Create a Dynamic Econometric Model of Home Construction in Developed and Top Tier Developing Countri

1
Create a Dynamic Econometric Model of Home
Construction in Developed and Top Tier Developing
Countries to Demonstrate Direct and Multiplier
Impacts on Host Economies

• Proposed by
• The Group for Home and Infrastructure Finance,
  Inc.
• Sponsored by
• IDOC/NA, Inc., a NY State 501(c )(3) non-profit
• April 2000 Confidential Proprietary

2
Why such a model?

• Measure the direct and multiplier economic
  effects of home building on all concerned
  sectors, going beyond regional and local to the
  National level, and THUS
• Enable government, communities, NGOs, the
  financial, and industrial sectors to forecast and
  plan.
• Determine the fiscal benefits to all levels of
  government from public policies favoring new
  housing construction.
• Implement public policy and good governance based
  on the outcomes.

3
Not Least of All

• To create incentives necessary to attract
  affordable home ownership finance for lower
  income populations currently excluded or
  underserved.

4
Who Benefits?

• Policy makers at all levels of civil society
• Builders
• Construction industry suppliers
• Civil engineering and infrastructure providers
• Community, Financial, and Corporate Entities
• Civil Society leading to socially and
  economically integrated development

5
Who Benefits?

• People being able to afford homes of their own
• People employed and improving their lives in an
  expanding economy

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Theres a (Short-Term) View
Property Taxes Economic Activity
(Less Costs of producing new housing units and
the required infrastructure
expenditures)
Housing Not Worth the Returns
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We believe this (Short Term) View

• Is STATIC
• Produces distorted and inflated estimates of the
  net fiscal costs of expanding the housing stock
• Understates the benefits, both fiscal and social

8
We believe this (Short Term) View

• Fails to include
• Revenues generated by construction and
  development
• Wages and salaries spent by construction workers
• Expenditures by workers in other industries that
  provide goods and services to the construction
  industry, and from furnishing of new units
• Revenues from small (and larger) businesses
  implanted in development zones.

9
Conventional Wisdom

• short-term results are sharply positive, residual
  results can be long lasting.
• direct and indirect (multiplier) impacts of
  housing are substantial.

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Informed intuition tell us Conventional
Wisdom is right but needs substantiation. The
Econometric Model will deliver the answers.
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The Dynamic Housing Model
Multi-Source Tax and Revenue Generators
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Conventional Wisdom into Measurable Results
If home building is a major economic fuel,
The question remains,
Fuel of what Octane?
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and is it the right fuel

• even if other investments produce higher yields?
  
• ANSWER The combination of positive economic
  impact that will be measured by the proposed
  dynamic model, plus the social need and utility
  of home construction, argue strongly in favor of
  substantial National commitments to build that
  place of which citizens can be mighty proud --
  the home of their own.

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Building the Model in the Age of Globalized
Capital Markets
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GHIF, Inc.
IDOC/NA, Inc.
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The Builders Approach

• Straightforward but Complex, built by experts.
• Uses known data bases from developed countries
  the United States and one other European nation
  to construct a model whose structure can be
  adapted to targeted top-tier developing
  countries.
• The objective through knowledge, skill, and
  speed -- a powerful, convincing model.

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Data Sources/Building Blocks

• National Income Accounts
• Consumer Expenditure Surveys
• National, Provincial and Local Budgets
• National Input/Output Matrices
• Labor Surveys

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NAHBs U.S. Regional and Local Impact Model a
foundation for Policy Makers

• The National Association of Home Builders local
  economic housing construction impact model
  (developed by Drs. Emrath and Dubin) is often
  used locally and nationally to demonstrate to
  policy makers New home construction does not
  drain their treasury
•  

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..generating treasury surpluses..

• While local policy makers sometimes see certain
  data tending to show that new multifamily and
  low-income housing units cause additional public
  deficits despite new property tax revenues
• NAHBs local impact model demonstrates that the
  difference between revenues generated and public
  sector costs narrow dramatically. In fact, added
  local spending by new housing residents often
  generates local treasury surpluses.

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U. S. Federal Impact Low Income Housing Tax
Credit Program, 1997 Tax Relief Act Extension

• Impact model results demonstrated that outcomes
  of construction and substantial rehabilitation of
  low-income units generated positive Federal tax
  revenues, covering almost the entire program
  cost. Federal policy makers were convinced of
  program worthiness. The Tax Relief Act was
  extended.

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The Builders of

• Dr. Elliott Dubin (Project Leader), Research
  Director, Multi-State Tax Commission earlier,
  was co-author of highly regarded regional and
  local econometric housing model for NAHB.
• Dr. Mark Zandi, RFA, discussion engaged, head of
  economic analysis firm worked with Nobel
  Laureate Kline on modeling.
• Prof. Booi Themeli (Labor cost issues South
  African), Adjunct Professor of Economics, Fordham
  University.

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cities on the hills

• Prof. Andrew Caplin (Peer Reviewer), Professor of
  Economics, New York University author, Housing
  Partnerships a new means to deliver housing
  finance for lower incomes or larger homes.
• Rutgers University Center for Urban Policy
  Research (Participant), accepted in principle.

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IDOC/NA, INC.

• International Documentation/North America, Inc.
  is a 501(c)(3) nonprofit educational
  institution incorporated in 1969 under the laws
  of New York State specializing in institutional
  programming, information exchange and publishing
  related to human renewal. Co-sponsor of study.

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IDOC/NA, INC.

• IDOC/NA, Inc., has sponsored and cosponsored a
  series of conferences with the United Nations and
  NGOs on Third World Development, Technology
  Transfer and Womens Political Rights, with
  funding from the New World, Ford and Lilly
  Foundations.

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Support for the Model

• With only a USA focus, such a model would have
  absolute value within our borders -- for policy
  makers, builders, mortgage companies,
  construction suppliers, and others.
• However, if the method used to construct the
  USA model could be applied to/for other countries
  using similar data sets, then its use on a
  comparative basis is dramatically increased.

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Support for the Model

• A housing and construction model would set a
  credible international standard for discourse and
  cooperation between public and private sectors,
  with the ultimate beneficiaries being families
  and the communities.
• -
  Donald R. Holton
• Secretary General
• International Union of
• Housing Finance

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Further Support for the Model

• In the mortgage finance arena, it is often
  difficult to demonstrate to policy-makers in
  developing markets how to perform the
  cost/benefit analysis of making changes to
  current tax structures, etc in order to implement
  modern mortgage finance systems. If such a model
  existed, I think that the decision-making process
  for governments will be easier.
• - Debra L. Erb President
  Societas, Inc.
• (the international advisory non-profit of
  the Mortgage Bankers Association of
  America)

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The Enterprise Foundation

• The Enterprise Foundation wholeheartedly
  supports your efforts to develop an econometric
  model on direct and multiplier impacts of
  affordable home construction in the United States
  and top tier developing countries. In fact,
  provision of affordable housing is not only a
  platform for stability and growth in a familys
  life, but an economic driver for employment, tax
  base and other economic activity. We would be
  most interested in having such a model developed
  and used for this country.
• F. Barton Harvey III
• Chairman of the Board
• and Chief Executive Officer

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It was the very opposite of grand, but it was
my first true home of my own and I was mighty
proud. - Nelson Mandela Long Walk
to Freedom
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Housing Econometric Model Contact Point For
information on how to support creation of the
Housing Model and any additional details, please
contact The Housing Model Program IDOC/NA, Inc.
and GHIF 34 East 64th Street, New York, NY
10021-7351 Tel [phone] Fax [phone]
Email pell_at_moveworld.compe_at_moveworld.com Confi
dential Proprietarype_at_moveworld.com