Housing in Pennsylvania
I had the opportunity last week to testify with one of my clients, the Housing Alliance of Pennsylvania, at an informational meeting before the Pennsylvania House Urban Affairs Committee. With budget cuts at the state level looming, these sessions are a forum for legislators to hear from constituencies about the impacts of proposed cuts at the community level. Here are my prepared remarks, and here's a link to a story on the hearing.
Good morning. My name is Lee Huang. I am a director at Econsult Corporation here in Philadelphia. I received an undergraduate degree from Wharton with a dual concentration in Accounting and Management, and a Master’s in Government Administration from the Fels Institute of Government at the University of Pennsylvania, with dual certificates in Public Finance and Economic Development.
Econsult Corporation is an economic consulting firm founded in 1979. Our work includes high-level economic and statistical analyses for government agencies, non-profit organizations, and private companies. We have particular expertise in economic impact studies for a variety of industries and entities.
Earlier this year, we were engaged by the Housing Alliance of Pennsylvania to conduct an economic impact study of a proposed Commonwealth of Pennsylvania investment in Pennsylvania Housing Trust Fund. Liz Hersh has brought additional copies of this report if you do not already have one.
Using industry standard input output methodologies, which I am happy to elaborate on during Q&A, we estimated that every ten million dollars in such a fund could generate 23 million dollars in total expenditures within the Commonwealth and a million dollars or more in state tax revenues, as initial investments ripple through the economy in the form of suppliers ramping up to meet new demand and employees spending their new earnings within the Commonwealth. It could also produce within the Commonwealth 200 jobs and 7 million dollars in wages in a variety of industries: construction, of course, but also retail, professional services, and health care, among other sectors. Combined with any leveraging of other public dollars plus private dollars, this all could have an even more potent effect.
Rehabilitating homes is particularly potent, in that it produces more houses per million dollars, and also has a greater statewide multiplier effect. Importantly, the savings associated with both reduced housing payments, as well as lower energy costs as a result of more efficient housing are also stimulative, in that the savings go right into peoples' pockets and can therefore be spent locally; whereas, since we are a net importer of energy in the Commonwealth, almost all of every dollar spent on energy leaves our state economy. Finally, the economic literature also suggests there's a huge positive spillover effect associated with reducing foreclosures and the destabilizing effect they can have on communities.
On the flip side, proposed budget cuts would have an opposite effect. The losses to local economies would be greater than the direct investments by the Commonwealth, since those investments have a ripple effect in terms of economic activity, employment, and earnings: take away the initial investments, and the ripple effects are also lost. Reduced investment also leaves unfixed energy inefficiencies in our housing stock, and exposes communities to further destabilization in the form of foreclosures.
As an economist, I am aware of the difficult choices our elected officials face. As Thomas Sowell once remarked, “There are no solutions; there are only trade-offs.” The current recession is necessitating tough choices that will not be without pain; some of those choices will have to be made, and some of us will have to bear some pain.
It is my hope that this testimony, and the report we produced for the Housing Alliance earlier this year, provides useful information on the important work of housing trust funds, so that you can make those tough choices properly and with the best interests of Pennsylvanians in mind. Thank you for your consideration.