Group Title: Affordable housing issues
Title: Affordable housing issues ; vol. 16 no. 3
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 Material Information
Title: Affordable housing issues ; vol. 16 no. 3
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: April 2006
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Bibliographic ID: UF00087009
Volume ID: VID00038
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.


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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 XVI, Number 3

April 2006

The purpose of this newsletter is to update material presented in previous economic impact
analysis reports produced by the Shimberg Center for Affordable Housing. As may be seen, the
residential real estate and construction industries combine to represent a significant portion of
Florida's economic activity. Although the newsletter focuses only on the state-level information,
the full report examines economic activity at the metropolitan statistical area (MSA) level and is
available on the Internet at

___ n oui o

Equity in real estate dominates the wealth of
the typical Florida homeowner and the value of
the Florida housing stock represents a sizable
proportion of total wealth in the state. At year-
end 2004, the state of Florida had nearly 9.04
million property parcels assessed at $1.45 trillion.
Of these, approximately 4.11 million parcels
represented single-family houses assessed at nearly
$701 billion.

An indirect impact of the real estate is the tax
revenue generated. The $1.45 trillion assessed
value has a taxable value of slightly more than
$1.02 trillion, which generates more than $22.5

billion in ad valorem tax revenues annually. These
proceeds fund county government, school districts,
special (water, sewer, etc.) districts, and municipal
ventures.1 However, the primary focus of this
report is on the direct impact of residential real
estate activity, which fundamentally consists of
construction- and real-estate-related transactions.
Total residential construction output in 2004 was
$36.9 billion. There were 822,500 real estate
transactions in 2003 totaling nearly $127.06 billion
in total sales, for a turnover rate of 9.23%.

The remainder of this report presents the impact of
Florida's real estate in several dimensions including

1 Nationally, property taxes provide over two-thirds of the average locality's revenues. See the National Realty Com-
mittee, "America's Real Estate: A National Policy Agenda," January 1995.

Only real property is considered in this assessment
of ad valorem taxes, i.e., personal property is
disregarded as part of the tax base. Additional
information is gathered from the 2004 Florida
Property Valuations and Tax Data publication. The
15 general land use categories and the total number
of real estate parcels in each category are: vacant
residential (1,712,507), single-family detached
housing (4,111,560), mobile homes (425,142),
condominiums (1,390,608), multi-family housing
[nine-or-less and ten-or-more units] (170,443),
miscellaneous residential [cooperatives and
retirement homes] (55,865), vacant commercial
(81,197), improved commercial (188,898), vacant
industrial (18,748), improved industrial (55,871),
agricultural (228,501), institutional (55,156),
government (201,790), and miscellaneous (319,458).
The total just value of the parcels in the land use
categories is $1.45 billion and the corresponding
taxable value is $1.02 billion. These data clearly
demonstrate that there exist large differences in the
sizes of the land use categories within the MSAs and
non-metropolitan regions as well as between them.
It should be noted that the parcel counts are not unit
counts because multiple living units located on a
single parcel are counted as one parcel. The result
is that parcel counts may severely undercount the
number of condominium and multi-family units.

The state has an average millage rate of 18.52;
the $1.02 trillion in taxable value generates
approximately $22.5 billion in tax revenues. On
average (for the state), school districts receive
the greatest proportion (40.59% or $9.12 billion),
followed by county government (35.9% or $8.06
billion), and municipalities (12.7% or $2.9 billion).
One noticeable difference between the individual
MSAs and non-metropolitan regions is how they use
their property tax revenue to finance their schools,
county government, and municipalities. Nearly 55%
of the revenues in Ft. Walton Beach go to schools
whereas the schools in the South Nonmetropolitan
area receive 34%. The South Nonmetropolitan
area directs nearly 53% to the county but in the

Melbourne-Titusville-Palm Bay MSA the county
receives just over 22%. The municipality's share
in the Ft. Lauderdale MSA is 21.5% but in the
Jacksonville MSA the municipality receives about 2.5%.

Construction Building Permit activity, obtained
from the U.S. Census Bureau and from the University
of Florida's Bureau of Economic and Business
Research, is analyzed to derive the value of new
construction for the state. Additions to the tax
base and revenues generated are also determined.
According to the building permit data, there were
approximately 256,000 new units built in Florida in
2004. Almost 187,500 of these units were single-
family units and the remaining 68,500 were multi-
family units. The single-family units have a value
of $29.5 billion and the multi-family units have a
value of $7.4 billion for a total of $36.9 billion in new
residential construction.

Transactions Using data from the 2004 Florida
Property Valuations and Tax Data publication, real
estate sales, mortgage and related activities are
examined. For the state of Florida in 2003, 822,500
real property parcel transactions took place with a
total sales value of approximately $127 billion. In
addition to the sales price, these transactions generate
fees, doc stamps, title transfers, and brokerage
commissions, which are estimated as a percentage of
total sales. Although the exact sales cost percentage
is not known, the revenues generated assuming four,
five, and six percent are as follows:

Sales Cost Sales Revenue

4 percent:
5 percent:
6 percent:

$5.08 billion
$6.35 billion
$7.62 billion

We conservatively estimate the demand for real estate
transaction related services to be $6.35 billion per year
for real estate transactions.

IMPLAN, an economic impact modeling software
program, is used to estimate the impacts generated
by residential construction and real estate related
transactions. When estimating the impacts, the
residential construction numbers were divided
into single-family construction and multi-family
construction to more accurately model the impact,
but only the combined impact is presented in this
report. Also note that in order to better model the
impacts of construction, Monroe County has been
combined with the Miami-Dade MSA and therefore,
has been removed from the Southern
Non-metropolitan region.
Three types of impacts are estimated for non-
residential construction and real estate related
transactions: direct effects, indirect effects, and
induced effects. Direct effects are the changes in the
industries to which a final demand change was made.
Indirect effects are the changes made in inter-industry
purchases as they respond to the new demands of the
directly affected industries. Induced effects typically
reflect changes in spending from households as
income increases or decreases due to the changes
in production.

Total Impact on Output Output multipliers
predict how much increased economic activity in
other industries is caused by every additional dollar
increase in one specified industry. Here the direct
impacts are the non-residential construction and the
real estate related transactions (estimated as 5% of
sales in the MSA). IMPLAN models these direct
effects and generates indirect and induced effects to
come up with a total impact on the MSA economy.
These effects are then summed to get an estimate of
the total effect on the state. The $36.9 billion in new
residential construction generates a total of $65.8
billion in economic activity, and the $6.4 billion in
real estate related transactions generates a total of
$8.9 billion in economic activity.

2 In past reports, the Shimberg Center has also calculated
the impact of nonresidential construction. Due to the dif-
ficulty in obtaining an accurate number for nonresidential
construction and due to the fact that the vast majority of
inquiries have been about residential construction, we
have decided to discontinue examining the impact of
nonresidential construction.

Total Impact on Earnings The $36.9 billion in
new residential construction generates a total of
$22.3 billion in earnings. Of this $22.3 billion, the
workers building the new residential construction
directly earn $12.2 billion. There are also $5.8 billion
of indirect earnings and $4.3 billion of induced
earnings. An example of an indirect earner would
be someone involved in mining the raw materials
used to make the concrete that is be used in the new
construction, and an example of an induced earner
would be a waiter who is hired due to increase
spending by the newly hired construction workers.
The real estate related transactions generate a total
of $1.7 billion of earnings.

Total Multipliers for Employment The direct
impact on employment is those workers hired to
build the new construction or complete the real
estate transactions. The indirect impact would be
a new miner hired by a concrete manufacturer due
to the increase in construction, and the previously
mentioned waiter would be an example of an
induced effect. Residential construction's impact
on employment is approximately 691,500 thousand
jobs and another 77,300 jobs are impacted by the
real estate related transactions. Therefore, over 760
thousand jobs in the state of Florida are related to
real estate in some manner.

Investment Returns from Real Estate The
multiplier estimates above do not include investment
("unearned") income from real estate. Because
real estate is considered a factor of production that
generates a return, such returns from real estate
should also be regarded as an "impact". All real
estate parcels provide either an explicit rent (if they
are rented or leased), or an implicit rent to the owner
who would otherwise have to pay rent in lieu of

Obviously, different parcels (with different land
uses and different locations) will generate different
returns. surveys the return
expectations of a representative sample of large
institutional investors each quarter. Published in their
quarterly Market Survey, this survey provides insight
into the required yields (capitalization rates) used by
large investors when making acquisitions. The mean
required yield for 2004 investments in all property

types was 9.75 percent. According to the Florida
Department of Revenue, the total just value of all real
estate is approximately $1.45 trillion. Applying a
9.75 percent yield rate to the $1.45 trillion of market
value suggests that real estate owners in Florida earn
approximately $141.8 billion in investment income

Figures here have been updated to the 2004 roll
year data, the most recent year for which data are
available from all the sources referenced. The
different impacts of real estate are taxes, activity,
and investment.

Ad Valorem Taxes: $22.5 billion annually goes
to school districts (40.6%), county government
(35.9%), and municipalities (12.7%).

Real Estate Activity (Residential Construction
and Transactions): We estimate an economic
impact from residential construction and real estate
transactions of approximately $74.7 billion annually.
Furthermore, residential real estate provides nearly
769 thousand jobs with annual earnings of nearly $24

Real Estate Investment Income: An explicit
and implicit investment return to property owners
of approximately $141.8 billion is generated
annually. This does not include the employment and
earnings that are generated from indirect real estate
investments such as REITs.

The inquisitive reader is encouraged to visit the
Florida Housing Data Clearinghouse website at to view the
complete 2005 update of The Impact of Residential
Real Estate on the Florida Economy.

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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