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Local Area Impact of Home Building in Cass and Crow Wing Counties

Posted on: December 1st, 2010 by Brainerd Lakes Chamber

Does new home construction have an economic impact in the Brainerd Lakes Area? The answer is a resounding yes!
New home construction leads to new income and jobs as well as additional revenue for local governments. The benefits are both immediate and long-term.
The Mid-Minnesota Builders Association recently sponsored a study, “The Local Area Impact of Home Building in Cass and Crow Wing Counties,” which was conducted by the National Association of Home Builders. This study was the topic of a recent MMBA meeting in Baxter, which Lisa Paxton and I attended on behalf of the Brainerd Lakes Chamber. The MMBA also hosted a meeting for elected officials to talk with them about the results of this study.
What was learned? The 384 single-family homes built in Cass County and Crow Wing County in 2009 will generate local income of $150 million and local taxes of $27 million in the first 10 years, according to the NAHB study.
These results show that home building is more than paying its own way and should put to rest the notion that existing home owners are subsidizing new home construction here in the Brainerd area, said Elliot Eisenberg, the Senior Economist, who conducted the analysis of the impact of home building here in Cass County and Crow Wing County.
The economic impact is not just viewed in terms of short-term job creation in construction-related industries but in the long-term job creation in other industries as a result of a ripple effect and the ongoing benefits resulting from occupancy of the home.
During the construction phase, the building of 384 single-family homes creates 838 jobs (578 jobs in construction alone), generates $2.4 million in local taxes and $37.2 million of local income in the first year. The ripple effect of those homes, which includes the wages and profits local area residents earn during the construction period that are spent on other local goods and services, results in another 403 jobs, $2.7 million in local taxes and $16.7 million in local income, also in the first year. The ongoing annual effect of those homes, which includes local jobs, income and taxes generated as a result of the home being occupied, is 263 jobs, $2.3 million in local taxes and $10.2 million in local income per year.
Conversely, the drop in the number of new homes built in the Brainerd Lakes Area the past few years has had a ripple effect on the economy here in this economic downtown. Fewer construction jobs has had a domino-effect on other jobs, ranging from jobs in constructed-related industries such as home improvement stores to jobs in service and retail sectors, such as restaurants and clothing stores. The community has lost tens of millions in local income and local taxes because fewer homes are being built today when compared to the number of homes being built here five years ago.
The impacts were calculated assuming that new single-family homes built in Cass and Crow Wing counties have an average price of $234,318; are built on a lot for which the average value of the raw land is $43,534; require the builder and developer to pay an average of $1,522 in impact, permit, and other fees to local governments; and incur an average property tax of $1,500 per year. The study was based on information gathered from the cities of Baxter, Brainerd, Breezy Point, Crosslake, Nisswa and Pequot Lakes; the counties of Cass and Crow Wing; the Cass County Office of Environmental Services; the Crow Wing County Assessor’s Office; the Greater Lakes Association of Realtors®; and the U.S. Census Bureau.
In his presentation, Eisenberg noted that collectively single-family residential construction jobs rank as one of the largest employee groups in this region. As a result, the economic impact of this industry is on par with any of the largest employers in Cass or Crow Wing counties. Before the recession, if this specific industry was one employer, it likely would have ranked as the largest employer in the region with more than an estimated 1,500 people working in the single-family residential construction field.
If you wish a complete copy of the study, please contact me or the MMBA at www.midmnba.org.

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