Given how little new home production currently contributes to the national economy, it’s hard to argue anymore that if you hurt the housing industry you’ll hurt the national economy. The national economic recovery has clearly left the station, leaving the home building sector waving from the platform.
The home building industry used to deal from a position of leverage when it came to national policy discussions. Its leaders could rightly argue that the home building industry leads the economy out of, and sometimes into, recessions. The message then was clear: Change the rules at your peril.
Home building used to be a big contributor to economic growth and jobs, too. During the middle part of the last decade, residential construction accounted for 6% of GDP and employed 3.5 million people. The message back then: Disturb the housing market and you threaten continued growth.
That’s a much harder argument to make today, when residential construction accounts for only about 2.4% of GDP (in the fourth quarter of last year) and employs roughly 1.4 million fewer people. And those numbers include remodeling activity.
Moreover, the economic recovery is chugging down the track with little regard to housing activity. GDP grew 3.1% in the last quarter of 2010. Corporate earnings are strong. Companies are hiring again.
It’s equally hard for housing leaders to argue that a paucity of new home production will raise housing costs and make homeownership unaffordable for middle-income buyers. Housing production is stuck at record lows and home prices continue to fall, even as the country adds 2.4 million people a year, according to U.S. Census projections.
About the only argument left for continued housing support is that things could be a lot better if the nation produced more homes. Unemployment in the construction industry is ridiculous–20%–more than double the national average. Many of these people could be back at work in a heartbeat, if companies had something to do.
Building new homes contributes mightily to local government tax coffers as well. Every 100 homes built generates $21.1 million in local income, $2.2 million in taxes and revenue for local government, and 324 local jobs, according to industry estimates.
But it’s hard to make people listen when the economy seems to be improving without you, and the nation is still trying to work itself out from under a huge shadow inventory of existing homes.