Housing Starts v. Growing the Bottom Line
As the election moves into its final days and the lull in activity that brings, I am turning my attention to another topic, the local economy.
One of my favorite blogs is Calculated Risk. The author there summarizes about fifty different national and selected local economic data sets, focusing on housing data. A couple of recent charts posted to Calculated Risk on housing data got me thinking about the data for Colorado Springs. For decades the housing industry in Colorado Springs has been a large driver of employment and economic activity.
Furthermore, a friend of mine has argued that Colorado Springs needs to stop chasing growth for its own sake, and start focusing on a sustainable growth driven by the natural increases in population. If that’s to be the case, we now have a window of opportunity to make the shift in direction.
We also have had one of the mayoral candidates saying that the solution to the city’s budget problems lies in growing the bottom line. That is certainly a laudable goal; will the housing industry lead us towards that end? In today’s post, let’s take a look at how we got to where we are today. In future posts, I will look at the local housing industry from two sides: the supply of housing, and the demand for housing.
What follows are a couple of charts I have put together. (It has taken me some time to teach myself how to run Excel and I still have a lot to learn.) The data was pulled from publicly available sources: sales and use tax data from the city’s website, and the data on single family housing permits, from the Pikes Peak Regional Building Department’s site.
The first chart is a double plot. In purple is the monthly number of single family permits issued by the PPRBD (left hand y-axis). On top of that in lime green is the year-over-year monthly percent change in the City’s sales and use tax receipts (right hand y-axis). A negative number for the green line means that the city took in less sales and use taxes in the referenced month than it did the same month a year earlier.
Three points to be made from this graph. First, there were about 500 single family construction permits issued each month in 2005. That figure began a steady decline in early 2006 until it reached about 100 permits per month in late 2008, where it has hovered ever since. Second, the City’s sales and use tax revenues quickly followed suit, with year over year decreases until the housing permits reached bottom. Third, since then, while housing permits have remained in the same tight low range, sales and use tax receipts have begun to show year over year increases. Those increases, however, have not returned us to pre-recession levels.
The second chart shows the actual monthly dollar receipts in sales and use tax revenues.
As we compare the monthly receipts for 2010 with those for 2005, we can see that the receipts are roughly the same. So we are out of the woods, right? Wrong. These are raw numbers, and are not inflation adjusted. The Denver-Boulder CPI Stood at 190.0 in 2005. In 2010 it was at 212.5, over 20 points, or approximately 10% higher. So merely getting back to even means we’re actually still 10% behind where we were six years ago.
We now have a housing industry that is a shadow of what it once was and a city revenue stream that is no longer driven by housing construction. Will housing return? Stay tuned . . .