Aging Housing Stock Needs Renovation Boom

Key Highlights

• Median age of owner-occupied homes is 37 years
• Biden-Harris housing plan targets $640B over 10 years to safe, affordable, accessible, and renovated housin

Demographics of Aging Housing Stock

According to Freddie Mac, close to 80% of America’s housing stock is at least 20 years old. Within that 80%, 38% of the country’s aging housing stock was built prior to 1970.

The median age of owner-occupied homes in the US is 37 years.

Areas of the country with the highest levels of aging housing stock are California, the Midwest, Mid-Atlantic and Northeastern regions of the country. In these states and regions, the median age of aging housing stockman be as high as 40-60 years.

Data from the National Association of Home Builders (NAHB) indicates that a full 55% of homes built before 1970 are owned and occupied by homeowners ages 55 years and up, according to HousingWire.

Renovation Boom Could Positively Impact Older Home

Rather than demolishing and removing some 1.7M older homes from 2009 to 2016 that would have doubled the country’s housing stock by 2017, according to the National Association of REALTORS® (NAR), lenders who focus in on helping borrowers and investors understand new renovation loan solutions could help…

• Their lending institutions’ own bottom lines
• Owner-occupants remain in their own homes more safely and energy efficiently
• Help improve the nation’s critical inventory shortages
• Help satisfy increasing consumer demand for housing
• Help encourage the engagement of developers and investors in renovating older housing stock

Biden-Harris Housing Plan

According to the White House, the Biden-Harris Housing Plan intends to invest $640 over 10 years in affordable, accessible, energy efficient and stable housing.

Specifically with this plan is the HOME program.  HOME would establish a $100B Affordable Housing Fund to construct and upgrade affordable housing.  Several components within the HOME program include:

• $65B as new incentives for state housing authorities
• $10B to make homes more energy efficient
• $5B to increase affordable housing stock in conjunction with larger community development efforts
• $20B increased funding for the Housing Trust Fund
• $13B over 5 years to enact Ending Homelessness Act
• $10B over 10 years for flexible funding for Community Development Block Grant
• $5B annually to expand New Markets Tax Credit Program
• $300M for Local Housing Policy Grants
• Expansion of Low-Income Housing Tax Credit for real estate developers
• Applying Community Reinvestment Act to mortgage and insurance companies

Freddie Mac Proposes Broader Financing Options

A Harvard University study indicates that the renovation market has grown more than +50% since 2009.  During the onset of the COVID pandemic and its subsequent lockdowns, the DIY renovation market surged to nearly $420B, or more than +3% while the US economy shrank by -3.5% in 2020

Homeowners with the wherewithal to pay for those renovations in cash or via insurance did.  Homeowners with low incomes spent less than $500 on home improvements if they were able to spend any amount at all on renovations or repairs.

Here are elements within Freddie Mac’s proposal that would include renovation mortgages with features such as:

• Single-closing transactions that would include financing for home purchases and renovation costs
• No cash-out refinancing assistance for current homeowners or potential buyers
• Ability of lenders to sell loans during construction but before renovations completed
• Expanded eligible renovations to include housing resiliency to help prevent and repair vagrancies caused by natural disasters and to include energy efficiency updates

Meanwhile, Regions Bank, a Utah-based subsidiary of CMS Energy, is placing a $1B bet on the home renovation market.

Regions intends to acquire EnerBank USA,a bank that specializes in home improvement lending.  EnerBank works with a network of 10,000 contractors and develops personalized loan programs funded via its balance sheet backed by FDIC-insured brokered CDs while also charging fees to its contractor clients

Thanks to Freddie Mac, US White House, National Association of Home Builders, National Association of REALTORS®, HousingWire and Harvard University.

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