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Industry
News:
Remodeling:
Wow Is It Important to the Local Economy!
By Elliot Eisenberg, Ph.D.
NAHB Senior Economist, Elliot Eisenberg,
Ph.D., gave a presentation to the
Home Builders Association of Peoria,
Ill., about the economic benefits
of the remodeling industry.
While I often give presentations to
builders and politicians about how
important new home building is to
the local economy, last month I had,
for the first time, the pleasure of
extolling the many virtues of remodeling
and how important it is! The event
was the summer meeting of the Remodelers
of Central Illinois held at the offices
of the Home Builders Association of
Peoria and I was the invited speaker.
Rather than just plow through an endless
supply of slides with graph after
graph, as economists generally do,
I began by first explaining how important
residential construction is to the
local economy. I then proceeded to
compare it to remodeling activity.
By the end of evening everyone was
far more appreciative of what remodeling
does for the local economy.
First, just like new construction,
remodeling injects a tremendous amount
of money into the local economy. Whether
you build a $300,000 house or do a
$300,000 remodeling job, both put
money into the hands of local tradesmen
(in the form of wages), local suppliers
(in the form of purchases), and local
governments (in the form of permits
and sales taxes). And, once in the
economy, that money creates a ripple
as it passes from person to person.
For example, a tradesman may spend
part of his paycheck at a local restaurant.
The waitress may then spend some of
that money to get her car fixed and
the mechanic may spend part of his
income going to a chiropractor. While
these transactions may be small, together
they add up.
On average every $100 million of remodeling
work creates 430 full time jobs, $2.9
million in local taxes and $47.7 million
of local income. But don’t forget
the ripple effect. It creates 350
more jobs, $2.8 million more in taxes
and another $22 million of local income.
Combined, the two phases result in
780 jobs, $5.7 million in taxes and
$67.7 million in local income!
Thought of another way, every 10 jobs
created during the remodeling phase
leads to eight more jobs during the
ripple phase while each dollar of
tax revenue generated initially creates
another tax dollar due to the ripple.
Finally, every dollar of local income
from the first phase creates 46 more
cents of local income courtesy of
the ripple.
Lastly, while new construction almost
always results in a permanent boost
to the local economy, there may well
be a permanent boost from remodeling
too. If the remodeling activity results
in an addition to the structure then
its taxable value rises and the flow
of property taxes to all local governments
rises.
After the presentation a very lively
question and answer session that lasted
well over an hour ensued. A number
of very thoughtful questions were
asked showing there is a real thirst
for this knowledge. It was also clear
that those in attendance left far
more able to articulate how and why
remodeling matters so much. I was
gratified to have connected with the
audience and hope to have another
chance to address a group of remodelers
soon.
Elliot Eisenberg, Ph.D. is a Senior
Economist at NAHB. He can be reached
at 800-368-5242 x8398. He loves hearing
from remodelers and builders, and
hopes to visit your Remodelers Council
in the near future.
________________________________________________________________________
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