The Economic Case for Housing

BY LISA MAY
Director of Advocacy and Public Policy for Maryland REALTORS^®.

Real estate transactions, or a lack thereof, are, of course, central to a REALTOR’S^® personal economic well-being, but recent reporting also highlights just how important home sales are for Maryland’s local and state economies.

Each year, NAR releases a report that quantifies the economic impact of a home sale in each state. For Maryland, each transaction adds $126,800 in direct and indirect economic activity.  Or, to put it another way, each home sale that doesn’t happen, removes that activity from being realized in our economy.

Of course, decreases in home sales also directly affect state and local revenues through reduced transaction tax collections. Recordation and transfer taxes provided local governments with over $1 billion in revenues in both Fiscal Years (FY) 2023 and 2024, according to the Maryland Department of Legislative Services County Revenue Outlook Report.

That is a significant sum. However, in FY 2022, that number was $1.6 billion.

Local governments experienced recordation tax decreases of 18.7% and transfer tax decreases of 21.5% over that two-year period. Those losses alone were enough to wipe out gains in other local government revenues such as property, income, and occupancy taxes.

As REALTORS^® have said many times, the causes of Maryland’s dual housing and economic crises are clear. We are not building housing in quantities to match our needs, and the housing we ARE building is so constrained by local regulations that it is not and cannot be affordable for our workforce.

Want proof? Harvard’s Joint Center for Housing Studies reported in January that the nation’s home price to income ratio had reached all-time highs—surpassing even the housing boom of the mid-2000s. In the Washington D.C. Metro Area, that ratio reached 5.1, meaning that home prices were over five times the median household income. The Baltimore Metro Region fared only slightly better with a 4.2 price to income ratio, rising to levels last seen in 2008.

The connection between housing and our economy caught the eye of Maryland Comptroller Brooke Lierman as her office gathered information for the 2023 Maryland State of the Economy Report.

The consensus from a series of regional roundtables with business leaders, including local REALTORS^®, was that our housing shortage was directly linked to a company’s ability to attract and retain employees. It stated, “housing is a major issue from an economic development standpoint as both businesses and residents require a sufficient supply of affordable and available housing across all income levels to thrive.”

It’s no coincidence that Maryland recently ranked 6th worst in the nation in two inauspicious categories: difficulty in hiring workers (according to WalletHub) and ability to find a starter home (according to constructioncoverage.com).

Absent adequate housing supply, businesses can and have turned down opportunities to expand their operations in Maryland, and work-ers are looking elsewhere.

Beyond the Numbers

The above figures are likely to convince statisticians and data-hobbyists. But are those enough to sway your local policymakers and business interest groups to action? If we’re being honest, probably not.

However, that doesn’t mean those stats are off-limits for advocacy efforts. It only means that they need to be humanized to really resonate. Luckily, there is an online tool that can help you with this process.

The National Housing Conference’s Housing Resource Center has created the Paycheck to Paycheck database. In it, they have gathered information on home prices, median wage data, and rental costs by Metropolitan Statistical Area.

In each of those areas, you can compare incomes for various professions against local costs to purchase or rent housing. For instance, if you want to know if a firefighter, elementary school teacher, or postal worker can afford to live in the area in and around Salisbury, this tool will tell you. (And in case you were wondering, yes, you can also look up what a real estate broker or agent can afford in those areas too.)

It will come as no surprise that those and many other professions make just a fraction of what is required to purchase a home in Maryland. This reinforces the Comptroller’s findings that high housing costs and our state’s business climate are inextricably linked. To improve on the latter, we must improve on the former.

When your local Council or economic development entity laments a lack of workers or inability to recruit them, this database can give you an answer as to why, with housing at the center of the solution. And isn’t that what we all really want from housing advocacy?