Local leaders have what might seem like a simple question – whether residential growth is worth the impact. But they’re not finding easy answers.
“It truly boils down to what is perceived as a healthy economy, as a healthy community,” said Fort Mill Mayor Guynn Savage. “Each one of us views that differently.”
Earlier this month, Fort Mill and Tega Cay councils met with Dr. Joseph Von Nessen, a research economist with the University of South Carolina. Von Nessen outlined economic impacts new home construction has statewide as parts of York County experience explosive growth.
York County Council should have an ordinance to vote on April 18, which eventually could put a moratorium on residential construction in the unincorporated Fort Mill and Lake Wylie areas.
“The big issue in the room, it’s about a moratorium,” Savage said. “We all have to think about it and we have to think about when do you start, when do you stop, how do you go into it, how do you come out of it and how do you accomplish what’s required within the restraints of it.”
For years, elected officials have talked about whether growth pays for growth. Von Nessen said it would be difficult, but not impossible, to answer that question locally. Municipalities or unincorporated areas would need lots of site-specific data.
“The short answer is, it depends,” Von Nessen said. “It’s not an unanswerable question.”
He did talk in detail about the impact construction has on state and federal economies.
Nationally, housing makes up about 15 percent of the gross domestic product. About 5 percent from that total comes from construction, the rest from related business.
“That’s everything from interior decorating to insurance to all of these other related services that are additional components when people buy a house or remodel,” Von Nessen said.
In the mid-1980s the contribution was about 18 percent, where it also was in 2005 before a drop brought on by the economic downturn in 2008. The 3 percent drop from 2005 to 2010 had a variety of impacts associated with recession, Von Nessen said, including reduced total employment, home depreciation and lower household incomes.
“That change in that period of time, that’s rather dramatic,” he said.
In South Carolina, home prices bottomed out in 2011 and 2012, but began appreciating the following year. In 2015 per capita personal income in the state returned to its historical average after several years below. The state is now past recovery from recession and into economic expansion.
“2015 has been by far the best year South Carolina has seen since the end of the great recession,” Von Nessen said.
The 2.7 percent statewide employment growth in 2015 is the highest since the economic downturn, and higher than the housing boom preceding it. South Carolina is outpacing the national average. More jobs are coming in manufacturing and professional services, with higher wages than the state average. This leads to more people moving into their first or new homes.
“Housing is seeing the results of this more broad-based growth, and it is benefiting from that. The demand for housing is rising.”
Even amid growth in many industries, construction stands alone at 4.8 percent growth last year. That’s a full point higher than hospitality at No. 2.
“The No. 1 industry over the last year has been construction,” Von Nessen said.
A rough estimate puts construction jobs at nearly double the economic impact of the jobs themselves.
“For every 10 jobs that are created in the construction industry on average,” Von Nessen said, “we see another eight jobs created elsewhere in the economy.”
The problem with a macro look at construction is, for local elected officials, it doesn’t tell them if they should approve the latest project.
“That’s the part of economics we have to deal more with at the municipal level,” said David O’Neal, Tega Cay councilman.
Tega Cay Councilwoman Dottie Hersey said the economic impact looks great in boom times, but the bust has to be considered. At some point there could be empty or overpriced homes, she said, if too many are built.
“But we may face, again, another bust at some point, just because the economy does that to us every once in a while,” Hersey said.
Von Nessen’s group works with “so what economics.” They look for impacts and data, but don’t make policy recommendations. His recent presentation to the councils was paid for by a homebuilders association. Neither council contributed toward the $2,500 fee.
“We are not a policy institute,” Von Nessen said. “Our goal is to provide objective information.”
Von Nessen considers housing one of four main indicators of sustainable growth in an area, along with geography, workforce and industry.
“When you have the right combination of these four, that’s how you really get to a thriving economy,” he said. “It’s not one or the other. All of these have to work together.”
York County’s economy grew by 2.2 percent overall last year, the seventh best rate among counties in South Carolina. Areas like Fort Mill, Tega Cay and Lake Wylie lead in housing and other growth indicators.
Proximity to Charlotte and Lake Wylie are main reasons why Tega Cay’s population tripled since 1990, Von Nessen said, while Fort Mill is up 250 percent. The statewide average is 2 percent annual growth. York County homes cost more than the $137,000 state average, while Tega Cay homes cost 83 percent more even than the county average.
“Tega Cay has one of the highest median home prices in the state, and Fort Mill is also substantially above the state average,” Von Nessen said.
Homes, Von Nessen said, are key to attracting new industry.
“You have to provide incentives for them to be in a local area,” he said.
Yet stopping new home construction for a period could have an impact, assuming commercial growth continues, that some find desirable.
“You are essentially going to get appreciation of home prices, because you’re going to be increasing demand,” Von Nessen said.
The task is difficult for elected officials because not everyone in a community agrees what makes it healthy, leaders say.
“The cost to serve is one of the main issues residents have,” said Jennifer Stalford, Tega Cay councilwoman.
One study cited by the Tega Cay group shows it costs more to provide public services to residences and less to commercial, based on the taxes those groups pay. But the study isn’t from Tega Cay, and it’s now more than a decade old. Using the same public services rates and factoring in three times higher property values in Tega Cay, Mayor George Sheppard wonders if the study might come to a different conclusion for his city.
“If you’re using those same numbers, that would mean that growth is paying for itself,” he said.
Another issue is, residents who approach public officials on growth decisions aren’t always consistent. Fort Mill Councilman Larry Huntley recalls a two-year town resident upset about the new residential growth coming in beside her neighborhood.
“A lot of people who are complaining about growth are themselves part of the growth problem,” Huntley said.
Neither council voted at the meeting. Neither has brought a moratorium up for vote, although both groups have discussed a desire for more commercial rather than residential growth.
York County’s moratorium would need to pass three readings, which would include a public hearing before it could be implemented.
Want to know more?
Watch video of the meeting on Tega Cay’s YouTube channel at http://bit.ly/1Ww9KQl.