The Economic Benefits of Housing in California
Funded through a grant from the California Homebuilding Industry
Prepared by:
The Sacramento Regional Research Institute
Dr. Robert Foundation, Chief Economist
Introduction
The housing industry is one of California's most visible and far-reaching industries, but many of the economic benefits of new housing construction and the housing industry at large are not readily apparent. The complete influence of housing in the California economy includes not only the construction of new units, but also the ongoing sales, financing, brokerage, repairs, management, and operation of existing housing units.
This report is designed to provide an economic perspective of the importance of the housing industry on the overall economic activity of California and its metropolitan regions. The report will present two views of the importance of housing in terms of economic activity and job-creation.
1. The importance of new housing construction, including the support industries and consumption expenditures, which are generated by housing construction.
2. The greater importance of the housing industry, broadly defined, to include the ongoing sale, financing, upgrading, repairs, management, taxation, all other aspects of the entire stock of owner-occupied and rented housing of the types.
Executive Summary
Contributions of New Housing Construction to the California Economy
New housing construction contributes over $59 billion per year to the California economy and creates an estimated 526,000 jobs statewide, based on 2003 new housing construction numbers. Approximately one half of that economic output (almost $31 billion) is directly the result of new housing construction. The balance is generated by those industries which supply components and services to the construction industry, as well as, to the retail and consumption sectors which service the employees of the construction industry and its supplier industries.
Every dollar spent on new housing construction in California generates approximately $1.92 in total economic activity.
New housing construction as a stand-alone industry ranks in the top fifteen in terms of total economic output.
Contrbutions of the Entire Housing Industry on the California Economy
The larger picture of the influence of housing in the California economy includes not only the construction of new units, but also the ongoing sales, financing, brokerage, repairs, management, and operation of existing housing units. When all facets of the housing sector are considerd -- including new home construction, residential real estate transactions, expenditures of homeowners, employment, maintenance and operation of housing, and the expenditures of employees of the housing sector and its supplier industries -- the housing industry produces the following economic benefits:
- Contributes nearly $218 billion per year to the California economy
- Generates 935,000 jobs
- Accounts for approximately 10% of all economic activity in the state
When all of the economic multipliers are factored in, the housing industry is the second largest industry group in the state with economic contributions matched only by the wholesale and retail industry.
Regional Economic Contributions of Housing
This reports breaks down the economic and job-creating contributions of the housing industry in California's 25 primary metropolitan statistical areas - including contributions of new housing construction and the effects of the housing industry as a whole. In all regions of the state, the housing sector is a significant economic force in terms of total economic output, job-creation and percent of total economic activity.
Housing Industry's Untapped Potential
While the housing industry is a leading economic force in the state of California, the potential economic and employment value of the housing industry, and in particular new housing construction, is much greater. This report primarily analyzes 2003 data, which reflect annual housing production of 188,000 units. According to the state Department of Finance, the annual housing need for California for the past 12 years - based on population growth, job creation and household formation - demanded production at levels closer to 230,000 units per annum. Clearly, an annual production level closer to the state need would significantly increase the economic benefits of housing in California as presented in this report.