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When Someone Doesn’t Build a House…Recovery Summer

When someone wants  to build a house, they buy a lot to build it on.  This means new business for a land seller, a real estate broker, a surveyor, a real estate agent, a title company,  a title insurance company,  a liability underwriter, a real estate attorney, an accountant, and a bank or other financial institution.  All of whom pay federal, state and local taxes, unemployment taxes, medicare taxes, social security taxes, employee health care premiums, and match contributions to individual retirement accounts. In addition, both the state and the city or county having jurisdiction over the lot derive tax revenue from the transaction.

When small businesses are profitable, it means new business for advertisers.

When small businesses make contributions to retirement accounts, it means new business for investment brokers.

When someone wants to build a house, they need plans to build from. This means new business for an architect, an interior designer, a civil engineer, a structural engineer, a mechanical engineer, an electrical engineer, a plumbing engineer, a landscape architect, and possibly a consulting engineer (if, for example, the house is to be built in a coastal location and requires  approval by a state environmental authority).  All of whom pay federal, state and local taxes, self employment taxes, unemployment taxes, medicare taxes, social security taxes. They pay for their employees’  health care premiums and for professional liability insurance; they match contributions to individual retirement accounts, are liable for continuing education, pay state and local license fees and annual dues to professional organizations. They retain the services of attorneys and accountants. They borrow funds from banks upon which they pay interest. They buy office supplies, computers, and software;  pay rent for office space and internet access;  lease automobiles, have commercial credit cards used for frequent travel and lodging;  and probably donate funds to their churches, universities, favorite charities, and local causes.

When someone wants to build a house, they need a building permit. This means the local government receives permit application fees and construction impact fees which fund the salaries of municipal employees, road construction, school construction, parks and recreation construction, water and sewer construction, utility construction, civil improvements, and other items critical to managing the growth of the local infrastructure.

When someone wants to build a house, they need construction financing.  This means more business for a bank, an attorney, the local tax collector, and an insurance underwriter.

When someone wants to build a house, they need someone to execute the work.  This means business for a general contractor who is insured, has a credit line at a bank, and pays federal, state and local taxes, self employment taxes, unemployment taxes, medicare taxes, workers’ compensation premiums, and social security taxes. The contractor pays for the services of attorneys and accountants.  The contractor borrows funds from banks on which he pays interest. The contractor pays his employees’  health care premiums and  his company’s liability insurance premiums.   He matches his employees’ contributions to their individual retirement accounts.  He pays state and local license fees, annual dues to professional organizations, is liable for continuing education, buys office supplies, computers, and software.  He rents his office space, pays for internet access, places orders for building materials, leases cars and heavy construction equipment, and probably donates funds to his church, university, favorite charities, and local causes.

To build the house, the contractor  signs a contract with the owner based on a specific schedule of values which comprises the construction budget and then contracts with a team of subcontractors from whom he has received proposals to complete the work.  He has agreements with subcontractors for the clearing, grading, and site preparation;  the foundation work, the structural frame, the masonry, the rough carpentry, the electrical work, the plumbing work, the heating, air conditioning and ventilation work, the insulation, the interior sheathing, the exterior sheathing, the interior painting, the exterior painting, the specialties such as solar, music, security, video, fire alarm, and data systems, the finish carpentry, the cabinetry, the plumbing fixtures, the lighting fixtures, the roofing, the kitchen and household appliances,  the interior finishes, the furnishings, the swimming pool and equipment;  the landscape planting, final grading, irrigation system, exterior  lighting,  mail box, ongoing cleaning, waste removal, and the final survey.  All these subcontractors pay federal, state and local taxes, unemployment taxes, medicare taxes, social security taxes, employee health care premiums, and match contributions to individual retirement accounts. They pay for the services of attorneys and accountants. They pay liability insurance premiums, pay workers’ compensation premiums, and borrow funds from banks on which they pay interest. They pay state and local license fees, annual dues to professional organizations, are liable for continuing education, place orders for building materials, buy office supplies, computers, and software.  They rent their office spaces, pay for internet access, buy trucks and construction equipment, and probably donate funds to their churches, universities, favorite charities, and local causes.

When the house is finished, the construction loan is converted to permanent financing.  This means more  business for the title company, the title insurance company, the bank, the local tax collector, and  the attorney.  It means new business for the flood insurance company, the home insurance company, the mortgagor, the possible second mortgagor, and a new perpetual flow of property taxes to the municipality.

When someone doesn’t build a house it’s called  Recovery Summer We need a recovery from Recovery Summer.

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  1. July 30, 2012 at 11:58

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