Stressing the tax revenue generated by new homes

Maryland homebuilders plan to outline the economic benefits of development in a study of six metropolitan-area counties.

December 12, 2004|By Bob Erle | Bob Erle,SUN STAFF

The state's homebuilders are embarking on a new campaign to highlight the economic influence of residential construction on local taxpayers and to counter criticism of their supposed role in area sprawl.

Members of the Home Builders Association of Maryland will outline a new study during a conference in Baltimore this week showing the tax dollars that new homes provide area jurisdictions. Builders want to emphasize the jobs that residential construction creates and the tax revenue it generates.

"We wanted to get a scientific analysis for determining what numbers do apply," said John Kortecamp, the association's executive vice president.

Many government officials and community leaders argue there has to be a balance between open space and growth to alleviate the crowding of schools and roads. Some leaders point out that the public services used by a family living in a new house often offsets the tax dollars generated.

"Development in the residential market is a double-edged sword," said Michael Sanderson, legislative director of the Annapolis-based Maryland Association of Counties. "Certainly there can be economic benefits with economic growth, but what you end up with is the added pressures for services they demand."

Several jurisdictions have placed limits on the number of homes that can be built in response to community concerns about insufficient infrastructure. Some builders complain that those limits have pushed home prices higher as demand for housing has grown while the supply has dwindled.

The average price of an existing home sold in the Baltimore area in October was $259,715 - a 23 percent increase compared with October last year, according to Metropolitan Regional Information Systems Inc., the Rockville-based real estate information provider.

New-home prices grew, too.

The average price of a new single-family home was $506,779 between April and June - a 36.2 percent increase from the corresponding quarter in 2003, according to the Meyers Group. The average price of a new townhouse was $311,588 during the second quarter - a 23.5 percent jump compared with April through June 2003.

"Builders are finding it difficult to obtain land to build on because of local jurisdictions," said Linda Veach, president of Edgewood homebuilder Bob Ward Companies. "There has been such animosity toward developers and homebuilders, and the thinking is that we're the ones costing the local economy so much money."

Veach, who also is president-elect of the builders' group, said her organization commissioned the study to counteract what it says is the perception that residential construction is not a significant source of tax dollars.

"Elected and appointed officials, they've said housing doesn't pay its own way, we're not going to have new housing," Kortecamp said. "We know that's not true."

Sanderson of the county association said that officials understand the need for new homes but he added that any formula calculating the economic benefits of new residential construction must include services these families use.

"They need to drive on roads, to use libraries, and all sorts of these services, which means the calculations can be overstated when they don't include calculations of citizen demand as well," he said.

Anirban Basu, chief executive of Sage Policy Group Inc. in Baltimore, which conducted the study, said the calculations accounted for the use of public services. It does not include construction revenue such as licenses and fees, which has a one-time impact, Basu said.

The homebuilders' study focused on the economic impact of 1,735 new homes in Anne Arundel, Baltimore, Carroll, Cecil and Howard counties. It found that the homes provided more tax revenue than the cost of the government services used.

For example, a new home in Baltimore County built in 2005 would raise $4,915 more than it would cost in services, according to the study. It estimated the cost of government services for a single-family home in the county to be $3,953 and that income tax, property tax and other revenue generated by those living in the house that year would total $8,868.

Basu said homes built in subsequent years should have a similar economic impact but cannot be calculated specifically because of changing tax rates and other variables.

The builders group said Harford County would be added to the study for Wednesday's presentation. A 2003 analysis of Harford County showed new homes would have economic effects similar to those in the other jurisdictions.

Veach said the study gives builders more ways to back up their contention that homes are economically beneficial to a jurisdiction and she hopes government officials will consider using it.

During the conference, the group also will discuss creating an inventory of available lots for residential construction throughout the region. State officials appointed a task force this year to study the issue.

The conference is scheduled from 8 a.m. to noon Wednesday at the Sheraton Inner Harbor, 300 S. Charles St. Registration is $95; $65 for government and nonprofit employees, and available at the door. Information: 410-265-7400, ext. 114, or gasupport@homebuilders.org or www.homebuilders.org.

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