For acquisition/rehab projects, please use the Renovation Calculator.
The Residential New Construction Economic Impact Calculator is designed to estimate the economic impact of new residential construction. The economic impact of existing or rehabilitated housing should not be estimated using this tool. The calculator can be used to estimate job creation, gross fiscal revenues, and economic growth due to new residential construction in the short term and the long term.
- Economic growth includes total increases in employee compensation, taxes on production and imports, and return on investments across all industry sectors. Economic growth and job creation during the short term happens while construction is actually taking place. Economic growth and jobs supported over the long term occurs after construction, when the residential development is in operation.
- Jobs supported when the development is in operation are typically sustained as long as the development is in operation.
- Fiscal revenues are gross revenues collected by state and local government. Fiscal revenues raised in the short term are from fees collected before the development is completed: permitting fees, recording fees, utility hookup fees, etc. Long term fiscal revenues are from real estate taxes collected each year.
Please read the directions, notes and sources below for more information about using the calculator and interpreting its estimates.
Enter the following data for a proposed development:
County/Independent City where home(s) are proposed to be built:
Type of building*:
Total number of units: unit(s).
Average square feet per unit: sq.ft.
Anticipated Construction Cost: If you would like to use your own construction cost estimate, enter it here. Only include new construction cost (this figure should not include land value, permitting costs, etc.; leave blank if unknown):
| Estimated Construction Cost**: |
| Economic Impact*** | |||
|---|---|---|---|
| Short Term | Long Term | ||
| Estimated Job Creation: | Estimated Jobs Supported: | ||
| Estimated Gross Fiscal Revenues: | Estimated Gross Fiscal Revenues†: | ||
| Estimated Local Economic Growth: | Estimated Local Economic Growth: | ||
There are three recommended methods for using the calculator:
- Entire Development: Enter the type of building, total number of units and average square feet per unit for an entire development into the calculator to get a rough estimate of the short term and long term economic impact of a proposed project.
- Separately by Building: To improve the accuracy of the calculator’s estimates, enter the type of building, total number of units, and average square feet per unit for each building in the development. Sum the estimates of economic impact for each building to determine the economic impact of the entire development. Entering this level of data will significantly improve the accuracy of the calculator’s results.
- Anticipated Development: If you know the anticipated construction cost of your proposed development, input it into the field provided to further improve accuracy. The calculator’s construction cost estimate is based on national construction cost data and assumes average quality construction. Replacing this estimate with an estimate customized for the anticipated project allows the calculator to do a better job of estimating short term economic impact
Interpreting the results:
The calculator’s short-term economic impact estimates are based on its construction cost estimate. The accuracy of the estimate depends on the detail of data entered by the user. Results are most accurate for single buildings and less accurate when aggregated for large developments.
In addition, the calculator’s construction cost estimate assumes average quality of construction. If your development includes higher quality construction specifications (e.g. green building standards), short-term economic impact is likely to be greater.
The calculator’s long-term economic growth and job creation estimates are annual and based on median rents in the selected county or independent city. If the units in your proposed development will be rented at a rate that is higher than the gross median rent for the county in which the development is proposed to be built, long-term economic growth will likely be higher. Actual rent to be charged per unit should include both rent paid by the occupant and any subsidy received by the unit owner on behalf of the occupant.
If the units proposed are being developed for sale, economic impact will be lower than the calculator estimates because median owner costs are typically less than median rent and sold units typically do not require management and maintenance employees.
Economic impact is both local and regional. The localization of economic impact depends on attributes of the locality of the proposed development. Estimates of job creation and economic growth in this calculator are based on the US Bureau of Economic Analysis Economic Regions, which are defined based on employment patterns and market connectivity. Use your knowledge of local employment patterns and the development’s ownership and management to determine whether economic impact is likely to be more or less localized.
For example, if many people in your locality work in the residential construction industry and the proposed development will be locally owned, economic impact will be more localized. Economic impact is affected by many characteristics of the local economy and development details, however many of these variables are not considered in this calculator.
In addition, the calculator does not account for very recent economic changes (e.g. major population increases or decreases, the construction of a new highway or mode of transit that significantly impacts regional economic connectivity, the addition or closure of a major construction firm or construction materials supplier, etc.).
Use your knowledge of the local economy to gauge the accuracy of the estimates. If you would like help interpreting the calculator’s results or to request a more in-depth economic impact study please contact Mel Jones at the Virginia Center for Housing Research at Virginia Tech (Mel.Jones@vt.edu).
Data Sources:
RSMeans Square Foot Costs 2013, RIMS II multipliers produced by the Regional Product Division of the Bureau of Economic Analysis, U.S. Census Bureau American Community Survey, Weldon Cooper Center for Public Service Virginia Local Tax Rates 2012, Virginia Economic Development Partnership Guide to Local Taxes, Virginia Circuit Court Deed Fee Schedule
Notes:
* Each building type is associated with a minimum and maximum square footage based on data availability. If your entry does not fall within the minimum and maximum square footage assigned to each building type, the accuracy of the calculator’s estimates will be diminished. For greatest accuracy, use the calculator to estimate economic impact on a building-by-building basis. Sum the economic impact of each building to determine the total impact of a proposed development. The bounds for each building type are listed below
- Single Family Detached: 600-3200 square feet per unit
- Single Family Attached: 1000-3800 square feet per unit
- Garden Style Apartments (1-3 story): 8000-36000 total square feet (all units)
- Multifamily Mid Rise (4-7 story): 40000-100000 total square feet (all units)
- Multifamily High Rise (8-24 story): 95000-600000 total square feet (all units)
** Construction cost estimates are customized based on type of building, square footage of the building, and location. All construction cost estimates assume average quality of construction. RS Means describes average quality construction as “…a simple design and built from standard plans. Materials and workmanship are average, but often exceed minimum building codes. There are frequently special features that give the residence some distinctive characteristics.” Construction quality categories includes: Economy, Average, Custom and Luxury, from least to most cost per square foot respectively.
*** Estimates of economic impact are based on construction cost, local median rents, local median home values, local tax rates, and RIMS II input-output multipliers. Estimated Fiscal Revenues are for the selected county only. Job Creation and Local Economic Growth are regional estimates. Residential construction in the selected county or independent city will likely have economic impacts in a broader region.
† Estimated Fiscal Revenues in the long term is an estimation of annual real property taxes (real estate taxes). Therefore, the long term fiscal revenue shown in the calculator is an estimate of taxes to be collected on the development in a single year at 2012 local tax rate.
The data estimates provided through the Economic Impact Calculator for New Residential Construction are intended for informational, educational and research uses. The information may not be used for commercial purposes or re-marketed. Any reproduction and distribution of this information must clearly identify HousingForward Virginia and Sourcebook as the provider of the information.
