Economist Says Growth is Good for McHenry County

"When homebuilding goes we all suffer," said Elliott Eisenberg, a senior economist for the National Association of Home Builders. "Think of home construction as a major driver of the economy. It really matters," he said.

Eisenberg was the guest speaker at "Housing McHenry County, Reality . . . Challenge . . . Opportunity," a public forum hosted by the McHenry County Housing Commission, Dec. 7.

"We, as a commission, feel healthy housing is part of the road back to a healthy economy," said Brent Burns, commissioner on the McHenry County Housing Commission and a mortgage lender. Burns stressed the need for affordable housing in McHenry County.  He noted that 20 percent of McHenry County households earn less than $35,000 per year.

While Eisenberg's presentation focused on a model which showed the economic benefits of higher-end housing development, he said there are equally important social benefits of affordable housing.

Future presentations by the McHenry County Housing Commission will focus on the challenges of providing affordable housing, said Jean Schober, commissioner of the housing commission and vice president of the McHenry County Economic Development Corporation.

"We're trying to get rid of the myth that growth isn't good," Schober said.

Building Has a Ripple Effect on Economy

There are three stages of economic growth, attributed to new construction – the construction phase, the ripple phase and the occupancy phase, said Eisenberg.

Eisenberg used a growth model he developed for New Lenox in Will County, to explain the economic benefits of building 100 single-family homes, in the $425,000 price range.

The model shows the first year of construction creates 228 local jobs – 157 in construction, 34 in wholesale and retail trade, and 18 in business and professional services.  The first year brings about $19 million in local income and another $3 million in local taxes.

"In the construction phase, there's lots of stuff being bought and the local government is making money from impact fees. But that's just the beginning of the benefits," Eisenberg said.  "In the ripple phase, the homebuilder who works on the job site spends money, the supplier spends money and the government spends money."

Eisenberg pointed out that not all the money stays in the local economy; some does leak out. One of the largest leaks is money spent on gasoline.

Eisenberg said the ripple effect brings about 50 percent additional revenue to the local economy. For instance, the construction worker is spending money locally by eating at local restaurants and using local services.

"Let's say I'm a builder and I hire you. You get paid every two weeks.  You're stressed and you see a psychiatrist. She tells you to get a drug . . . The psychiatrist sees a psychologist; the psychologist sees a masseuse . . . If you add the whole thing, it's 50 percent bigger than the initial benefit – that's a big effect," Eisenberg said.

"The stimulus is equal to building another half the amount of homes," he said.

Eisenberg noted that people don't spend all their money in one town, or one county. New construction has an impact on the entire metro-Chicago area.

The final phase is the occupancy phase, which is when the costs of building kick-in, such as extra government services and extra costs for school districts.

In this model, with $425,000 homes, the economic impact offsets costs. Net revenue in the first year is $220,60 and is $537,600 thereafter, Eisenberg said.

Eisenberg explained the reason new homes pay their way is that they are more expensive and the homeowners have more disposable income to spend locally.

In this model, the total economic impact of building 100 homes, over 10 years, is about $80 million in local revenue, plus 361 temporary jobs and 54 permanent jobs.

"If you haven't built 1,000 homes, that's $800 million you lost," said Eisenberg.

Eisenberg believes, in the Chicago suburbs, impact fees and property taxes are too high. He urged government officials to focus on lowering fees and taxes.

"When permits become 10 percent (of the home price) it's hard for builders and realtors to make any money," Eisenberg said. He said property taxes in Illinois are more than twice the national average.

Finally, Eisenberg pointed out that cities that are not growing tend to be less desirable communities.

"Where do you want to live, places that are not growing or those that are growing?" he asked the audience. "Growing cities are doing well; growth is pretty good financially."

Commission Wants Balance of Housing Types

The McHenry County Housing Commission's focus is on promoting balanced growth, said Elise Livingston, commissioner on the housing commissioner and realtor at ReMax Plaza in Richmond, in a later interview.

"What we are seeing in McHenry County is that we need more balance, so that people in service jobs can live locally," Livingston said.

She said the housing commission isn't supporting building more high-end developments, but wants to encourage developments that are a mix of higher- and lower-end housing.

Livingston said people living in affordable housing also shop at the grocery store and support local businesses.

"If it's a $200,000 to $250,000 home, it may not pay for itself in the first year. Maybe it will take three years, but it's still a plus," she said.

"What we want to do is take the fear away from communities and provide historical documentation that a balance of housing types is healthy," Livingston said.