EMPTY FEELING
HOME-BUILDING JOBS DRY UP AS SPRINGFIELD DOES NOTHING
One only has to drive past another undeveloped suburban subdivision plot overgrown by weeds and prairie grass to understand how gridlock in Springfield is choking economic growth around us.
The Chicago area is dotted with them. And big builders are steering clear.
Many in the construction industry say that a number of workers who left the industry after the recession never came back to it because the pace of home-building in Chicago has yet to rebound enough to make it a steady career again. You know the rest of the story. Good-paying jobs go away, so do skilled laborers, and so do tax dollars, etc. Thank you, Springfield. It’s not what lawmakers and Gov. Bruce Rauner are doing, it’s what they are not doing that is scaring off investment, specifically the kind of long-term, hearty investment — like home-building — that you need to keep a region vibrant and competitive.
No longer is the placid “Prairie State” an apt slogan for the budget mess we find ourselves in. “Fear State’’ is more appropriate. And its consequences are real and frightening.
The latest warning came from a newsletter that crossed our desk from John Burns Real Estate Consulting under the headline: “Chicago: Lessons from the Most Beat-Up Market in the Country.’’
It is not news that Chicago’s housing market has rebounded much more slowly than most big markets around the country. According to Burns, while U.S. construction remains 60 percent below its peak, the Chicago market remains 80 percent below.
While there is optimism — the report points to job growth, a solid resale market and rising prices — there is also pessimism.
The report starkly points out that the Chicago market is unique in that the unsettled question of property taxes is putting a brake on real estate growth. And really, it’s the “fear” of taxes that has builders spooked.
“If elected officials can devise a plan to appease the fear of rising taxes,” states Burns, “we expect Chicago housing to rebound strongly.’’
What company in its right mind would look to spend money here now expecting a payoff in two, five or 10 years if it can’t be sure the rug won’t be pulled out from beneath it? Few, if any. Yet Gov. Bruce Rauner and House Speaker Mike Madigan seem hell-bent on continuing this disastrous game of chicken that is costing the city and state untold amounts of money in investment and job creation.
Like climate change, the harmful effects of uncertainty may not be understood in the moment as people go about their lives. But the long-term damage is profound, and reversing it will take time.
Steven J. Davis, a well-respected economics professor from the University of Chicago Booth School of Business, has done extensive research on the effects of policyrelated
Rauner and Madigan seem hell-bent on continuing this disastrous game of chicken that is costing the city and state untold amounts of money in investment and job creation.
uncertainty and sums up the problem best. And though he hasn’t looked at the Illinois situation specifically, his research should be studied by every office-holder in the state.
Why be concerned about policy uncertainty? “Because it’s typically costly to reverse an investment or hiring decision, greater uncertainty naturally prompts businesses to pull back from capital expenditures and job creation,’’ Davis said in a speech last month in Nebraska. “Weak investments in new technologies, capital goods, product development and worker training undermine longrun growth.’’
The bottom line: “Policy uncertainty has negative economic effects.”
Play chicken with that and everyone loses.