A report released by the Joint Center for Housing Studies at Harvard University, Improving America’s Housing, found spending on home improvements and repairs reached a high of $424 billion in 2017. Among many factors contributing to the booming home-improvement industry is a significant increase in spending by rental property owners, accounting for 30% of home improvements and routine maintenance expenditures in 2017, and the conversion of rental homes to homeownership.
Much of the spending by rental property owners is attributable to the growing demand for rental housing following the Great Recession. Despite a boom in multifamily construction in this period, construction costs rose faster than incomes, putting rents for new rental homes out of reach for many renters. Owners of existing rental properties responded to demand updated, but less expensive rental homes by investing in significant building upgrades.
The authors also attribute the recent strength of the remodeling market to substantial investments in rental and vacant units converted to owner-occupied housing. Converted units are a growing share of the housing stock, with 6.6 million units converted in 2016 and 2017. Some of these converted units were potentially lost from the stock of lower-cost rental housing. Owners of newly converted homes have made substantial investments to improve the conditions of these units, spending $50 billion in total, or an average of $7,500 per owner. Home-improvement spending on homes that were owner-occupied during the entire two-year period averaged $5,500.
A growing share of national improvement expenditures is made to repair and restore homes damaged from natural disasters. Homeowner spending for disaster-related improvements has almost doubled over the past two decades, exceeding $27 billion in 2016 and 2017. Homeowners paid out-of-pocket for 40% of repair and restoration projects, with insurance covering the rest. Owners typically spread repairs and renovations over two or three years following a disaster, and the recent damage caused by wildfires and hurricanes in 2017 and 2018 is likely to result in an increased backlog of disaster-repair spending.
The report identifies factors expected to contribute to continuing strength in home-improvement expenditures over the coming years. With 80% of the 137 million homes in the U.S. at least 20 years old and 40% at least 50 years old, current and future spending on home improvements and renovations will be necessary to maintain their quality. As the baby boomer generation ages into their 70s and 80s, spending on home modifications to improve accessibility is expected to rise. Growth in the remodeling industry will also be facilitated by an increase in homeownership among younger generations, as these new owners modify their homes to suit their needs and preferences.
Improving America’s Housing is available at: https://bit.ly/2HuddyA