One of the most common arguments by NIMBYs against additional development, particularly of high-density housing such as apartments, is that the residents of these developments will be a drain on municipal services. Renters and the communities they live in, however, are vital engines of economic growth and contribute significantly to the prosperity of local economies. More specifically, research by Hoyt Advisory Services and Eigen10 Advisors, LLC found that apartments and their residents contribute $3.9 trillion to the national economy annually, or $52.8 billion for every 100 apartments built.
Below, we illustrate the four major components of this impact.
Spending from the Building and Operations of Apartment Communities
When a new apartment community is built, it generates economic activity from a variety of sources—the construction of the property itself generates spending on necessary building materials and creates new jobs for a range of workers involved with the development. Some of those workers will spend their earnings in the local neighborhood on goods such as lunch, which creates profits for those local businesses and supports local employment.
The building of a new 100-unit apartment community generates $35.7 million in economic activity in the construction stage alone and supports 179 jobs.
Once the new community is built, new jobs are generated for onsite employees such as leasing agents, maintenance employees and property managers. Just as with the construction workers, those employees produce a spillover effect at local businesses with their purchases. Furthermore, expenses related to the ongoing operations of the property create spending opportunities as well. Spending such as utility payments, insurance payments, security and property taxes are part of ongoing operating expenses. There are also expenses related to turnover costs and capital improvements that generate spending—this translates into over one-quarter (28%) of the impact to the economy and supports four jobs for every 100 apartments.
Resident Spending in the Local Economy
The spending from apartment residents represents the bulk of economic activity: beyond the rent payments made by residents, households also spend in a variety of other arenas, many of which are in the local community. Renters spend money on transportation, utilities such as internet and cable, and retail and entertainment. This is spending that, in the absence of the apartment community, could be spent elsewhere, i.e., if a locality chose not to approve a new housing development, another locality could gain that resident spending if the development was built elsewhere.
A 100-unit apartment community generates $16.0 million in economic activity from resident spending and supports 85 jobs.
Payment of Taxes
Tax payments constitute a substantial portion of economic activity from both property operations as well as from apartment residents themselves. These taxes are paid in a variety of forms—not only do housing providers pay property taxes to varying levels of government (often at a higher effective rate than single-family households), but sales taxes are also generated from both housing providers and their residents. Sales taxes are paid when a housing provider purchases office supplies for the leasing office and by apartment residents or property employees at the local coffee shop. Residents also pay income taxes to varying levels of government.
Digging deeper into the spending categories discussed previously, tax payments are a not insignificant portion of spending from both operations and residents:
Building More Will Increase Economic Activity
This economic activity supports jobs at local establishments as well as helps to pay the salaries of government employees such as firefighters and teachers. Our nation’s housing undersupply prevents new households from being formed, and building additional apartment communities would only serve to increase economic activity. To learn more about the economic impact in various jurisdictions around the country, visit www.weareapartments.org.
About Caitlin Sugrue Walter
Caitlin Sugrue Walter, Ph.D., is Vice President of Research, with primary responsibility for conducting NMHC's research on apartment industry trends. Prior to working at the Council, Caitlin was an analyst at a real estate advisory firm. Caitlin has a B.A. and B.S. (Planning and Public Policy, Criminal Justice) from Rutgers University. She also holds an M.A. in Urban and Regional Planning and a Ph.D. in Planning, Governance and Globalization with a concentration on metropolitan economies and development from Virginia Tech. She is an active member of the National Association for Business Economics, a member of Up for Growth’s Advisory Board, and is a member of the Eastern Panhandle Advisory Council for Girls on the Run of the Shenandoah Valley.
She can be reached at cwalter@nmhc.org.