How Construction Can Lead Economic Recovery

Originally published by: American Institute of ArchitectsSeptember 2, 2011

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The American Institute of Architects (AIA) today issued the most comprehensive look yet at the built environment’s role in economic recovery, highlighting six specific policy steps that will generate jobs and help grow the American economy.

The policy document, “The Built Environment’s Role in the Recovery,” is being issued on the eve of President Obama’s major jobs initiative to be unveiled next Thursday in a speech before a Joint Session of Congress. The AIA white paper was delivered this week to the White House and to Congressional leadership on both sides of the political aisle.

The report notes that the value of construction put in place each year equals between six and nine percent of annual Gross Domestic Product. Each $1 million in new construction spending supports 28.5 full-time, year-round-equivalent jobs, according to a study by George Mason University economist Stephen J. Fuller. Yet, despite record low interest rates, a financing crunch still persists in this sector, severely limiting job creation. 

“We’re putting these recommendations forward now because it’s time for the Administration and Congress to get real about creating an environment in which people are willing to lend and borrow,” said AIA President Clark Manus, FAIA. “When credit flows to worthy projects, it unleashes the job creation potential of the American economy.” 

“It’s also important to realize that infrastructure is more than roads and bridges,” Manus said. “The American people need to let their politicians know that the built environment is where the most potential exists to grow the economy.”

The six steps outlined in the policy document are:

About The American Institute of Architects
For over 150 years, members of the American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. Members adhere to a code of ethics and professional conduct to ensure the highest standards in professional practice. Embracing their responsibility to serve society, AIA members engage civic and government leaders and the public in helping find needed solutions to pressing issues facing our communities, institutions, nation and world

  • • Support Recovery in Private Lending Markets

    In May, the report notes, the U.S. Government Accountability Office reported that “new [commercial real estate] borrowers have faced tighter credit conditions, due to banks tightening their underwriting standards in response to the downturn…” The trend of tighter credit standards suggests that borrowers who previously were considered creditworthy might not meet banks’ higher standards.

    “Without spending a dime,” the AIA policy document states, “the federal government could immensely improve conditions within the construction industry by improving access to credit.”

    • Re-establish the Build America Bonds Program

    In the two short years that the program was authorized, state and local governments used Build America Bonds to finance roughly $180 billion new construction projects, preserving tens of thousands of jobs. What’s more, the AIA estimates that at least $45 billion of that amount was used in the construction sector to finance schools, offices, hospitals and other building projects that improve communities.

    Establish a National Infrastructure Bank

    Establishing an Infrastructure Bank is an improvement that should be made immediately. Receipts to the National Highway Trust Fund are falling and an infrastructure bank could leverage private capital to stretch federal dollars further. Two current and similar proposals sponsored by Senator Kerry and Representative DeLauro would provide a source of patient capital for loans or loan guarantees for building energy retrofits, storm-water management, and electric grid improvements, modernizing a broad spectrum of infrastructure and making smart investments in America’s future.

    • Jumpstart Green Construction and Schools

    President Obama called for a new Better Buildings Initiative that would reduce energy used in commercial buildings by 20 percent over 10 years. The initiative would be a catalyst for private sector investment in upgrading the efficiency of commercial buildings. In particular, enhancing and expanding the energy efficient tax deduction by turning it into a credit, streamlining the certification process, and making it available to more owners of commercial property, the Better Buildings Initiative would encourage private investment in energy efficient improvements. More investment, in turn, means more jobs. In addition, financing the renovation and retrofit of schools will create jobs, lower school districts’ energy bills and provide better learning environments for students.

    • Pass a Surface Transportation Bill that Maintains Current Levels of Funding

    The construction industry understands that transportation drives development. In January 2008, the AIA and the University of Minnesota’s Center for Transportation Studies released Moving Communities Forward, a study authorized by Congress that shows how well-designed transportation projects can bring multiple enhancements to communities. The legislation that authorizes and guides transportation investment nation-wide expired in September 2009.

    • Repeal the Three Percent Withholding Rule for Government Contracts

    Legislation enacted in 2005 requires three percent of all payments to contractors by federal, state and many local agencies contracts be withheld, starting in 2013. This law not only reduces the cash flow for millions of small businesses who perform public work, but it also will cost taxpayers an enormous sum to implement. The Department of Defense estimated that it will have to spend more than $17 billion to implement this requirement. At a time when the governments face severe funding shortfalls and businesses are struggling to make ends meet, the three-percent withholding law needs to be repealed.

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