of Habitat for Humanity of Greater Memphis o n the Memphis Region 1
Habitat for Humanity of Greater Memphis (HFHGM) 2 was established in 1983 as an affiliate of Habitat International, and as of June 30, 2022 has built 560 homes, completed 1,189 home accessibility and repair projects for seniors, made significant contributions to neighborhood revitalization, and supported the building of over 100 homes outside the United States. Habitat homes are modestly sized, efficiently built with sustainable materials, and are energy efficient. Habitat also operates the Memphis ReStore, a retail store that sells donated building materials, appliances and home furnishings. All ReStore proceeds support Habitat’s housing programs.
By providing comfortable, safe, and affordable housing, Habitat helps its clients achieve self-reliance, allowing them to focus on employment, health, education, and breaking the cycle of poverty. Their children, their neighborhoods, and their communities all benefit from the advantages of homeownership.
Habitat’s model for delivering affordable housing includes extensive homebuyer education and counseling, the use of volunteers and donated materials, “sweat equity” labor volunteered by clients, and interest-free mortgage loans HFHGM’s model has expanded over the years to include neighborhood revitalization. This approach combines new home construction, foreclosure rehabs, and repairs to other houses in order to systematically eliminate blight and revitalize entire communities. These efforts help secure the value and livability of both Habitat homes and other neighborhood properties. Since 2016 HFHGM has developed and expanded across Tennessee a program providing repairs and accessibility enhancements to the homes of seniors, allowing them to stay in their homes and age-in-place.
In addition to a record of substantial housing benefits over the past 39 years, Habitat for Humanity of Greater Memphis provides significant economic impacts that stimulate the overall economy of greater Memphis as well as social benefits that accrue to both Habitat clients and society as a whole.
Following are analyses of Habitat’s economic and social impacts on the Memphis region. Economic analysis considers Habitat’s operations in providing services to prospective homeowners, the impact of construction spending, associated real estate closings, homeowner educational programs, and ReStore operations. Social impacts reflect the estimated dollar value of homeownership benefits to Habitat’s clients and to the greater society, based on sound social and economic research studies that allow for economic quantification of benefits. Similar studies were completed in 2013, 2018 and 2020.
1 We use the Memphis Metropolitan Statistical Area (Memphis MSA) for the region. Included are Shelby, Fayette, and Tipton Counties in Tennessee, DeSoto, Marshall, Tate, and Tunica Counties in Mississippi, and Crittenden County, Arkansas.
2 Habitat for Humanity of Greater Memphis, HFHGM, and Habitat are used interchangeably throughout the report
Economic Impacts
The economic impact estimates in this analysis utilize a standard methodology based on the U.S. Bureau of Economic Analysis’ (BEA) Regional Input-Output Modeling System (RIMS II) and utilizes the most recent (2020) economic multipliers. RIMS II is used to calculate estimates of Habitat’s spending as it circulates throughout our local economy.
These estimated economic impacts reflect the initial round of expenditures by Habitat for operations, construction, etc., and the resulting subsequent rounds of spending for goods and services by local businesses, households, and government. In addition to the direct effects of Habitat generated expenditures in the local economy, our analysis reflects the indirect impacts of expenditures by their suppliers and the induced impacts resulting from subsequent rounds of spending in the local economy by businesses and their employees.
Annual Economic Impacts
The initial round of direct expenditures used in this analysis is based on the following expenditures by Habitat for Humanity of Greater Memphis for the fiscal year ending June 30, 2022. Construction expenditures include $1,479,404 for nine new homes and $2,710,422 for repairs and safety enhancements on homes under the Aging in Place (AIP) program.
Table 1 Annual Direct Impacts
The following table summarizes the local economic activity generated by Habitat’s activities during FY 2022 and shows impacts of direct spending by Habitat (Initial Expenditure above) plus those impacts generated through real estate closings. The economic impacts in Table 2 reflect the initial expenditures by Habitat (Table 1) plus the impacts of these expenditures as they circulate throughout the Memphis MSA economy among all industries.
Table 2
Annual Economic Impact
2021-2022 *Closing costs paid by home purchaser
Direct, Indirect & Induced Impacts *
Earnings Jobs (FTE)
On an annual basis, Habitat contributed almost $18.5 million in economic impact to our local economy during FY2022, including 102 full time equivalent (FTE) jobs with $6.5 million in employee earnings. These jobs are created throughout the local economy and among many different industries and employers. Habitat employees and subcontractors are included in the 102 FTE jobs.
Additionally, Habitat’s successive rounds of spending contributed $10.7 million in valueadded final demand to our economy. Value added represents employee compensation, taxes, and profits and is comparable to gross domestic product (GDP). Overall, Habitat’s direct expenditures for goods and services generate over twice that expenditure as it circulates through the local economy.
These estimates are generally conservative as the economic impacts of only major programs and activities where impacts can be directly and causally linked to Habitat expenditures were considered in our calculations. The Memphis MSA is used as it reflects Habitat’s local service area and is also the area in which most expenditures by Habitat, its suppliers and employees occur.
The above impacts do not include cost savings in the local economy resulting from ReStore’s operating model. ReStore allows for the resale of thousands of tons of construction and other materials that would ordinarily go to landfills with tipping fees and environmental implications. 3 At the same time, ReStore provides affordable building materials and furnishings to local businesses and households.
Economic Impacts on Major Industry Groups in the Memphis MSA
The economic impacts outlined in Table 2 flow throughout our local economy, stimulating revenue and jobs spread among many businesses across every major industry group operating in the Memphis MSA. These downstream impacts are summarized by 21 major industry groups and are shown in Table 3, which follows. As with Table 2, these impacts by industry include the direct impacts (HFHGM spending) and the indirect and induced impacts as those direct impacts circulate through the local economy.
The larger impacts seen in both Construction and Other Services 4 include the direct expenditures of HFHGM as shown in Table 1, plus HFHGM’s indirect and induced impacts among other establishments categorized in the Construction and Other Services industry groups. However, impacts seen in the remaining industry groups show the results of HFHGM’s indirect and induced spending resulting from successive rounds of Habitat’s spending on construction and administration/social services.
3 Marohn, Kirsti, ReStore outlets finding niche. USA TODAY, May 18, 2011.
4 Other Services includes the detailed industry classification for HFHGM: 813A00, Grant making, giving, & social advocacy organizations.
Table 3
Economic Impact by Major Industry Group FY2021-2022
*Includes government services and government enterprises (Utilities includes MLGW).
Beyond Construction and Other Services, the largest Total Impacts of Habitat’s indirect and induced spending are seen in Nondurable Goods Manufacturing, Retail Trade, Finance & Insurance, Real Estate & Leasing, and Healthcare & Social Assistance. Similarly, Retail Trade (over 10 jobs when combined with restaurants), Real Estate, and Healthcare posted the largest gains in employee earnings and jobs.
The two major components of Habitat, construction and the administration of social services (including the ReStore), complement each other to support the broad base of industries impacted by Habitat’s expenditures. Review of the economic multipliers and impacts for construction and administration independently 5 shows that Habitat’s construction spending, to a greater degree, supports both Durable and Non-Durable
5 Not presented here, but available from the author.
Goods Manufacturing, Retail, and Wholesale Trade. These impacts, in part, reflect second and third round expenditures by Habitat and their sub-contractors for building materials - and those retail purchases creating subsequent replenishment sales by local hardware wholesalers and lumber mills, and potentially the local manufacture of HVAC equipment.
On the other hand, Habitat’s administrative and social service functions support Finance & Insurance, Information, and Administrative industries to a greater extent. For example, the administration of non-profits relies on financial institutions, IT firms, and other administration-related businesses and organizations.
Importantly, Habitat expenditures for both Construction and the administration of Habitat have a large impact on our local Healthcare industry. This results from both the additional direct and indirect employment created by Habitat and those employees and their families needing medical care, plus the magnitude and interconnectedness of healthcare establishments in the Memphis region. Likewise, Habitat’s Construction and administrative functions contribute heavily to Real Estate & Leasing businesses. This reflects, in addition to real estate closings and building rental, equipment leasing for construction and other activities.
Cumulative Economic Impacts from Construction
The following table summarizes the cumulative local economic impact generated by Habitat’s construction activities over the past 39 years. Cumulative construction expenditures total $52,642,026, reflecting $36,119,534 for the construction of new homes and $16,522,492 for AIP and other home improvements. Administrative, ReStore and closing costs are not included in these cumulative impacts. The following table shows the cumulative impacts of this $52 million expenditure plus the indirect and induced impacts it has generated as building material suppliers, construction workers, and others have made successive rounds of purchases in the local economy.
Table 4
Cumulative Economic Impacts of Habitat Construction Projects
Table 4 shows that since 1983 Habitat has provided almost $155 million (restated to 2022 dollars) in local economic activity through its construction activities alone. Over $50 million of this cumulative impact represents employee earnings throughout the Memphis economy, which have supported an average of over 17 jobs for the past 39 years. Historical data for operations, family services and the ReStore were not included in the cumulative impact; however, these additional impacts would easily reach tens of millions.
It should be noted that Habitat for Humanity of Greater Memphis’ home building and home renovation activity has increased significantly over the past several years. A significant portion of the increase since 2015 is due to the AIP program. But, in addition, increased new home construction has, at least on occasion, placed Habitat among the top home builders in Shelby County in the recent past. 6 Furthermore, HFHGM’s construction spending has an even greater impact on the national economy, where every dollar of spending adds $3.08 to the U.S, economy (GDP). 7
Direct Economic Benefits to Local Government
Additionally, local government benefits significantly from Habitat’s activities as shown below through property taxes paid on Habitat houses, plus local option sales taxes on direct expenditures for construction materials and sales taxes generated through successive rounds of economic activity. 8 Property taxes are estimated for Habitat homes built during FY2022, and total $22,530. Current property taxes on all homes Habitat has built since 1983 are estimated to exceed $550,000 annually based on their construction costs without consideration for possible appreciation in tax assessor valuation.
Table 5
Annual Fiscal Impact – City, County & State Government FY 2021-2022
Notes:
1) Includes only estimated property taxes generated by homes built in FY2022. Cumulative 2022 property taxes on all Habitat homes built since 1983 are conservatively estimated to exceed $550,000.
2) Includes only Habitat houses Additional property taxes can be generated through the successive rounds of spending by suppliers and employees.
3) Several other smaller taxes and fees for utilities, vehicles, fuel, alcoholic beverages, etc. are not included here. Also, sales taxes collected by ReStore are not included in the above totals.
Retail sales generated through Habitat’s construction, operations, and the successive rounds of spending by others provide $119,931 annually in local option sales taxes. Additionally, these activities generate $305,276 in sales tax revenue at the state level. In
6 Shelby County Homebuilders, Memphis Business Journal (April 15, 2011 and April 13, 2012). HFHGM ranked 5th and 6th in the preceding years.
7 Fuller, S. The contribution of residential construction to the U.S. economy, George Mason University, Schar School of Policy and Government (2020).
8 Does not include benefits to MLGW reflected in Table 3’s economic impacts for the Utilities industry group.
total, during FY2022 Habitat for Humanity of Greater Memphis generated $447,737 in state and local taxes on activities completed during the 2022 fiscal year, and an estimated $975,274 when 2022 property taxes from Habitat homes built since 1983 are included. 9
Direct Economic Benefits to Habitat Clients
While Habitat operations provide significant economic benefits throughout the local economy, the primary beneficiaries are Habitat’s client families. Through no-interest loans and equity accumulation Habitat clients can achieve substantial financial benefits from homeownership.
Interest-Free Mortgage Loans
Table 6, on the following page, shows the estimated value of interest-free mortgage loans to Habitat clients by year for the past 39 years, based on average annual interest rates and estimated annual loan values. The column showing Interest Expense at Prevailing Rate is the amount of interest that would have been charged over the loan life for the average 30-year conventional loan.
Since 1983 Habitat for Humanity of Greater Memphis has saved its 560 clients $30 million in interest expense and over $344,000 in points at closing, lowering their monthly house payments by an average of 45.8% and reducing the amount of money needed at closing 10 Importantly, Habitat’s interest-free loans allow families the opportunity to have an affordable monthly mortgage payment, without which they would likely be unable to purchase a home
9 While Habitat’s AIP expenditures clearly add value to client homes, these improvements may not be fully captured through the county’s appraisal process used to determine tax assessments. Therefore, the above property tax benefits to local government do not reflect AIP spending. Sales taxes generated through AIP repairs and home construction spending are included, however.
10 Savings are likely much greater than the $30 million shown in Table 6. Under conventional underwriting many Habitat home buyers would be considered higher risk sub-prime borrowers and subject to significantly higher interest rates.
Table 6
Value of Interest-Free Mortgage Loans
Estimates for Loans Without Mortgage Service Data: ǂ
Estimates for Serviced Loans and Recent Construction: ǂǂ
* Freddie Mac Primary Mortgage Market Survey, www.freddiemac.com/pmms. 2020-2022 calculated from Freddie Mac weekly data reporting.
ǂ Values are approximated based on 147 homes selling for $40,000 with a 20-year loan. Interest rates and points are Freddie Mac averages for 1983 through 1995.
ǂ ǂ Estimates from 1992 through 2013 are from 2013 mortgage records. Annual construction expenditures for new homes were used for 2014 through 2022.
Equity from Loan Amortization
A major advantage of home ownership is the accumulation of wealth through both paying off a mortgage and increases in the property’s value over time. Table 7 shows estimated homeowner equity in Habitat houses based on principal amortization alone. Home equity from principal amortization for Habitat’s 560 homeowners totals over $16.2 million.
Table 7
Estimated Current Homeowner Equity in Habitat Houses (Based on Principal Amortization)
Loans Originated From 1992 to 2022 * $ 10,360,615
Loans Paid Off Before 1992 (Estimate) ** 5,880,000
Estimated Homeowner Equity $ 16,240,615
* Based on HFHGM mortgage data for homes built between 1992 and 2013 and the construction value of homes built between 2014 and 2022
** Estimated home costs for pre-1992 loans
Furthermore, the absence of amortized interest payments allows Habitat homeowners to accumulate equity at a faster pace than with conventional loans. For example, a Habitat homeowner with level principal payments on a $140,000 house would have $23,333 in equity after five years versus only $11,440 with a conventional loan for 30 years and a 5.0% interest rate.
This wealth accumulation can assist homeowners demonstrate creditworthiness, provide funds for retirement, or be passed along to children or other family members.
Appreciation in Home Value
In addition to equity gained from paying down the mortgage principal, appreciation in the value of a home can add to the homeowner’s equity and wealth. Since most Habitat homeowners have remained in their homes, we were unable to review repeat home sales to determine how prices may have changed over time on Habitat homes. However, tax assessor appraisals were used to estimate house price appreciation from a sample of Habitat homes. While not based exclusively on a home’s actual sales price, these appraisals do reflect pertinent characteristics of the house and sales data on other homes in the immediate neighborhood.
This study updates our 2013 and 2017 studies to reflect current levels of home appreciation as we move beyond the aftermath of the 2008 housing crisis and into a phase of housing inflation not witnessed since the 1980s. We continue with the sample of 54 homes selected from the 2013 Habitat mortgage database, where each fifth loan was selected in order to achieve a random sample comprising 20% of all mortgage loans in effect for 2013. Current (2022) appraised values from the Shelby County Tax Assessor 11 were compared with the house’s original sales price to determine if the property’s value
11 Data from the Fayette County Tax Assessor were used for one house.
had increased or decreased since it was built and sold to the Habitat owner. Original sales prices were estimated from the monthly principal payment and the loan term. Sales dates in the sample ranged from 1994 to 2013, covering multiple economic and housing price cycles. Loans beyond 2013 were not included in order to allow adequate time between purchase and re-appraisal to show more realistic growth in the property’s value. 12
Additionally, appreciation values from the above sample were compared with home price changes for the entire Memphis MSA for the same time periods (e.g., the overall change in house prices from the year the Habitat house sold to the present). House price changes for the Memphis MSA are from the Federal Housing Finance Agency (FHFA) Home Price Index (HPI) which is based on repeat sales and appraisal data from Fannie Mae and Freddie Mac. 13
Table 8 provides aggregate and average appreciation estimates for the Habitat sample. These 54 houses have an estimated original cost of $2,733,752 and are currently appraised at $3,477,600 for tax purposes, showing an aggregate paper gain of $743,848
Table 8
Home Appreciation Estimates for Habitat Sample 2022 Appraised Value vs. Original Cost
Appraised Value Value based on Original Cost Tax Assessor HPI Change Appraised Value HPI Change (Various Years) 2022 2004*- 2022 vs. Original Cost vs. Original Cost
Sample
* 2004 is the average year of construction for the sample.
The average house in the sample cost $50,625 and is currently appraised for $64,400, with a total appreciation of $13,775, or 27.2% over the original cost. Thirty-one homes increased in value while 23 currently have appraised values less than their original cost.
A “typical” mix of homes in the Memphis MSA of the same values and age would have increased $1,773,734 or 64.9% over the same time period (HPI change versus original cost). In other words, the Habitat sample homes would have increased by 64.9% or $32,847 if they performed as the entire Memphis housing market performed during the same time periods. However, it must be noted that the HPI comparison of the entire Memphis MSA housing market was heavily represented by sales of homes in growing
12 This sample matches the sample from the original 2013 study with the exception of one house which the tax assessor shows was demolished in 2013.
13 HPI All-Transactions, not seasonally adjusted, from beginning of First Quarter, 2022 (matches date of tax assessor appraisal). The all-transactions index, as opposed to the purchases-only index, was used as it contains appraisal data and logically should be more closely aligned with tax assessor appraisals even though different methods of appraisal are used by each. The purchases-only index shows somewhat higher levels of appreciation for the years used in our sample.
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suburban markets and escalating (or recovering) prices on larger homes during much of the time represented in our comparison period.
Appreciation history for the Habitat sample is shown in Table 9, and covers the periods considered in the 2013 and 2017 studies, along with changes from 2017 to 2022.
Table 9
Home Appreciation Estimates for Habitat Sample Over Three Time Periods
Change in Appraised Value
Homes w/ Increased Value 19
% Change in Appraised Value
Homes w/ Increased Value 52
Aggregate appreciation between construction (2004 is the average year of construction) and 2013 was only $26,648 as the start of 2013 saw the lowest point in Memphis house prices during the housing recession. Fewer than half (24) of the homes in our sample of 54 increased in value. However, during the same time frame and also a result of the 2008 housing crisis, the average annual HPI change for the Memphis MSA was slightly negative. 14 Appraised values for the Habitat sample had similarly small gains between 2013 and 2017, but only 19 houses saw increases in appraised values. The HPI began recovering from the recession and posted more normal gains in value.
Clearly, the last five years have accounted for almost the entire increase in the tax assessor’s appraised values. This pattern of recent appreciation generally mirrors changes in the HPI for the Memphis area over the same time period, but with our sample showing a smaller magnitude. Table 9 shows that $691,200 of the $743,848 in total appreciation has occurred since 2017, representing a 24.8% average change in appraised value for the Habitat sample. Importantly, 52 of the 54 Habitat homes have appreciated in value. Comparatively, the overall Memphis market experienced a 50.9% growth in house prices between 2017 and 2022 as measured by the HPI. Altogether, the Habitat sample shows solid value growth for the past five years with 96% of homes showing gains. Recent trends are encouraging for Habitat houses, showing solid appreciation with the ability to
14 It is noted that the Habitat sample shows a very slight gain in value between the original cost and 2013 compared with a slight decrease in the HPI. This small difference could be due to a number of factors other than actual home value changes. These include cost estimation techniques used for the sample, selection of the particular HPI, geographic differences, etc.
significantly increase owner equity and provide long term wealth accumulation. Hopefully, positive gains will continue as the market returns to a more stable level of housing appreciation.
With a sample of only 54 homes, it is difficult to glean solid information on appreciation by neighborhood or other level of geography. However, sorting by ZIP Code reveals some preliminary differences. Of the ZIP Codes with at least six houses in the sample, 38128 (Raleigh) was the leader with a 10.5% average annual appreciation between 2017 and 2022, a bit ahead of the 10.2% annual appreciation in the Memphis HPI. Each Raleigh house in the sample had an increase in appraised value of from $37,200 to $39,700. ZIP Code 38127 (Frayser) had a 3.7% average annual appreciation during the same period and 38109 (Westwood/Whitehaven) experienced a 2.8% increase. ZIP Code 38126, adjacent to downtown, witnessed a 5.6% average annual appreciation between 2017 and 2022; with the exception of one, these houses increased in value from $10,700 to $14,000. It is noteworthy that this appreciation in appraised value is in the ZIP Code with highest overall and child poverty in Shelby County based on recent Census data. 15
For perspective, between 2017 and 2021 residential properties in the City of Memphis experienced a 6.6% average annual increase in total appraised valuation (8.0% for Shelby County). 16 While larger than the 4.0% annual appreciation shown for Habitat homes in the above table, this citywide increase includes the addition of new properties to the tax roll.
Several cautions are important in interpreting these home price changes. 1) We have a relatively small sample size of 54 houses. 2) Appraised values are based on computer assisted mass appraisals by the tax assessor rather than actual sales data or a more detailed home appraisal typical for mortgage lending. Similarly, the HPI values are not totally based on sales data, and also include appraisals for refinancing or other purposes. Likewise, there are several different housing price indexes, each with advantages and disadvantages and each yielding somewhat different results. 3) The past two decades have seen relative extremes in home price changes – rapid increases in value followed by a housing crisis with large declines in value and a post-crisis period with increasing values, but that has seen varying degrees of recovery among neighborhoods. 4) As mentioned above, most Habitat houses are not located in the high growth, high value housing markets, but are frequently built in older inner ring suburbs such as Frayser, Oakhaven and Raleigh, and in inner city neighborhoods where property values have often suffered from out-migration of wealthier homeowners, disinvestment by businesses, and higher rates of foreclosure. Property values in these neighborhoods unfortunately cannot be expected to achieve the same rates of appreciation as those in more prosperous areas in practically any housing market.
Importantly, the objective of Habitat for Humanity is to provide quality and affordable homes in vital neighborhoods, and not to achieve gains in property value to fund
15 2021 Special Edition of the Memphis Poverty Fact Sheet, Elena Delavega, The University of Memphis.
16 Calculations based on the State Board of Equalization Tax Aggregate Report of Tennessee, Tennessee Comptroller of the Currency, (2017 & 2021). 2022 data were not yet available at the time of this study.
subsequent home purchases. Especially considering the importance of revitalizing older neighborhoods to enhance livability, the above results for Habitat homes should be considered as quite positive.
Underscoring the above findings of economic benefits to Habitat clients, a recent Brookings Institution study of low and moderate income new homeowners found that between 2005 and 2008 these homeowners had greater net worth and total assets than a comparable group of renters. 17 The Brookings authors conclude that “lower-income homeowners who have access to mortgages that are carefully underwritten with responsible terms, including low upfront costs and low interest rates – or what we like to call ‘responsible mortgages’ – can experience increased financial security and independence.”
Summary of Economic Benefits
The following table summarizes the economic benefits detailed above. While these benefits have some overlap and are not additive, these data do show the substantial impact that Habitat for Humanity of Greater Memphis has had on the Memphis region over the past 39 years.
Table 10
Economic Benefits Summary
& State Taxes 447,737 $ + Not Available
$ Home Appreciation 743,848 $
* The impacts of real estate closings and sales taxes have been removed to prevent double counting.
Note: Local property taxes from all 560 Habitat homes built since 1983 are conservatively estimated to exceed $550,000 annually.
Total cumulative benefits well exceed $200 million in current dollars and are likely between $300 million and $400 million. The great majority of these benefits are longlasting, continuing well beyond Habitat’s initial expenditure as they contribute to wealth accumulation and an increased tax base for local government.
17 Grinstein-Weiss, M. et al. Homeownership and Wealth among Low and Moderate-Income Households. Housing Policy Debate, Vol. 23 (2013). Also: Grinstein-Weiss, M. Opinion: Is Homeownership Still a Sound Financial Move? The Brookings Institution, Washington (June 7, 2013).
For economic benefits of all Habitat for Humanity affiliates across Tennessee refer to the recent study by Middle Tennessee State University. 18 In addition to statewide economic impacts, selected district and affiliate data are presented.
18 Habitat for Humanity of Tennessee: Economic Impact, Business & Economic Research Center, Middle Tennessee State University, 2018. Accessed January 12, 2023, https://mtsu.edu/berc/docs/habitatfinalreport2018.pdf.
Potential Secondary Benefits
Homeownership has been valued and promoted for many decades in America. It is often viewed as a cornerstone to middle class life and has been supported by numerous federal and state programs since at least the 1930s, ranging from the Federal Housing Administration and the IRS code to the Clinton administration’s National Homeownership Strategy and recent HUD strategic plans. A substantial body of academic and practitioner research shows that homeownership has numerous benefits beyond quality housing and equity creation. Among those that have been demonstrated and quantified in economic terms are higher academic achievement and higher lifetime earnings among children from homeowner households, better mental and environmental health, lower rates of risky teenager behavior, and higher levels of civic engagement. Many of these benefits accrue to the children residing in homeowner households, providing positive outcomes throughout their adult life.
In presenting the economic impact of Habitat for Humanity of Tennessee, Dr. Marat Arik, citing influences on mental health, employment, and crime rates wrote that Habitat for Humanity also creates personal empowerment and fosters community development, and “The scope of Habitat for Humanity’s effects, in this light, far exceeds its tremendous impact as an economic contributor.” 19
Furthermore, Dr. Megan Sandel of Boston University’s Schools of Medicine and Public Health states in a Q & A with Habitat International, “We have to get out of the mindset that stable housing is an individual-level intervention. A stable home is a communitylevel intervention. We all benefit.” 20
The following benefits of homeownership and homeownership education programs can be considered potential secondary benefits. It is not a given that they will occur with all clients, but we can estimate their likelihood of occurrence based on historical data or research studies. Likewise, all benefits of homeownership are not reflected here. Only those benefits that can be causally linked to Habitat’s activities and are measurable in dollars saved or earned are included.
This section is based largely on a recent study completed by the Indiana University Public Policy Institute (IUPPI) for Habitat for Humanity of Greater Indianapolis. 21 IUPPI conducted a wide-ranging review of academic and practitioner research on the impacts of homeownership, and documented benefits which could be measured with reasonable levels of confidence and could be expected from Habitat’s programming.
19 Arik, M., Habitat for Humanity of Tennessee: Economic impact, Middle Tennessee State University, Business and Economic Research Center, (2019).
20 Housing’s effects on child development, Habitat International www.habitat.org/stories/housings-effectschild-development. Accessed 1/30/18.
21 Social Impact Study: Habitat for Humanity of Greater Indianapolis, Indiana University Public Policy Institute, Indianapolis (October, 2012).
IUPPI calculated benefits only when a causal relationship between homeownership and outcomes could be reasonably established. Simple correlations between homeownership and outcome variables were not included in their benefits calculations. Empirical research on the effects of homeownership is relatively new and continues to be in a developmental stage. 22 Accordingly, the causes and magnitude of some outcomes should be viewed as tentative. For instance, it is not totally clear if homeownership per se or the stability resulting from homeownership results in some outcomes that produce economic benefits. In either case the cause can be attributed to Habitat’s intervention.
This study follows the same approach as the Indianapolis study but substitutes data relevant to Memphis where appropriate. Calculations and discussion update our 2020 secondary benefits study to reflect Habitat housing construction through June 2022 (reflecting 560 Habitat families), inflation, current demographics, and more recent research studies where available.
The IUPPI study can be referred to for additional discussion on background research and methodology. A literature review by Rohe et al. provides a good background on the mechanics by which homeownership can influence positive benefits related to health, behavior of youth, neighborhood stability, and civic engagement. 23 Dietz and Haurin outline the econometric issues in establishing causal relationships between homeownership and positive outcomes. 24 A recent review by Rohe and Lindblad 25 for the Joint Center for Housing Studies at Harvard provides a detailed presentation of research findings on the social benefits of homeownership. They conclude that “Even after taking self-selection and other confounding factors into account there is considerable evidence that positive homeownership experiences result in greater participation in social and political activities, improved psychological health, positive assessments of neighborhood, and high school and post-secondary school completion.”
The Value of Homeownership Education
An important component of the Habitat model is educating clients in how to be financially responsible homeowners. HFHGM requires their clients to complete the multi-week Habitat Homebuyer Education Course as part of the home purchasing process. While there are numerous advantages to homeownership counseling and education programs, reductions in the rate of foreclosure have been well documented. These are direct impacts for both the homeowner and the larger economy. Research studies suggest a nine to 14.2 percent lower rate of foreclosure among homeowners who have received homeownership counseling in general. 26 “There is abundant evidence that
22 Some calculations are based on a very limited number of sound empirical studies but are included here as a substantial body of qualitative evidence of these benefits is demonstrated in the literature.
23 Rohe, W. et al. Home ownership and access to opportunity. Housing Studies, Vol. 17, No. 1 (2002).
24 Dietz R. and Haurin, D. The social and private micro-level consequences of homeownership. Journal of Urban Economics, Vol. 54 (2003).
25 Rohe W. and Lindblad, M. Reexamining the Social Benefits of Homeownership after the Housing Crisis. Joint Center for Housing Studies, Harvard University (August 2013).
26 IUPPI Ibid.
involuntary loss of homes is severely destructive to both the homeowners and their neighborhoods, potentially exceeding whatever benefits were gained by becoming homeowners in the first place, and that foreclosures are an “early warning indicator of neighborhood change.” 27 Furthermore, one recent study 28 found that each foreclosure leads to an additional 0.3 to 0.6 foreclosures within a one-tenth square mile, further compounding the negative impacts of foreclosed homes.
Cost of Foreclosure to a Household
IUPPI found that the typical cost of foreclosure to a family is $13,950 (restated to 2022 dollars based on the Consumer Price Index). 29 Foreclosure costs to the owner’s household include lost equity in the home, moving expenses and legal fees. 30 Applying this cost to an 11.6% reduction in foreclosures (midpoint between 9% and 14.2%) yields an average cost savings of $1,618 per household. For Habitat for Humanity of Greater Memphis’ 560 clients the cumulative potential savings are $906,214 from 1983 to 2022. The foreclosure reduction rate and resulting savings may be greater for Habitat households, particularly since an extensive financial literacy program is required. 31
Spillover Effects on Neighborhood Property Values
Considerable research has documented the spillover effects of foreclosures on the property value of surrounding homes. Memphis data from the U.S. Senate’s Joint Economic Committee 32 indicate a decline in home value of $1,505 (restated to 2022 dollars) caused by one foreclosure within a 1/8 mile radius (approximately one block). Applying this loss in property value to an average of 40.66 single family homes per 1/16 square mile (1/8-mile radius) in Memphis results in a negative spillover effect of $61,180 per foreclosure. 33 Using an 11.6% reduction in foreclosures yields an average spillover effect of $7,097 for each client receiving homeowner education and a cumulative savings of $3,974,256 for all 560 Habitat clients receiving homeowner education. Research on spillover effects continues to emerge with evidence that foreclosure spillover effects likely vary over both geography and time, and that property values may return when the foreclosed house is re-occupied. 34, 35 Nevertheless, declines in value of neighboring
27 Mallach, A., Homeownership and the stability of middle neighborhoods, Community Development Investment Review. Federal Reserve Bank of San Francisco, (2016).
28 Gupta, A., Foreclosure contagion and the neighborhood spillover effects of mortgage defaults, Journal of Finance, (May, 2019).
29 Moreno, A. Cost Effectiveness of Foreclosure Prevention. Family Housing Fund: Minneapolis (1995).
30 Rohe and Lindblad (2013) also found evidence linking foreclosure to serious psychological illnesses.
31 IUPPI notes that Habitat homeowners have lower mortgage payments due to interest-free loans which are also a factor in reducing foreclosures.
32 Sheltering Neighborhoods from the Subprime Foreclosure Storm, Joint Economic Committee, U.S. Senate, Washington; (2007).
33 Based on 2017 and 2020 Census Bureau data for Memphis. The actual number of homes within the 1/8 mile radius may be greater depending on residential location, resulting in a higher spillover effect. However, spillover effects in Memphis will likely be lower than other cities due to Memphis’ relatively low population density.
34 Chun, Y., Pierce, S. and Van Leuven, A., Are foreclosure spillover effects universal? Variation over space and time, Housing Policy Debate 31 (6), (2021).
35 Gerardi, K., et al. Foreclosure Externalities: Some New Evidence, Federal Reserve Bank of Atlanta Working Paper Series (August 2012).
homes has been shown to begin when the property becomes delinquent and last until a year after the bank sells to a new owner. 36
Foreclosure Impact on Local Government
Foreclosed and vacant properties cost local governments not only in lost property tax revenue, but also put greater burdens on basic city services. Increased criminal activity results in more police calls and associated costs to the legal system. Research from New York City shows a 0.7% increase in total crime and a 1.5% increase in violent crime in the immediate area for each additional foreclosed house. 37 Abandoned properties also require additional efforts from fire, public works, and code enforcement departments. Applying the local government cost from foreclosure from the Joint Economic Committee study ($27,344 in 2022 dollars) to the 11.6% foreclosure reduction rate yields a $3,172 savings to local governments for each client receiving homeowner education, and a $1,776,265 cumulative local government savings for all 560 Habitat clients.
Foreclosure Impact on the Financial Sector
Foreclosures represent very significant costs to the financial institutions and other parties that originate, bundle, and hold these mortgages. The Joint Economic Committee study found that financial sector losses amount to $71,108 38 for the typical foreclosure. Applying the 11.6% foreclosure reduction to these financial institution costs indicates a $8,249 savings per Habitat household for homeownership education. In Memphis 74.1% of mortgage loans are originated by local lenders 39 yielding a $6,113 savings per Habitat household for local financial institutions. Cumulative financial sector savings attributed to the 560 Habitat clients receiving homeowner education total $3,423,318.
Foreclosure Impact on Health
Since the 2007-2009 housing crisis a number of studies have shown that foreclosure can lead to significant physical and mental health diagnoses. Among households experiencing foreclosure, higher rates of hypertension, heart disease, severe depression, suicide, child abuse with traumatic brain injury, and other problems are well documented. 40 In addition, other homes in neighborhoods with significant foreclosure rates suffer medical issues ranging from increases in blood pressure, higher incidences of domestic violence and child abuse, to outbreaks of West Nile Virus due to abandoned swimming pools. At present, however, there is not a sufficient body of research to establish the more direct economic impacts of foreclosure on health.
36 Gerardi, K., et al. Foreclosure Externalities: New Evidence, Federal Reserve Bank of Atlanta (March 2015).
37 Do Foreclosures Cause Crime? Furman Center Policy Brief, Furman Center for Real Estate and Urban Policy, New York University (2010).
38 Benefit values have been restated to 2022 dollars for this and subsequent benefits.
39 HMDA data reported in: Betts, P. et al. 2010 Lending Study of Shelby County: An Evaluation of Lending Performance and Neighborhood Market Indicators. University of Memphis Center for Community Building and Neighborhood Action, completed for the Community Development Council (Summer 2012).
40 Tsai, A.C. Home foreclosure, health, and mental health: A systemic review of individual, aggregate, and contextual associations, PLOS ONE 10(4) DOI:10.1371 (April 2015).
Altogether, HFHGM’s homeowner education program has provided an estimated $18,000 in per household benefits and $10,080,052 in cumulative benefits since its beginning in 1983.
Effects of Homeownership on Health & Well-being
“A safe, decent, affordable home is like a vaccine. It literally prevents disease. A safe home can prevent mental health and developmental problems; a decent home may prevent asthma or lead poisoning; and an affordable home can prevent stunted growth and unnecessary hospitalizations.” 41 There is a growing body of policy research that links substantial savings in healthcare expenditures to the provision of adequate and affordable housing. For instance, a national survey of Habitat homeowners found that 74% said their families’ overall health had improved since moving into their home. 42
A recent study from Great Britain 43 specifically addressed homeownership and health outcomes among renters who were allowed to purchase their rental homes. 44 Owning one’s home was found to lead to a reduction in the number of chronic health conditions, including a 14 percentage point lower probability of cardiovascular disease, a 13 percentage point lower probability of respiratory problems, and 11 percentage points less likely to smoke. We have not calculated cost savings based on this research, even though these results are impressive. It is only an initial study and further research is needed to further explore these health benefits and to link the benefits to economic savings. However, we do present savings related to mental health, lead-based paint, and the reduced incidence of nursing home admissions.
Mental Health
Studies show that living in decent, safe, and affordable housing indirectly benefits the mental health of low income householders. Research among Habitat for Humanity programs in New York state found a 9% improvement in levels of psychological distress after moving into a Habitat house. 45 Following the IUPPI methodology and estimates for the incidence and treatment costs for psychological illnesses, using the 9% reduction in psychological stress as indicative of a 9% decrease in the likelihood of seeking professional psychological help, coupled with a 30% incidence of psychological episodes in the general population, provides an estimated reduction of 2.7% in psychological help
41 Congressional testimony of Dr. Megan Sandel, Associate Professor, at Boston University School of Medicine, in The health benefits of homeownership, Habitat for Humanity, Atlanta (2019).
42 Habitat Ibid
43 Munford, L.A, Fichera, E., & Sutton. M., Is owning your home good for your health? Evidence from exogenous variations in subsidies in England, Economics and Human Biology, December, 2020.
44 This study is particularly useful in establishing health impacts for Habitat homeowners as it 1) clearly isolates the impact of home ownership as a causal factor in improved health, and 2) the homeowner sample is similar to Habitat families in that in each, the transition from renting to homeownership is through a program that provides significant financial advantage (interest free loan for Habitat families and direct housing grants for the former public housing families in the British government scheme). Family incomes were equivalent to approximately $25,000 USD for the British sample.
45 Evans, G. et al. Housing quality and mental health. Journal of Consulting and Clinical Psychology (2000).
needed by Habitat homeowners. With an average cost of $10,658 for treating depression (used as a proxy for all psychological treatment), $288 is saved per household, with cumulative savings of $161,149.
Environmental Health
Homes built by Habitat also provide families with improved environmental health, in particular protecting children from the hazards of lead-based paint, and all residents from mold. However, the 560 homes built by Habitat are not reflected in the benefits calculation as the houses those Habitat families moved from may now be occupied by families with children and these houses would not have had lead-based paint abatement by Habitat.
While a societal net improvement in environmental health may not exist from mitigating exposure to lead, Habitat families have likely seen benefits as lead poisoning is associated with reductions in intellectual ability. Based on findings of decreased IQ and lifetime earnings associated with moderate lead poisoning Habitat children historically had an average lifetime earnings gain of up to $1,800, 46 and considering historic levels of lead found in Shelby County children, the cumulative benefits since 1983 may approach $1 million. Fortunately, the Centers for Disease Control and the Shelby County Health Department report a very significant decrease in the incidence of childhood lead poisoning in Shelby County over the past 10 to 15 years 47 due, at least in part, to leadbased paint abatement programs through local government.
Decreased Reliance on Social Services
There is insufficient data to quantify the relationship between homeownership and reduced use of most social services. However, IUPPI found living in one’s own home lowers the chance of the elderly entering a nursing home (or other long-term care facility) by 30%. Based on the cost difference between nursing home and home health care for treatment of a hip fracture 48 and a 43% incidence of nursing home admission among the elderly, $4,404 49 is saved per Habitat homeowner. Cumulatively this amounts to a savings of $2,466,057 for all HFHGM households to date. In addition, as noted above, Habitat’s home repairs can help elderly clients stay in their homes longer and enjoy better health. Homes built by Habitat are ADA compliant and accommodate specific accessibility problems when needed. Benefits from HFHGM’s Aging in Place home repair program for senior citizens are discussed later in this report.
46 Based on removing a $195,819 lifetime earnings loss per child with significant levels of lead poisoning times a historic 0.43% incidence of lead poisoning in Shelby County children.
47 Shelby County Health Department Annual Report (2016) and CDC’s CBLS county-level data for Tennessee (2017 data).
48 Braithwaite R. et al. Estimating Hip Fracture Morbidity, Mortality and Costs. Journal of the American Geriatrics Society, Vol. 51 (2003).
49 Calculated as the cost difference between a nursing home and home health care for the Memphis MSA based on Genworth Financial’s 2022 Cost of Care Survey.
Physical and mental health benefits for the two cost categories with net benefits (mental health and social services) total $4,691 for each household, with cumulative benefits of $2,627,206.
Effects of Homeownership on Youth Outcomes
Homeownership can have very large impacts on children as advantages achieved in childhood allow them to prosper for the remainder of their lives. The IUPPI study cites several reasons social science researchers give for this positive effect between homeownership and childhood outcomes. These include: 1) greater stability in the child’s living situation (homeowners move much less frequently than renters), 2) homeownership offers children a more stimulating environment, 3) improved housing conditions create a safer environment, and 4) homeowners are more likely to monitor and control social deviance in their neighborhood. Furthermore, positive outcomes with children in homeowner families tend to be greatest in low-income families.
The Habitat model directly addresses these childhood outcomes through the provision of quality housing in a stable neighborhood allowing for long-term tenure, and that alleviates overcrowding and environmental hazards. 50 Substantial improvements in children’s school grades (56%) were found in a survey of Minnesota Habitat families, and was coupled with a 64% improvement in study habits and improved school attendance. 51 Benefits to families will vary based on the number of children per household and their ages when the family moves into homeownership.
Academic Achievement
Referencing several studies linking increases in standardized test scores to lifetime compensation, IUPPI estimated a $49,080 to $86,728 gain 52 per child attributable to homeownership and its resulting stability. Research by Green and White 53 found that children of homeowners were significantly less likely to drop out of school, while Rohe finds that the outcomes result from the stability of homeownership. 54 Using the midpoint of the above IUPPI range ($67,905), and 2.12 children per household reflecting Census estimates for Memphis, yields a lifetime earnings gain of $143,958 (2022 dollars) for each Habitat household.
Cumulatively, this equates to $80,616,411 since 1983 for all 560 HFHGM families (between $58 million to $103 million using the above range in earnings gain per child).
50 How does housing affect children’s education? A Habitat for Humanity U.S. Research and Measurement Team evidence brief, Habitat for Humanity, Atlanta (December, 2021).
51 Mattessich, P. and Hansen, M., Impacts of Habitat for Humanity homeownership: Connections to quality of life, Habitat for Humanity of Minnesota, Wilder Research, St. Paul (2015).
52 Based on lifetime earnings estimates (restated to 2022 dollars) associated with a one standard deviation increase in standardized test scores from: Kane, T. and Staiger, D. The promise and pitfalls of using imprecise school accountability measures. Journal of Economic Perspectives (2002).
53 Green, R. and White, M. Measuring the Benefits of Homeowning: Effects on Children. Journal of Urban Economics, Vol. 41 (1997).
54 Rohe (2013) Ibid
Improved Graduation Rates
The above gains from academic achievement accrue to those children whose families move into homeownership. However, society too has economic gains from increased levels of education. These gains can be expressed as the avoidance of societal costs associated with increasing the rate of high school graduation and include savings arising from reduced crime and public assistance as well as the receipt of higher taxes based on the increased lifetime earnings of high school graduates.
The monetary costs to society per dropout total $178,541 55 with homeownership leading to a 6.7% reduction in dropouts 56 (IUPPI study). With 2.12 children per family, this amounts to $25,360 per low income household in Memphis, and cumulative benefits of $14,201,577 for HFHGM families.
Reduced Teenage Pregnancy
Homeownership has been shown to lead to a 2% to 4% reduction in teen pregnancy 57 with a societal cost of $23,403 per pregnancy 58 (IUPPI). Teen pregnancy costs include decreased earnings for both mother and father, public assistance, infant medical care and foster care services. Using a 3% reduction rate (midpoint between 2% and 4% percent above) and assuming one half of the 2.12 children per Memphis household are females yields a societal cost savings of $744 per family. This totals $416,765 for the 560 Habitat families.
Youth outcomes associated with homeownership total $170,062 per Habitat household with cumulative benefits of over $95 million. Higher lifetime earnings resulting from better academic achievement represents a large share of these benefits. The above environmental health benefits of reduced exposure to lead paint could also be considered a youth outcome of Habitat programs.
Academic research continues to underscore the profound impacts of homeownership in preparing children for a productive adulthood. Two studies in particular, 59, 60 where children were followed over a 20 year period, show greater educational attainment (high school, college, and post graduate) for young adults who grew up in houses owned by their parents (up to 8.7 percentage point increase in likelihood of obtaining a bachelor’s degree, Blau et al.). Equally as important, these adult children of homeowners were less likely to be on public assistance (7.7 percentage points, Blau et al), experience a less
55 Brown, W. et al. The costs and benefits of after school programs: The estimated effects of after school education and safety program act of 2002. After School Alliance, Claremont, CA (2002).
56 Aaronson, D. A note on the benefits of homeownership. Journal of Urban Economics (2000).
57 Green and White (1997) Ibid
58 IUPPI based cost on findings from: Rosenthal et al. Economic evaluation of a comprehensive teenage prevention program: Pilot Program. American Journal of Preventative Medicine (2009).
59 Blau, D., Haskell, N., & Haurin, D. The impact of house characteristics and homeownership on child development and young adult outcomes, SSRN Electronic Journal (January 2016).
60 Rostad, W., Ports, K. & Tang, S. Mothers’ homeownership and children’s economic success 20 years later among a sample of US citizens, Child Youth Serv. Rev. (2019) and National Center for Injury Prevention and Control, CDC, Atlanta (PMC 2020).
likely chance of being convicted of a crime (6.4 percentage points, Blau et al.), and be 1.6 times more likely to be a homeowner (Rostad et al.).
Effects of Homeownership on Civic Engagement
There is also a substantial body of research demonstrating the influence of homeownership on various forms of civic engagement. Homeowners tend to know their neighbors, be more involved in their communities’ organizations, and generally be more involved in political and social organizations, compared with renters, and this involvement is irrespective of home value. 61 Austin Habitat for Humanity reports that homeowners are 28% more likely to vote, 26% more likely to be involved in parentteacher organizations, and 11% more likely to know who represents them in Congress. 62 As with other impacts of homeownership, civic engagement may be mediated through the longer periods of tenure and stability common with home owners. Both participant and society benefit, with this increase in social capital being even more important in lowincome communities.
Value of Increased Volunteering
Volunteering is a good measure of civic engagement and can be expressed in monetary terms. The IUPPI study uses a 22% increase in volunteerism among homeowners, 63 and Memphians who volunteer, on average, volunteer 28.45 hours per year. 64 With 1.22 estimated volunteers per Habitat household in Memphis, increasing their volunteer hours by 22% and with volunteer time currently valued at $26.02 per hour, 65 homeownership can be estimated to result in a $199 gain in the economic value of volunteer time each year. Based on an estimated 17-year tenure, 66 this totals $3,377 per Habitat household. Cumulatively, this becomes $1,891,325 for the 560 Habitat households. Actual tenure and resulting benefits from volunteering for Habitat clients may in fact be considerably longer than 17 years.
One local example of increased volunteerism inspired by Habitat for Humanity of Greater Memphis is the presence of community associations at both the Trinity Park and Las Cruces communities. Each has sponsored neighborhood clean-ups, socials, etc., and undertaken significant civic improvements including successfully lobbying an adjacent property owner to clear an abandoned and burned apartment complex.
61 Social benefits of homeownership and stable housing, National Association of Realtors, Research Division, (2012).
62 The benefits of homeownership, Austin Habitat for Humanity, austinhabitat.org, accessed 1/13/23.
63 Based on findings from: DiPasquale, D. and Glaeser, E. Incentives and social capital: Are homeowners better citizens? Journal of Urban Economics (1999).
64 Volunteering and Civic Life in America (2018), Corporation for National & Community Service. Accessed from: www.volunteeringinamerica.gov/export.cfm
65 Value of Volunteer Time (2022 data for Tennessee). Independent Sector, Accessed from: www.independentsector.org/volunteer_time. Independent Sector’s survey data reflects household members age 16 and over.
66 Estimated tenure for Habitat families based on 2013 review of 294 serviced loans. Actual homeowner tenure is expected to be much longer as 127 Habitat families with paid off mortgages (and presumably still homeowners) were not reviewed.
Several economic impact studies of Habitat for Humanity note the dollar value of volunteer hours in the construction of Habitat homes. However, as with the economic impact study for Habitat in Tennessee, this impact has been correctly reflected in the appraised value of homes as presented in the preceding economic impact section under indirect impacts. 67
Summary of Secondary Benefits
Table 11, below, summarizes all potential secondary benefits quantified above and denotes the primary beneficiary of the benefit.
Table 11
Summary of All Potential Secondary Benefits
Spillover
Note: Totals may not add due to rounding.
Secondary benefits of $196,131 per Habitat household have been identified. For the 560 HFHGM households assisted since 1983 cumulative benefits total almost $110 million. Habitat families are the primary beneficiaries of the great majority of these benefits ($151,012 per household).
67 Arik, Ibid.
Owing primarily to increased academic achievement and the prospect of higher lifetime earnings, average benefits of $144,702 accrue to the children in each Habitat household. These investments in children’s health, safety, and educational outcomes account for almost 74% of total potential secondary benefits ($81 million cumulatively). 68
While Habitat households are the primary beneficiaries of most secondary benefits, society as a whole also benefits from the health and academic improvements achieved by Habitat families, totaling $45,119 per Habitat family and over $25 million since 1983.
Compared with the 2020 study (reflecting benefits through June 2019) Total Potential Secondary Benefits in Table 11 above have increased $19.8 million (22.0%). Additional home construction (41 houses since 2019) accounts for 7.9% of this growth, with much of the increase owing to a significant recent increase in inflation (15.7 percentage points of the 22% change). A 1.6 percentage point net decline was due to several cost, demographic, and methodological changes, yielding decreases in estimated household civic engagement benefits and decreased reliance on nursing homes under the Health and Well-Being benefits.
Whether homeownership alone leads to the benefits outlined in this report, or if better quality housing, better neighborhood conditions, or residential stability are the main reasons, the intervention by Habitat for Humanity of Greater Memphis in providing quality housing and stability is the causal factor leading to positive outcomes. It would likely be more difficult to achieve these same social and economic benefits through rental housing programs, and the great majority of Habitat families would be unable to achieve homeownership without the interest-free loans, financial education, and support they receive from Habitat for Humanity of Greater Memphis.
68 This total does not include higher lifetime earnings from eliminating the risk of lead-based paint poisoning, as this is not considered a net benefit to society.
Economic & Social Benefits of HFHGM’s Aging in Place Program
Habitat for Humanity of Greater Memphis’ Aging in Place (AIP) program serves senior citizens in Shelby County with the goal of making home improvements that allow a senior to remain in their home. Home improvements focus on accessibility and mobility modifications, weatherization enhancements, and critical home repairs, including significant roof repairs. The Aging in Place program was initiated in 2015 with a $3.9 million grant from The Plough Foundation and with supplemental grants from several public, private, and nonprofit donors. Additionally, thousands of hours of labor have been provided by volunteers. The following analysis covers FY2016 through FY2022 (June 2022).
The measurable economic impacts of Habitat’s AIP program result directly from physical improvements that make client homes safer, more accessible, more energy efficient, and structurally sound. These improvements allow senior citizens to remain in their homes and neighborhoods longer (i.e., age in place) and stay healthier and happier, leading to cost savings for both the client and our healthcare system. Detailed below are these economic impacts. As with secondary benefits, these calculations rely on a limited number of research studies, and evolving methodology; therefore, the same caveats apply to AIP estimates.
Long-Term Care Savings
Substantial savings are realized when a senior is able to remain in their home versus having to move into an assisted living facility or a nursing home. These savings accrue mainly to the client, their family, or in many cases to the state’s Medicaid program (TennCare in Tennessee). Furthermore, the lack of housing options among the elderly can lead to “overcare,” or the provision of inappropriate long-term care because no other housing option is available. In addition to the high cost of long term care, overcare can easily lead to a loss of freedom or independence, decreased mobility, depression, learned helplessness, and accelerated general deterioration. 69
In the City of Memphis 16.8% of persons age 65 and over live in poverty (14.6% for Shelby County as a whole), compared with 13.0% for Tennessee and 11.9% nationally. 70 This aging population with limited incomes will continue to place many elderly homeowners at risk for serious housing problems with little or no resources for repairs.
Of the almost 1,200 elderly Memphis and Shelby County households receiving AIP assistance since 2015, an estimated 139 were likely to have had to enter a nursing home, assisted living facility, or independent living residence if Habitat for Humanity had not performed major repairs or accessibility/safety improvements to their homes. Habitat for Humanity of Greater Memphis’ recent surveys of AIP recipients 71 reveal that 37% indicated they would need to move if problems with their house were not fixed (another
69 Lawler, Kathryn. Aging in Place: Coordinating housing and health care provision for America’s growing elderly population. Joint Center for Housing Studies of Harvard University (October 2001).
70 Delavega, E., 2022 Poverty Fact Sheet, School of Social Work, The University of Memphis.
71 Habitat for Humanity of Greater Memphis: Senior Trust: 2-Month Survey, computer run 2/21/23
24% were not sure if they might need to move). Eighty-eight percent would have had no other means to address their housing repairs without assistance from Habitat and 90% had lived in their homes for over 20 years.
Calculations from the above surveys indicate approximately 84 clients would have entered either an assisted living facility or independent living 72 with an average annual cost of $39,741 and an average stay of 2.33 years based on national averages. 73 Based on average annual local costs of $39,741 for a 50/50 split between assisted living ($50,400) 74 and independent living ($29,081) 75, annual savings are $7.8 million.
Similarly, based on client surveys, 55 clients are estimated to have needed to enter a nursing home if they had not received necessary home repairs. The cost burden for these clients would average $85,045 76 for a semi-private room in a Memphis area nursing home, and their stay would have averaged 2.58 years. 77 Additionally, 46 of the assisted living/independent living clients could be expected to subsequently enter a nursing home, based on long term care statistics and actuarial analysis. Consequently, preventing nursing home admissions by making improvements to seniors’ homes saved $17.2 million.
In total, AIP interventions that allow elderly clients to remain in their homes saves $25 million that would have been spent on long-term care facilities. While the lives of 139 clients have been dramatically improved, the largest financial beneficiary of this program is most likely the state’s TennCare program.
Medical Cost Savings due to Fewer Falls
Falls in the home are a major health risk for the elderly, with a third of older adults falling each year and up to 20% experiencing serious injury such as fractures or head trauma. 78, 79
At least 892 AIP client households have received an intervention designed to prevent falls (892 accessibility projects and 594 safety enhancements 80). As 12% of Habitat survey respondents are married, the number of individuals impacted by these interventions totals about 999. On average, 5% of elderly Tennesseans experience a fall
72 Based on number of survey respondents stating they would need to move from their home if repairs were not made, and the proportion anticipating moving to a nursing home, assisted living facility, or independent living facility.
73 From The cost of long-term care and how long it’s needed, Buena Vida Estates, citing data from the American Health Care Association and the National Center for Assisted Living.
74 Genworth Financial, Inc. 2021 average cost for an assisted living facility in Memphis.
75 Tennessee cost data from assistedliving.org/independent-living.
76 Genworth Financial, Inc. 2021 average cost for a semi-private nursing home room in Memphis.
77 Long-term care providers and services users in the United States, 2015-2016, National Center for Health Statistics, Centers for Disease Control and Prevention (February 2019).
78 The costs of fatal and non-fatal falls among older adults. Injury Prevention, 12:290-295 (2006).
79 The health of Americans 3: Prevention of injury and violence in the USA. Lancet, Vol. 384, July 5, 2014.
80 Presumably, there is substantial overlap with many clients receiving both interventions.
of sufficient severity to require an Emergency Department visit, 81 representing an annual average of 50 serious falls with long-term effects (5% of 999) for the Habitat clients receiving a fall prevention intervention. Medical care is estimated to cost $12,122 for each fall, which may range from a simple office visit, to an ED admission, or hospitalization with extensive rehabilitation. 82
Studies of home modification programs to reduce falls (grab bars, ramps, etc.) have found varied results as to the percentage of falls they prevent, ranging from no statistically significant impact to a 26% reduction. 83 For this analysis a 9.1% reduction in falls is used based on a large scale Australian study with similar interventions as the Habitat AIP program. 84 The 9.1% reduction rate reflects individualized home modifications coupled with exercise to enhance balance. Applying the 9.1% fall reduction to 50 falls per year yields a reduction of 4.55 falls a year among the 999 Habitat clients for an annual cost savings of $55,103. These annual savings can then be extended over these clients’ remaining life expectancy of 13.35 years (based on life expectancy of a 73-year-old) to estimate cumulative savings of $735,630. 85
In addition to savings associated with a reduction in actual falls, home modifications and other programs designed to prevent falls go a long way in giving the homeowner confidence in accomplishing their activities of daily living. This security can help seniors stay in their homes longer and forestall or prevent moving to an assisted living facility or nursing home.
Reductions in Utility Bills
Over 700 clients have received energy efficiency improvements to their homes, and 93% reported monthly savings on their utility bills Those savings were grouped into six categories ranging from a $20/month or less decrease to over $100/month decrease. Extending the midpoint dollar savings of each range to the percentage of clients in each savings range yields an annual savings of $308,038. This is a direct savings for the homeowner and averages $434 a year per household, a significant amount for many seniors. Over just a five-year period (based on years of continuing homeownership required in the AIP program) these savings total $1,540,191, and savings should continue for years to come, even through subsequent owners, if the property is properly maintained.
81 Falls among older persons and the role of the home: An analysis of cost, incidence, and potential savings from home modification. AARP Public Policy Institute Issue Brief, No. 56. (Figure 1, 2000 data for Tennessee).
82 The direct costs of fatal and non-fatal falls among older adults, J. of Safety Research, authored by Centers for Disease Control. (Cost updated to 2022 dollars based on CPI for medical care).
83 Studies showing no significant impact of intervention on the incidence of falls typically have suffered from insufficient sample sizes to detect a reduction in falls rather than a finding that the intervention was not successful. Larger reductions in falls have been found when the population studied had already experienced a serious fall.
84 Day, et al. Randomized factorial trial of falls prevention among older people living in their own homes. British Medical Journal, Vol. 325, July 2002.
85 Not included in these costs are the physical and emotional pain, discomfort, and loss of function associated with injuries. These can be much greater and last longer with the elderly. In addition, costs can be borne by family members and others who provide care to persons incapacitated by a fall.
Increased Home Value
Investments in a home, whether enhancements or repairs, add value to that property. Certain roof repairs and other critical repairs may prevent substantial damage to the home that could lead to structural failure and eventual loss. Consequently, many of the AIP interventions add value to the home itself. Roof repair, critical structural repairs, energy efficiency, etc. can be expected to add value currently and be realized at the time of a future sale if the home is properly maintained. This added value is assumed to equal the AIP investment made by HFHGM in the home, and totals, at a minimum $8,924,933. 86 Wheelchair ramps and other interventions that are unique to the AIP client have been excluded as any subsequent unimpaired or non-elderly owner of the home is likely to not be willing to pay more for the home. 87
Summary of AIP Economic Benefits
Table 12 summarizes the above direct economic benefits of the AIP program. Treated separately, and to follow, are the economic impacts of major or critical home repairs on the reduction of neighborhood blight.
Table 12
Summary of AIP Benefits
Initial Year* Cumulative
Long Term Care Savings $ 1,431,541 $ 24,970,068
Medical Cost Savings (fall prevention) 55,103 735,630
Utility Bill Savings 308,038 1,540,191
Increased Home Value 8,924,933 8,924,933
Total AIP Savings $ 10,719,616 $ 36,170,822
* First year AIP benefits. Long-term care savings based on percent of survey respondents indicating they would have been likely to move within the first year.
The AIP program has clearly demonstrated benefits greater than its investment, generating direct benefits estimated to be 2.51 times the investment (Total AIP Savings in Table 12 above divided by the $14,382,443 investment in AIP).
Expenditures for the AIP program also generate indirect and induced economic impacts which have been included in the construction expenditures in the preceding section on cumulative economic impacts. In addition to the above $36.2 million in direct economic benefits, indirect and induced economic benefits totaling $16.4 million were generated by the initial $14.3 million AIP expenditures as it circulated throughout our local economy. Adding these benefits to the above AIP savings yields a total return of $52.5 million that is 3.65 times the $14.3 million spent for AIP projects over the past seven years since 2015.
86 Estimated value based on a total of 818 homes receiving roof or other critical repairs with an estimated average cost of $10,462.
87 On-line real estate appraisal forums generally support the fact that most accessibility improvements do not add to a home’s appraised value.
Critical home repairs under the AIP program also can play a role in the reduction of neighborhood blight by preventing homes from falling into a serious state of disrepair and harming the value of nearby homes. The following section quantifies this societal benefit.
Economic Impacts of Blight Reduction
AIP expenditures, along with other investments by Habitat for Humanity, strengthen neighborhoods and help prevent blighted conditions. Repairs that prevent deterioration, and eventually lead to demolition, add directly to neighborhood quality and uphold the value of neighboring properties. The following analysis considers the 818 AIP homes that received major structural or roof repairs, along with 49 homes receiving similar repairs prior to the AIP program.
A common definition of neighborhood blight is the presence of vacant and abandoned properties. Numerous studies have shown these properties lower the property values of nearby homes, and to also result in significantly higher costs for local governments. As of 2021 Memphis had 31,523 vacant homes that were not for sale or for rent, 88 and therefore at high risk for deterioration and neighborhood blight.
Impacts of blight and blight removal are typically assessed in a similar fashion to foreclosures; their negative impacts are associated with a decline in property values within a specific radius (typically 500 feet versus a 1/8 mile radius with the impact of foreclosures). 89 There is a great deal of overlap between the definitions of foreclosed and blighted properties with the former often leading to the latter. In our earlier analysis of foreclosure costs we were noting the impact of homebuyer education in preventing foreclosures of Habitat houses. In this case we estimate the impact a Habitat rehabilitation of a blighted, or potentially blighted. home has on its neighborhood as it is fixed up and ultimately presents an attractive face to the community.
Recent studies of the economic impact of blight show overall negative spillover effects of from 1.7% to 4.2% within a 500 foot radius. 90, 91 , 92 Type of neighborhood (i.e. predominately homeowners or renters and whether distressed or not) is one factor in determining the impact of a blighted property. In a large scale Cleveland study 93 the impact ranged from a low of -0.4% for simply an unoccupied home in an ownership neighborhood experiencing moderate economic stress to a high of -9.8% for a land bankowned home in a rental area and -10.94% for a land bank-owned home in a non-stressed ownership neighborhood. For our analysis we use an impact of -2.26% based on the
88 2021 American Community Survey, U.S. Census Bureau.
89 Using a 1/8 square mile radius (660 feet) and a 500 foot radius are reasonably similar given that the impacts of a foreclosure or blighted property diminish as you move further away from the subject property.
90 Ibid. HUD
91 Measuring the Impact of Blight Removal: Spatiotemporal Data Systems & Econometric Modeling. 2017 Ohio Housing Conference (November 2017).
92 Policy Brief: Detroit Blight Elimination Program Neighborhood Impact. Dynamo Metrics LLC, Detroit (July 2015).
93 Ibid. Ohio Housing Conference.
overall neighborhood average for a mortgage-foreclosed and unoccupied home in the Cleveland study. 94
Assuming an average neighborhood home value of $64,400, 95 the 2.26% reduction in home value for a nearby blighted property is $1,455 96 Applying this value to an estimated 27.37 houses within a 500 foot radius 97 yields a $39,837 positive impact for each repaired house. Extending this positive impact on neighboring properties by 263 houses that have received critical repairs, and are estimated to have been at risk for blight, 98 totals $10,491,165.
In addition to neighbors, local governments benefit from the elimination of blighted properties through reduced costs for police, fire, and code enforcement. For critical repairs we will use the same savings per house shown with our foreclosure prevention analysis ($27,344). Extending these savings by 263 repaired houses totals $7,201,070.
It should be noted that even when a house becomes blighted its negative impact on surrounding property values fortunately can be eliminated if the blighted home is restored to its original condition. Consequently, we should view this property value reduction (and our calculated savings) as, hopefully, transitory.
.
94 Subsequent research has shown that the number of blighted properties in a neighborhood plays an important role in the degree of reduction in value of neighboring properties.
95 The average 2022 appraised value of HFHGM homes in our appreciation sample is used as a proxy for neighborhood home values in areas where HFHGM has undertaken critical home repairs.
96 Incidentally, this average reduction in home value is similar to the $1,618 decrease calculated for foreclosure spillover effect, which is expected as the two are measuring very similar events.
97 22.37 houses within a 500’ radius was determined by proportioning the 36.13 houses per 1/8 sq. mile used in foreclosure impact analysis down to the smaller 500 foot radius.
98 Critical repairs include roof repair, structural damage, etc. (887 in total), and is multiplied by the percentage reported as a “high cost repair” in the AIP 2-Month survey (56.25%) and then by the percent of clients who have waited six or more years for repairs (54%) to yield an estimate of houses that are likely to fall into a blighted condition.
Summary of Economic and Secondary
Benefits
Of primary importance is the provision of necessary housing services to Habitat’s client families. Table 13 below highlights the cumulative economic and secondary benefits received by these families since 1983. While the physical structure itself is of very significant value, these findings indicate the greatest advantage may lie with the secondary benefits provided through homeownership.
Table 13
Expected Benefits to Habitat Families Receiving Benefits from 1983 through 2022
*Homeowner equity includes equity from loan pay-off and appreciation. Each will increase over time.
** Includes only direct benefits to Habitat families. Healthcare and long-term care are not included as the majority of savings accrue to insurance carriers, and state and federal governments.
In addition to improving housing conditions and quality of life for hundreds of Memphis area families, Habitat for Humanity of Greater Memphis has provided substantial economic benefits over the past 39 years. HFHGM provided almost $18.5 million in economic impact during FY2022 as its spending circulated throughout the local economy. Construction expenditures alone have accounted for over $154 million in cumulative economic impact since 1983.
Potential secondary benefits arise from increased homeownership and education in financial literacy. These benefits include reductions in the number of foreclosures, improvements in health outcomes, and the long range benefits to children of a stable home environment. These secondary benefits are estimated to total $196,131 per HFHGM household, and over the past 39 years total $110 million.
Table 14, on the following page, details the cumulative benefits of Habitat for Humanity of Greater Memphis since its beginning in 1983. These benefits total almost $366 million. Other economic benefits that we were not able to include in this study could expand these benefits to one-half billion dollars. These benefits extend well beyond Habitat clients to include their neighborhoods, area businesses, state, local, and federal government, and society as a whole.
Construction
Summary of All Cumulative Economic & Secondary Benefits
