Question:
Like many rural areas, our largest employer is the public school system, 275 employees. We have less than four houses for sale in our county of 7000 citizens that have a sale price of $150,000 or less, which is the price range the majority of our school staff or new residents want to pay. I am proposing a Neighborhood Revitalization tax rebate housing program in order to incentivize our residents to rehab older homes. One commissioner does not believe this will help our residents and will only cost the County money in the long run, The rebate is on the increased appraised value of a house over the current and is only for five years.I need help on the economic impact of losing our largest employer, which would be detrimental as well as the economic impact of increased construction in our county to include the direct, indirect and induced impact. I know the 7x multiplier is incorrect, but is there a way to estimate the economic impact?
Answer:
The primary issue you have identified is the shortage of houses, especially those priced below $150,000. Since there is not enough information to evaluate the entire situation, let's make a few assumptions and discuss how the tax rebate policy may play out under each of those scenarios.
Scenario A: There are several older and/or abandoned homes in the area that are causing the observed shortage of affordable housing. Homeowners want to sell these properties, and buyers are willing to purchase and renovate them with financial incentives. Although this scenario is ideal for the tax rebate policy to address the highlighted problem, the financial incentive from the temporary tax rebate alone may not be large enough to induce buyers to enter the market if they were previously unwilling to do so. This suggests that the problem and its solution are more complex than they appear.
Scenario B: There are several older and/or abandoned homes in the area that homeowners are unwilling to sell. While the tax rebate serves as an incentive to renovate older, potentially abandoned houses, homeowners may choose to rent them out instead of selling them.
Scenario C: Everyone participates in the tax rebate program and renovates their current residences and/or newer properties. The renovation and improvement of homes generally result in a rise in market value. While this may benefit homeowners aiming to build equity, it can negatively impact housing affordability, with even fewer properties available at or below $150,000. Increasing property values will create a problem for new buyers, especially school staff members and new residents seeking homes in the $150,000 or less price range. Therefore, the program may not effectively increase housing supply or affordability.
Moreover, higher property values could lead to increased rents, posing challenges for renters to afford housing in the revitalized neighborhood. Furthermore, property owners might choose to sell their improved homes, reducing the availability of affordable rental units. This shift may result in a decline in rental affordability, affecting a segment of the population unable to purchase homes.
Therefore, it is vital to understand several other economic factors that are likely causing the housing shortage. Similarly, the situation of losing the public school system is unique. Without specifics, the conclusion that the lack of housing is responsible for the closure of the public school system sounds quite extreme. It is important to understand the reasons for the potential school closure to address that issue. Such a problem generally requires a multi-faceted solution, which may or may not involve a neighborhood revitalization tax rebate program.
