H12 Economic Impact Analysis: Hickory Creek

Transcription

1 H12 Economic Impact Analysis: Hickory Creek 2012

2 Executive Summary $5.3 million of local income generated from Dallas Habitat s construction efforts in Hickory Creek 117 new jobs generated in construction and related industries $117,000 paid in local taxes and fees from home sale transactions $244,000 contributed to the local economy in first-year move-in spending by new Dallas Habitat families in Hickory Creek Overview of Dallas Habitat s Activities in Hickory Creek Dallas Area Habitat for Humanity (Dallas Habitat) is dedicated to transforming communities by promoting affordable homeownership. Dallas Habitat recently finished its building efforts in the Hickory Creek subdivision neighborhood. Hickory Creek was a subdivision that suffered from the housing collapse that is still impacting Texas homeowners. As a result of the housing crisis, home builders left several unsold homes and vacant lots in the subdivision. In 2011, Dallas Habitat started building in the area with the intent to bolster the community, protect the property investment of previous homeowners in the subdivision, and provide a vehicle for economic growth in Hickory Creek. Building in an unfinished subdivision not only creates affordable housing opportunities, but it also helps stimulate the local economy and promotes short and long term job creation. The economic impact of the project includes construction and other housing related jobs, as well as new income to local businesses from the workers and from new residences. While Dallas Hickory Creek Economic Impact Report Page 2 of 11

3 Habitat normally uses volunteers extensively, Hickory Creek was built entirely by subcontracted labor. This report examines the local economic impacts created by Dallas Habitat s building activities in Hickory Creek. Methodology In order to examine the economic impact of building in Hickory Creek, Dallas Habitat used a data collection tool made available through the Success Measures system. Success Measures was provided through a partnership of Habitat for Humanity International and NeighborWorks. Success Measures uses the N-Best model created by Michael Collins for the NeighborWorks Campaign for Home Ownership, Neighborhood Reinvestment Corporation. Dallas Habitat compiled the cost, mortgage, and homebuyer data for the 81 new single family homes built in Hickory Creek. The compiled data included the price of acquiring land, cost of construction (excluding the land price), sales price, the financed mortgage amount, monthly income of homeowners, and the down payment of homeowners. The interest rate on each mortgage at the time of sale is also part of the model; however, the Habitat homeownership model is based on a 0% mortgage so the interest rate is not a factor. After compiling the data, the Success Measures economic model was able to provide information about how Dallas Habitat s building efforts in Hickory Creek affected the local economy. The economic impact of construction can be direct, indirect, or induced. Direct effects describe the impact of Dallas Habitat construction spending on the local economy. Indirect effects reflect the economic impacts that arise from the activities of Dallas Habitat s vendors. Induced effects are the economic impacts of all of the employees of the various firms spending a portion of their wages in the local economy. Additionally, the sales transactions and spending by the new homeowners also have direct, indirect, and induced effects. The N-Best model divides the economic impacts into five different modules. Module A analyzes figures associated with construction costs in order to determine the one-time benefits to the local economy. Module B uses the sales price of Habitat homes to homebuyers to determine the local economic benefit that was generated through the home sale transactions. Because Dallas Hickory Creek Economic Impact Report Page 3 of 11

4 Habitat does not typically pay brokerage fees and commissions, this section reports actual fees, transfer taxes, and commissions paid. Module C projects the first year spending of new homeowners based on the homeowners average income. The economic impact model also includes Module D, which estimates the amount of continuous economic benefits that the mortgage payments made by Dallas Habitat Hickory Creek homeowners would have on the local economy. This module takes into account interest rates that homeowners pay to lenders. As mentioned, Dallas Habitat does not charge interest on mortgages, and therefore returned a null value for some sections of the module. It should also be noted that local for this report is defined as the entire metropolitan area of Dallas. Hickory Creek Economic Impact Report Page 4 of 11

5 Figure 1. Summary of each module used in the N-Best model Module A One time benefits to local economy Input: Output: Cost of construction(excluding land) per home Total cost of construction (excluding land) Local business income Local wages and salaries Total local income from construction Taxes and fees from construction Local jobs (FTE) in construction and related industries Module B Income from home sales transaction Input: Output: Sales price of 81 Dallas Habitat homes Government transfer taxes and fees (actual) Broker fees and commissions (actual) Title insurance premiums and fees Other settlement charges and fees Local income from home sales Module C First year move-in spending by homeowners Input: Output: Sales price of 81 Dallas Habitat homes Income of the 81 Dallas Habitat homeowners Total Income of homeowners Income to local economy from move-in spending Total local income from construction and move-in spending Total taxes and fees to local governments Module D Economic Value of Mortage Interest Payments Input: Number of homes financed by Dallas Habitat Average home mortgage amount Interest rate on mortgages Output: Average interest rate financed by Dallas Habitat (0%) Average cumulative interest paid over 10 years ($0) Total interest paid to local lenders over 10 years ($0) Hickory Creek Economic Impact Report Page 5 of 11

6 Profile of Hickory Creek Homeowners Dallas Habitat homeowners moved into the subdivision neighborhood Hickory Creek from November 2011 to July The Dallas Habitat homeowners who purchased houses in Hickory Creek had an average gross annual income of $31,654. The income of the homeowners at the time of their mortgage closing was used in the economic impact module. Comparatively, in 2010 the median household income of residents in the Hickory Creek census tract (Census Tract ) was $41,589 1 about one-quarter more than the average Hickory Creek Habitat Homeowner. Demographically, over half of those homeowners (63.4 percent) identified as Black or African American; the remaining 36.6 percent identified as ethnically Hispanic or Latino. 2 The majority of homeowners also identified as female. The median age of the homeowners, as of July 2012, was 33; the ages ranged from 23 years old to 65 years old. Half of all Hickory Creek Habitat homeowners were between the ages of 27 and 42. Nine out of every ten homeowners listed dependents living in the home with them; the average number of dependents was 2.04 dependents with a range from zero to six dependents. Just over one-quarter (28.6 percent) of homeowners filed with a co-borrower. The average household size was 3.27, with a range from 1 to 8 members in the household. Ranging from 1,852 dollars to 3,897 dollars, the average monthly income for Habitat homeowners was 2,626 dollars. The average percentage of the area median income (AMI) was percent based on the 2011 income data. Residents AMI ranged from 36 percent to 71 percent. 1 US Census Bureau Hickory Creek Calyx Report, Dallas Area Habitat for Humanity 2012 Hickory Creek Economic Impact Report Page 6 of 11

7 Construction Cost Benefits to the Local Economy Module A predicts one time benefits to the local economy from construction. Dallas Habitat spent over $7.9 million dollars on construction, excluding land, in Hickory Creek. The resulting economic impacts are shown below. Creation of 117 new jobs Over $960,000 in local business income $4.3 million in local wages and salaries Benefits to the Local Economy from Construction Over $620,000 in taxes and fees from construction costs Figure 2. Projected benefits to the local economy from Dallas Habitat s construction in Hickory Creek The model projects that the local economy benefited by an estimated $5.3 million dollars from the construction in Hickory Creek. This estimate includes $960,000 in local business income from construction and $4.3 million in local wages and salaries. Habitat s building efforts in Hickory Creek were estimated to have created 117 new jobs in construction and related industries as well. Dallas Habitat also paid a projected $620,000 in taxes and fees from construction costs while building and developing Hickory Creek. Hickory Creek Economic Impact Report Page 7 of 11

8 Local Income from Home Sales Transactions Because of the unique home buying program offered by Dallas Habitat, actual expenditures for home sales transactions were used in this section, rather than the projected expenditures from Module B of the economic impact model. Dallas pays very few broker fees or sales commissions. Dallas Habitat paid $261,197 in total closing costs for its 81 homes in Hickory Creek and $117,324 in local taxes and fees for home sales. First Year Move-In Spending by Homeowners Module C estimates the local impact of the first-year move-in spending of homeowners. First-year move-in expenses include property maintenance equipment (i.e., lawn mowers and tools), furniture, appliances, and textiles. Calculations are based on the family s gross monthly income. The total annual income of the 81 Habitat homeowners is $2,564,000. Based on income of the new homeowners, Module C estimates the impact on the local economy from families first-year move-in expenditures to be $243,614. Hickory Creek Economic Impact Report Page 8 of 11

9 Economic Value of Mortgage Interest Payments To calculate the local economic benefit of mortgages, Module D considers the interest rates that each home buyer pays on the loan. Because Dallas Habitat does not charge any interest on its loans, this module does not produce a predicted economic impact. That does not mean, however, that the mortgage payments made by Habitat homeowners have no impact. In fact, these mortgage payments become part of Dallas Habitat s Fund for Humanity, which enables Dallas Habitat to build affordable homes and to continue to offer 0% loans to homeowners. The fund takes Habitat mortgage principle payments and reinvests them to construct new homes in Dallas. The value of the Fund for Humanity also helps with Dallas Habitat s operating expenses and allows it to continue to invest in the local economy. Module D is not designed to take the Fund for Humanity into account when determining the economic value of mortgage payments. Collect mortgage principal payments from existing homeowners Payments are invested to construct new homes Affordability of homes allows new homeowners to spend in the local economy Figure 3. Representation of how the Fund for Humanity benefits the local economy Hickory Creek Economic Impact Report Page 9 of 11

10 Total Added Short-Term Economic Impact Taken together, Dallas Habitat s construction spending for Hickory Creek generated the following projected economic impacts: Local wages and salaries $4,338,760 Local business income 961,785 Taxes and fees (actual) 117,324 First-year move-in spending activity 243,614 Projected Economic Impact Generated by Dallas Habitat's Construction in Hickory Creek $4,338,760 $961,785 $117,324 $243,614 Local wages and salaries Local business income Taxes and fees First-year move-in spending activity The work of Dallas Area Habitat for Humanity in Hickory Creek created affordable homeownership opportunities for 81 first-time homebuyers and helped rescue an unfinished subdivision that might have succumbed to disinvestment and abandonment. Additionally, the construction of the homes had a welcomed positive impact on the local economy during a period of serious economic recession. Hickory Creek Economic Impact Report Page 10 of 11

11 Appendix Data Input for Success Measures Economic Impact Model Local Economic Impact of New Construction in Hickory Creek Project Data Number of houses built 81 houses Average sale price per house $99,792 Average mortgage amount financed 90,656 Average income of homebuyers 31,654 One-Time Benefits to Local Economy from Construction Total cost of construction, excluding land $7,885,452 Local business income (projected) 961,785 Local wages and salaries (projected) 4,338,760 Taxes and fees generated from construction (projected) 620,344 Local jobs (FTE) created in construction and related industries 117 jobs Local Income from Home Sales Government transfer taxes and fees related to home sales (actual) $117,324 Closing costs (actual) 261,196 Additional First-Year Move-In Spending by Homebuyers Total income of new homebuyers $2,564,005 Total generated income to local economy from move-in spending 243,614 Hickory Creek Economic Impact Report Page 11 of 11