Group Title: Affordable housing issues
Title: Affordable housing issues ; vol. 13 no. 4
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 Material Information
Title: Affordable housing issues ; vol. 13 no. 4
Series Title: Affordable housing issues
Physical Description: Serial
Language: English
Creator: Shimberg Center for Affordable Housing
Publisher: Shimberg Center for Affordable Housing
Place of Publication: Gainesville, Fla.
Publication Date: June 2003
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Bibliographic ID: UF00087009
Volume ID: VID00021
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.

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AF F O RD A B L E


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M.E. Rinker, Sr., School of Building Construction College of Design, Construction & Planning PO Box 115703,
University of Florida, Gainesville, FL 32611-5703 TEL: (352) 273-1192 SUNCOM: 622-7697 FAX: (352) 392-4364


Volume XIII, Number 4


June 2003


At various times the Shimberg Center for Affordable Housing receives inquiries about the
impact of the construction and real estate industry on Florida's economy. As a result, the
Center has published a summary titled "The Impact of Real Estate on the Florida
Economy." The report has been updated to reflect 2002 data. The full report is available
on the Center's web site at www.shimberg.ufl.edu by clicking on "Florida Housing
Data" and then on "Reports."
This newsletter summarizes the content of the 2003 report and is directed to a general
audience that asks the same question What is the impact of the construction and real
estate industry on Florida's economy?
The purpose of this report is to characterize the direct and indirect impact of the real estate
industry, broadly defined to include construction, on the economy in the state of Florida.
Before proceeding it is important to recognize some basic numbers.


The indirect impact of the construction and
real estate industry is the tax revenue generated
by the real property produced. Keep in mind
that only real property is included in this
discussion, personal property as part of the tax
base is disregarded completely.
The 2002 Florida Property Valuations and Tax
Data publication shows the total number of real


estate parcels, their total assessed (also called
"Just") value, and total taxable value in each of
fifteen general land use categories. The 2002
totals show 8.6 million property parcels with a
total assessed value of $1.1 trillion and a total
taxable value of $794 billion. Using an average
millage rate of 17.12, this $794 billion taxable
value generates approximately $13.6 billion in
tax revenue.


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The direct impact of the real estate and
construction industry fundamentally consists
of construction- and real-estate-related trans-
actions.

Building permit activity is used to analyze
the value of new construction in Florida. Using
Census Bureau data and the 2002 Florida Prop-
erty Valuations and Tax Data publication, new
construction in Florida in 2002 is valued at $33.5
billion. The total value of residential construc-
tion based on building permits is $22.5 billion
leaving $11.0 billion for non-residential new
construction. A total of 128,716 single-family
and 56,712 multi-family units were constructed
during 2002.

A total of 653,355 real property parcel trans-
actions took place in Florida in 2001 with a total
sales value of $98.4 billion. These transactions
also generate fees for doc stamps, title transfers,
and brokerage commissions. These fees range
from 4 to 6 percent of the sales price. Using the
middle value of 5 percent, a conservative esti-
mate of the total demand for real estate transac-
tion services comes to $4.9 billion per year.






The Bureau of Economic Analysis of the U.S.
Department of Commerce has developed a
Regional Input-Output Modeling System called
RIMS II that can be used to estimate the eco-
nomic impact of any industry with a Standard
Industrial Classification (SIC). For each indus-
try there are a set of three total multipliers:
output, earnings, and employment. The output
multiplier is used to predict the increase in


economic activity in other industries resulting
from a dollar increase in a specific industry. The
earnings multiplier is used to compute the
earnings that a given industry pays, both di-
rectly and indirectly, to households in industries
in the region in order to produce a dollar of
output. Finally, the employment multiplier
works in much the same way as the output and
earnings multipliers. That is, the employment
multiplier is used to predict the number of both
direct and indirect jobs that will be created by an
industry for every million dollars of output
value.




The RIMS II total output multiplier for the
new construction industry in Florida is 2.1207
and that for the real estate industry is 1.3990.
Using the new construction value of $33.5 billion
and the real estate transaction total of $4.9 billion
and applying these multipliers yields a total
2002 economic impact on the state's economy of
approximately $77.9 billion.




The total earnings multiplier for the new
construction industry in Florida is 0.7134 and for
the multiplier for the real estate industry is
0.1612. Applying these multipliers to the $33.5
billion for new construction and the $4.9 billion
for the real estate transaction total produces
approximately $24.7 billion in direct and indirect
earnings paid in 2002.




The new construction industry's total employ-
ment multiplier is 37.6 and that for the real
estate industry is 13.5. Once again using the








$33.5 billion in new construction and the $4.9
billion in real estate transactions times the
multipliers yields approximately 1.26 million
jobs are created.

Using building permit data for 2002, the total
construction output of $33.5 billion can be
divided into new residential construction
estimated at $22.5 billion thus leaving $11.0
billion for non-residential new construction.
That means that new residential construction
alone accounted for 846,000 of the 1.26 million
jobs created.




The RIMS II multipliers do not account for
unearned income from real estate. That means
that income from a rented parcel is not consid-
ered. Also not considered is the implicit rent to
the owner who would otherwise have to pay
rent in lieu of ownership. Although different
parcels in different locations will generate
different returns, a company called
RealtyRates.com surveys the return expecta-
tions of large institutional investors each quar-


ter. They reported that the mean required yield
for 2002 in all property types was 10.57 percent.


Using the $1.1 trillion assessed value of the
8.6 property parcels in Florida and applying the
10.57 percent yield rate indicates that real estate
owners in Florida earn approximately $117.7
billion in investment income in 2002.





It is clear from these numbers that the con-
struction and real estate industries represent a
significant portion of the Florida economy.
According to the Commerce Department's
Bureau of Economic Analysis the gross state
product of Florida in 2001 (the most recent
report available) was $491.488 billion. The total
economic impact of the construction and real
estate industries as discussed comes to $233.9
billion or 47.6 percent of the gross state product.


For addition information about the content of
this newsletter, please contact Douglas White at
the Shimberg Center for Affordable Housing.


Florida's 2001 Gross State Product


Other Industries
Construction &
Real Estate


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Affordable Housing ISSUES is prepared bi-monthly by the Shimberg Center for Affordable Housing for the purpose of
discussing contemporary issues facing affordable housing providers. Reproduction of this newsletter is both permitted and
encouraged. Comments or questions regarding the content are welcome and should be addressed to Robert C. Stroh, Director.


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