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ON THE LEVEL: UW center director finds construction could be doing more for state’s economy

Mark Eppli

Mark Eppli

It probably came as little surprise to readers of a recent University of Wisconsin report on Wisconsin construction and real estate that these two industries are only behind manufacturing in their contributions to the state’s economy.

What might have been a bit unexpected was the conclusion that the trades are not as strong in Wisconsin as in many other states. For this lackluster performance, the report – “Impact of Real Estate on Wisconsin’s Economy” – found much more to blame than the most-commonly cited culprit: the industry’s protracted labor shortage.

The author of the report, the UW faculty member Mark Eppli, also noted the state’s lack of national builders, easily obtainable loans for land purchases and the sort of attractions that make a state a desirable to place for workers to move to. Separately, tight development restrictions continue to weigh on the homebuilding industry, putting the cost of a new house out of reach for many.

Eppli’s position as director of the Wisconsin School of Business’s Graaskamp Center for Real Estate ensures he has plenty of time to think about these matters. But his familiarity with construction came at a much earlier age.

When he was growing up about 5 miles east of Wisconsin, his father helped support the family with small land-development projects. In college at UW-Madison, Eppli found himself enrolled in a class taught by James A. Graaskamp, a professor widely credited for establishing the high reputation of the UW Real Estate Department.

“Graaskamp’s ability to teach real estate in a rigorous, yet applied manner captured my imagination,” Eppli said. “While Dr. Graaskmap was a quadriplegic, a victim of polio, his voice intonation, facial expressions and ability to tell a story was second to none.”

Eppli recently chatted with The Daily Reporter about his report, the product of a commission by the Wisconsin Realtors Association, and his general thoughts about the state’s construction industry. (The responses have been edited for clarity and brevity.)

The Daily Reporter: What do you think your most significant findings were?

Eppli: There were also several challenging findings of the research. First, Wisconsin has 26% less of its GDP attributable to construction than the United States. In short, the state is falling behind the U.S. in providing residents with modern and interesting places to live and engaging and productive places to work, making it difficult for the state to attract and retain the best and brightest minds in the U.S. Additionally, subdivision employment is down 61% from 2005 subdivision-employment highs, greatly limiting the number of finished lots in the state and adding to the shortage of workforce housing problem in the state.

TDR: Why did the Wisconsin Realtors Association ask you to write your report “Impact of Real Estate on Wisconsin’s Economy”? What questions were they seeking answers to?

Eppli: The WRA has a long-standing relationship with the Graaskamp Center and the Real Estate Program at the University of Wisconsin. (It’s) part of the university’s “Wisconsin Idea,” the idea that the University of Wisconsin research should not only advance the academy, it should also advance the way citizens and business leaders throughout the state and beyond make informed, data-driven decisions.  As director of the Graaskamp Center, I was a natural fit to analyze the impact of construction and real estate services on the state’s economy.

The direct and indirect impact of construction and real estate services on the Wisconsin economy is over 15% of state GDP, 380,000 jobs, and $17.6 billion in personal wages. Almost one out of every six dollars earned, jobs, and GDP in the state is attributable to construction and real estate services.

TDR: What policies could the state adopt to better support the construction industry?

Eppli: While the safety of workers and residents in the state and the state’s environment must be protected for future generations, the regulatory and code enforcement environment in Wisconsin increases the cost and risk of building homes and commercial buildings and limits the development of new lots for commercial and residential uses.

Since the Great Recession, land loans have been difficult, if not impossible, to secure. As land loans generated some of the largest loss rates for banks during the Great Recession, regulators have imposed more stringent regulation and banks have become more conservative.

Lastly, the continued commitment to training construction workers — there is a dearth of talent is almost all of the construction trades.

About Dan Shaw, dan.shaw@dailyreporter.com

Dan Shaw is the associate editor at The Daily Reporter. He can be reached at dan.shaw@dailyreporter.com or at 414-225-1807.

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