces and a clean, sound environment (as they should since these are very real positive intangibles), safe, decent and affordable homes also have many intangible benefits to society.  Homes are one of the few, if not only, places to where we can escape and find solitude, where we can do just about anything we want, where we raise our families, entertain our friends and play and sleep and build our dreams.  New homes create the greatest gift to people’s hopes for a better life.  Homes are our castles, and safe, decent, affordable shelter is a necessary ingredient to sustain life.

Home equity accounts for more than half the total net wealth of the typical home owning family, making home ownership the fundamental first step toward accumulating personal wealth.  Abraham Lincoln said that "the strength of a nation lies in the homes of its people."  Henry Cisneros, former HUD Secretary, said that the opportunity to own your own home defines what America is all about and is the single most important reason why so many people want to come to America.

Thus, as an industry that builds people’s dreams, we urge policy makers to consider the impact of laws and regulations on our ability to provide safe, decent and affordable homes to people where they want them to be built.  If builders are not allowed to meet the demands of the marketplace, then people will move elsewhere.  And Connecticut loses.

The results of not accepting expected growth and not adopting the policies outlined above will be the all too familiar symptoms of failed land use control strategies of the past:  sky rocketing house prices resulting from artificial constraints on the housing supply; high land costs and other disincentives for new and existing businesses and employees (e.g., disincentives such as the inability to live or work in the place or in the home of your choice); and long commutes for nurses, teachers, policemen, store clerks and many others who work in a community but cannot afford to live there.  The defining criteria for CT’s deep recession of 1989 to 1996 was that we did not grow.  Housing values went down and thousands lost their jobs.  Policies that could precipitate a return to that deep negative cycle or prevent us from fully participating in the nation’s growth should be avoided.

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