September 2011
Affordable Housing’s Contribution
to Economic Development
The Issue
Many Americans support the development of affordable
housing. But they may nonetheless object to allocating public
funds for affordable housing when the local economy is
struggling. However, the data show that investments in
affordable housing contribute significantly to local economic
development.
The Facts
Rehabilitation, construction, and production of affordable
homes can put people to work, leading to increased spending
in the local economy.

A study of the economic impact of expenditures by ten
large public housing authorities found that the
combined spending by all ten agencies generated an
estimated $8.2 billion for their regional economies.1

This study utilized an economic impact modeling system
to calculate the ripple effect of the public housing
authorities’ spending on their regional economies and
found that for every $1 in direct spending, the region
experienced $1.34 in induced or indirect expenditures.2

The National Association of Home Builders (NAHB)
estimates that the construction of the average single
family home generates 3.05 jobs and $89,216 in taxes.
NAHB further estimates that the average new
multifamily rental unit generates 1.16 jobs and $33,494 in
taxes and every $100,000 in residential remodeling
generates 1.11 jobs and $30,217 in taxes.3
It is easier for businesses to attract and retain workers when
housing is available in a range of prices that workers can afford.

A 2001 study in the Twin Cities area found that
approximately 5,000 additional households could be
attracted to the area if workforce housing were
available.4

The additional households would lead to an estimated
$128 million in additional annual consumer spending
and $137 million in additional business income for their
employers.5
The Answers to Common
Questions
Isn’t attracting jobs more important than
providing affordable housing?
A balanced economic development plan
should include both commercial growth and
affordable housing. Where decent,
affordable housing is lacking, firms often
encounter difficulty hiring and retaining
workers.

Boeing cited the rising costs of housing
and commuting as one of the main
reasons for the relocation of its corporate
headquarters from Seattle to Chicago.8

Small businesses are affected as much or
more. "It's hard enough for small
employers to find good people," a small
business owner in Suffolk County, Long
Island was quoted as saying. "If there
were more affordable housing … I would
definitely have a broader range of
potential employees to choose from."
Why do we need more housing for
workers when so many homes are
vacant?
In many communities, vacant foreclosed
homes can be part of the solution to the
affordable housing shortage facing low- and
moderate-income households, but the
properties will often need to first be acquired
and rehabilitated by an affordable housing
provider in order to be suitable for
occupancy.
Continued on next page
Prepared by the Center for Housing Policy’s
Housing Research and Advisory Service
PAGE 2
The Answers to Common
Questions, cont’d.

Vacancies due to foreclosure are often
subject to vandalism and may even be
stripped of wiring, pipes, appliances, and
siding. The rapid deterioration of vacant
foreclosed properties may leave them
more suitable for demolition than for
occupancy. Extensive rehabilitation may
be needed before the homes can be reoccupied.

While home prices have fallen around
the country, they remain unaffordable to
most working families. In the fourth
quarter of 2009, the salaries for
neighborhood wage earners, such as
police officers, elementary school
teachers, retail salespeople, and
licensed practical nurses, fell short of the
level needed to afford to purchase a
home in many of the markets studied—
despite home prices dropping in 192 out
of 207 metro markets.

As home prices have declined, rents
have actually gone up. Many workers’
salaries are not sufficient to afford to rent
a market-rate apartment.
When done well and as part of a comprehensive community
revitalization strategy, the development of quality, affordable
housing can stimulate neighborhood revitalization. The
economic benefits may be due in part to the replacement of
dilapidated properties or underutilized lots with new or
significantly rehabilitated homes.

A study of an initiative in Richmond, Virginia, that
featured the development of new mixed-income
housing in seven struggling neighborhoods found that
after five years housing prices in the targeted
neighborhoods appreciated almost 10 percent faster
than the citywide average.6

Prices in non-targeted areas of Richmond, but within
5,000 feet of the targeted neighborhoods, appreciated
over five percent faster than the citywide average.

A study in New York City looked at price appreciation in
the vicinity of subsidized housing and found that prices
appreciated more in the immediate vicinity of newly
built or rehabilitated subsidized homes than in other
parts of the city. In addition, the tax benefit of these
subsidized homes to New York City exceeded the
money the city put into the developments.7
Green affordable housing can stimulate the economy by
increasing purchases from local businesses.

Using local materials reduces the carbon footprint of
housing development or rehab and is therefore a
common practice for green affordable housing.
Prioritizing the use of local materials leads to increased
business for local manufacturers and industries.
Isn’t overproduction of housing what got
us into the economic mess we’re in
now?
No. The foreclosure crisis is due primarily to
the use of unaffordable and unsustainable
mortgage products—products whose
popularity was related at least in part to the
shortage of homes at levels that families
could afford with traditional fixed-rate
mortgages.
Some markets did experience an overproduction of higher-priced homes, and this
supply will need to be worked through before
the higher-end market can grow again. But
even in markets with an oversupply of higherend homes, there were often shortages of
housing affordable to working families. The
problem may be better described as a
mismatch between supply and demand,
rather than overproduction.
PAGE 3



Affordable transit-oriented development, as well as
other compact forms of development, can stimulate
the local economy by increasing spending and earning
in the area.
Affordable housing located in close proximity to public
transit or places of employment can help reduce
families’ combined costs for housing and transportation,
increasing the amount of funds available to meet other
expenses. Locating retail, grocery stores, restaurants,
and other services nearby can increase the chances
that families’ additional disposable income will be spent
near home and flow back into the local economy.
For more information on the connections
between affordable housing and
economic development, view the
Center for Housing Policy report,
The Role of Affordable Housing in Creating
Jobs and Stimulating Local Economic
Development: A Review of the Literature at
www.nhc.org/media/files/Housing-andEconomic-Development-Report-2011.pdf
Well-located affordable housing can also reduce
barriers to employment, and potentially lead to
increases in earned income, by giving families better
access to jobs at local businesses and in transitaccessible employment centers.
Image on page 2 provided courtesy of City of Austin/
Neighborhood Housing and Community Development
References
Center for Housing Policy
1900 M Street, NW
--- 2007. Assessing the Economic Benefits of Public Housing.
Washington, DC: Council of Large Public Housing Authorities.
1
2
Suite 200
Washington, DC 20036
Ibid.
Phone: (202) 466-2121
Liu, Helen Fei and Paul Emrath. 2008, October. The Direct
Impact of Home Building and Remodeling on the U.S. Economy.
HousingEconomics.com.
Fax: (202) 466-2122
3
Email: [email protected]
Website: www.HousingAdvisor.org
Maxfield Research Inc. and GVA Marquette Advisors. 2001,
September. Workforce Housing: The Key to Ongoing Regional
Prosperity, A Study of Housing’s Economic Impact on the Twin
Cities. Minneapolis, MN: Family Housing Fund.
4
5 Maxfield
Research Inc. and GVA Marquette Advisors. 2001.
This Talking Points handout is intended for use by
Accordino, John, George Galster and Peter Tatian. 2005, July.
The Impacts of Targeted Public and Nonprofit Investment on
Neighborhood Development: Research Based on Richmond,
Virginia’s Neighborhoods in Bloom Program. Community Affairs
Office of the Federal Reserve Bank of Richmond.
Housing Solutions Service subscribers, and may be
Schwartz, Amy Ellen, Ingrid Gould Ellen, Ioan Voicu, and
Michael H. Schill. 2006, November. “The External Effects of
Place-Based Subsidized Housing.” Regional Science and Urban
Economics 36(6): 679-707.
maintained.
6
7
Katherine Heaviside, President of Epoch 5 Marketing, Inc.,
quoted in “The American Dream,” Newsday (Friday, May 25,
2001): C6.
8
reproduced by subscribers for individual or noncommercial purposes provided that it is
reproduced intact and appropriate attribution is