Study: State Economy Hinges on Housing; New-home Construction Contributes $59 Billion to the Economy, Sustains 526,000 Jobs and Delivers Homeownership Opportunities.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--May 5, 2004

New-home construction helped drive California's economic recovery in 2003 as the industry generated $59 billion in economic activity and more than 526,000 jobs, according to a study by the Sacramento Regional Research Institute (SRRI) released today.

"Homebuilding has been a major driver of California's economic growth for the past several years," noted Sunne Wright McPeak, secretary of the state's Business, Transportation and Housing Agency and a longtime housing advocate. "This report reminds us of how important housing production is not only to meeting the needs of working men and women of California but to the health and stability of the state's economy."

The report, The Economic Benefits of Housing in California, examined three key aspects of the industry:

-- the impact of new-home construction

-- the overall impact of the housing industry as a whole,

including economic activity generated by existing homes

-- and the regional benefits in 25 of California's metropolitan

areas.

(Copies of the compete study, including tables detailing the regional impacts, are available at www.cbia.org.)

While new-home construction alone is a major part of the economy, the report also found that the housing industry as a whole (including expenditures on existing housing) contributes $218 billion to the economy, supports almost 1 million jobs and accounts for approximately 10 percent of all statewide economic activity. The report also found that every dollar invested in new housing activity generates almost two dollars in total economic activity, and the industry is a major force in every region of the state.

As important to the state as homebuilding is, CBIA President Sherman D. Harmer Jr., a San Diego homebuilder, pointed out that the study emphasized the "untapped potential" of the homebuilding industry.

"The report's calculations are based on the 188,000 housing starts recorded in 2003, but according to the state Department of Finance, the statewide annual housing need is far greater, about 230,000 homes and apartments each year," Harmer said. "If the industry were producing enough homes to meet the need, the economic impact for the state and for regional economies would be significantly greater."

And with the state's population increasing by 600,000 people a year, Harmer said the only way to ease California's worsening housing affordability crisis is to build enough new homes and apartments to meet that demand for places to live.

Harmer added that state and local policy makers should support long-overdue reforms that would allow more new homes and apartments to be built, especially in the job centers where the need for housing for the state's workforce is particularly great.

"This report should be required reading for every state legislator and every city council member and planning commissioner around California. Housing drives our state's economy, and this report proves that point, but too many decision-makers haven't connected the dots yet. The sooner our state and local officials understand how critically important housing is, the better off California's economy and California's families will be, he said."

The report updates the original Economic Benefits of Housing report released in late 2002. The new report, prepared under the direction of SRRI's chief economist, Dr. Robert Fountain, tracks the growth of homebuilding's impact on the economy from 2001 through 2003, based on housing start data compiled by the U.S. Census Bureau and computed by using the Minnesota IMPLAN model, considered the industry standard for determining the total economic outputs of an industry or specific project.

The report found that homebuilding generated a total of $45.5 billion to the state's economy in 2001, $51.67 billion in 2002, and $59.35 billion in 2003. And as builders built more houses, they also employed more Californians. Total employment generated by homebuilding rose from 403,600 in 2001 to 456,600 in 2002 and then to just under 526,000 in 2003, the report found.

(These figures include economic activity and employment directly related to building homes; indirect activity from businesses doing business with homebuilders such as suppliers, consultants, transportation firms, and financers; and all the purchases and expenditures that the employees of these companies then are able to make.)

Harmer said the study's results help confirm that creating new jobs and new homes for California families is just as important as any social, environmental, or economic goal.

"Policy makers who try to limit housing production must understand that they're not hurting homebuilders as much as they're hurting the families who need housing and the young men and women who build California's homes," he said.

Note to reporters: Dr. Robert Fountain of SRRI is available today for interviews. If you're interested, please call or e-mail CBIA Public Affairs Director John Frith as early as possible and he will forward your request to Dr. Fountain.

The California Building Industry Association is a statewide trade association representing more than 6,000 businesses - homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals.