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Kush: Apartments are a good deal for Scottsdale

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There has been considerable debate on the virtues/drawbacks of multifamily (rental) housing in Scottsdale, to include the suggestion by several no-growth council and mayoral candidates like Littlefield, Borowsky, Janik and Durham who claim that housing does not pay for itself and places an added tax burden on the general population.

These no growth candidates provide no evidence for their claims as there are none and anyway, the soundbite plays well with their anti-growth rhetoric.

The truth is quite opposite, according to an exhaustive study conducted in 2015 by the National Association of Home Builders, multifamily housing more than pays for itself.

This study states that assuming Scottsdale finances capital investment by borrowing at the current municipal bond rate (which they do).

In the first year, a typical 100 rental apartment community provides for an estimated $2.5 million in taxes (sales; rental & property) and other revenue for the city, while on average, costs to the city include $232,000 in current expenditures to provide public services to the net new households, and $1.6 million in capital investment for items such as new structures and equipment.

After the first year and going forward, these same 100 rental apartments generate $503,000 in taxes and other revenue for Scottsdale, with $464,000 in local government expenditures needed to continue providing services at current levels.

By way of clarification, the difference between government revenue and current expenditures is defined as an “operating surplus.” The surplus generated by multifamily construction during the first year is large enough to service and pay off all debt incurred by investing in structures and equipment at the beginning of the first year by the end of the first year.

After that first year time period, future operating surpluses will be available to finance other projects or reduce taxes.

Furthermore, after 15 years, these 100 apartments will generate a cumulative $9.5 million in revenue compared to $8.4 million in costs, including annual current expenses, capital investment, and interest on debt.

Other advantages to multifamily housing are that 100 single family homes require about 25 acres of land while 100 apartments require around 2-3 acres.

Also, statically, 100 single family homes will generate 50 school age children while the 100 multifamily units will generate around four school age students.

Finally, apartments generate more tax revenue for the same amount of land and have 75% less school age children and since apartments are infill, residents drive less and spend more resulting in more sales tax revenue.

Most importantly, these new multifamily homes provide much needed housing for all of the people who wish to live in Scottsdale and cannot otherwise afford to buy.

So much for housing not paying for itself.

Editor’s Note: Larry Kush is a long time Scottsdale resident, and is senior vice president of Orion Investment Real Estate; he currently serves on the Scottsdale Planning Commission and is a member of the Scottsdale 2020 executive committee.