Lexington Habitat for Humanity Inc. — Economic Impact Study

University of Kentucky/Gatton College of Business and Economics
Glenn Hamilton, Bill Quenemoen, Tony Shartle, Walter Ferrier, Ph.D.
December 21, 2003

Issue Studied and Relevance to Habitat for Humanity
This project partnered Lexington Habitat for Humanity Inc. (LHFH) with the University of Kentucky’s Gatton College of Business to study the full economic impact of LHFH services on individuals and the larger Fayette County community. The study shows the many economic benefits for both individuals and the community as a whole. These benefits reach far beyond individual homeowner families and continue to be felt in the community long after house construction is completed. The methods and types of sources used in the study can readily be used by other affiliates to measure the economic impact Habitat for Humanity has on their own community.

Methods
The study examined the direct financial benefits of LHFH on the Fayette County economy, measuring the actual dollars added to the economy from 1997 to 2002. The affiliate has been in existence since 1986 and had built over 200 homes by 2003. The study utilized local property tax records, Property Valuation Administrator records, Internal Revenue Service Form 990 tax returns, audited financial records, accounting statements and other sources to determine economic benefits.

Key Findings
The information in the study is divided into four parts: effects on individuals, on government, on local businesses and on the community as a whole. The executive summary of the study concluded that LHFH had a financial benefit of $1,538,497 for Fayette County in 2002.

Lexington Habitat for Humanity directly benefits individuals. Homeowners collectively saved $292,260 in interest in 2002 on their no-interest mortgages, and an estimated $35 per month per household on utilities. Additional savings were accrued on the zero-interest, forgivable second mortgages as outlined in the full report. LHFH also benefits its employees, who received $453,081 in salary and benefits for 2002.

The Lexington Habitat for Humanity program benefits the local government through payroll taxes at both the state and city level, through the improvement of property values which increases property tax revenues, and through sales tax revenues from sales of recycled building materials from LHFH’s resale store. In 2002, the total tax revenue for state and local government from the LHFH program was $235,981.

Local companies gain from the work of LHFH. In 2002, the total benefit to local companies in the form of consumable goods and services purchased was $146,956. The benefit for construction and professional services was $326,219.

The study also looked at the ways LHFH benefits the entire local community. Property values for twenty-two Habitat homes — built since 1997 and reappraised — increased at a rate that was 3 percent higher than the Lexington average, suggesting that property values for the surrounding neighborhood also increased more rapidly than the Lexington average. The ReStore recycled approximately 872 tons of construction materials, with an estimated annual cost savings of $13,000 in landfill reduction.

Overall, this study does an excellent job of measuring the economic benefits of the work of Habitat for Humanity on a local community.

Implications for HFH

• HFH has a measurable and positive effect on both homeowner families and the local economy.

• Study quantifies the savings, in dollars, to homeowner families, the income to employees and local businesses, and the tax revenue to government. These savings and income support the local economy.

• Sources and methods used in this study can be replicated by other communities to determine the economic impact of their program on the community.

• Data from this type of study can be used to educate community members and donors on the economic importance of Habitat for Humanity to a community.

Questions for Reflection

• What are all the ways in which a Habitat for Humanity affiliate impacts its community beyond the houses built or renovated? What challenges are faced when attempting to document the impact of Habitat on a community? What affiliate and community resources can be leveraged to assist in the reliable and valid documentation of Habitat’s impact?

• Have we effectively determined and documented the economic benefits of the Habitat for Humanity program on our homeowners? Who could benefit from knowing this information? How can we share this information?

• How could the methods in this study be used to compare the property values of different site development and building methods? For example, how could we compare values from individual, scattered sites with small clusters of sites or large-scale developments such as a neighborhood? Who can we partner with to ensure a valid and reliable study?

• Should our affiliate review current privacy laws and make a determination about whether or not to collect and maintain additional information about the properties we acquire and sell and the homeowners we partner with? If so, what information would be helpful and necessary? What processes should be in place to ensure legal and appropriate data collection methods?

Sources Used in Study

• Audited financial statements – for affiliate mortgage values, ReStore sales

• IRS Form 990 – salary/benefits for employees, taxes, operating expenses

• Property Valuation Administrator office – for assessed value and current tax of properties

• Kentucky Housing Affordability Index – for average mortgage rate

• Consumer Price Index

Full Paper

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