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JCHS: Nonprofits Play Key Role in Repairing U.S. Homes

Nonprofits Play Key Role in Repairing U.S. Homes

Private sector spending on improvements and repairs to U.S. homes is approximately $300 billion a year. Yet as a new Joint Center working paper shows, each year nonprofit organizations and public agencies are also investing resources into the rehabilitation and repair of the homes of America’s most vulnerable households—including the elderly, disabled, and those with low-incomes—who might not otherwise be physically or financially able to undertake critical home remodeling and repair projects themselves. Major nonprofits such as Rebuilding TogetherHabitat for Humanity,Enterprise Community Partners, the Local Initiatives Support Corporation, and NeighborWorks America, as well as thousands of local community development organizations across the country, are filling a significant and growing need, largely unmet by the private sector, by investing considerable resources—financial, technical, and direct provision of services—to make homes safer, healthier, more energy efficient, and more accessible for disadvantaged households.The recent foreclosure crisis and sluggish economy undermined years of efforts to stabilize and improve distressed neighborhoods in cities across the country, only adding to the need for nonprofit and public sector involvement. Until this past cycle, housing inadequacy—a measure of the physical condition of housing units—had been on the decline in the United States, largely due to the success of govern­ment housing policies and the growing affluence of the pop­ulation. Since the housing market bust, however, this trend has reversed with the number of moderately or severely inadequate homes increasing by 7% between 2007 and 2011 to 2.4 million units. Certainly the severe housing and economic downturn had a measurable impact on the quality of the nation’s housing.While a comprehensive data source of home rehabilitation and repair activity by nonprofits and public agencies does not exist, this new Joint Center working paper provides some insight into the topic. Rebuilding Together, one of the nonprofits in the study, provides critical home rehabilitation and modification services to low-income homeowners through its extensive network of local affiliates. A member of the Joint Center’s Remodeling Futures Steering Committee, the organization provided support for an affiliate and homeowner survey that collected data on the various types of projects undertaken by their affiliates, as well as demographic and socioeconomic information about the homeowners served and their experience partnering with Rebuilding Together.

Recent spending on home repairs and replacements, as reported by participating households, suggests that many of the homes worked on by Rebuilding Together have seen significant under-investment over the years. While the average American homeowner spent $3,000 on home improvements and repairs in 2011, according to Joint Center analysis of the American Housing Survey, almost two-thirds of Rebuilding Together program participants reported having spent less than $500 on average in the past year—fully 80% less than the typical homeowner in the U.S. Indeed, according to estimates developed by Rebuilding Together affiliates and the Joint Center’s Remodeling Futures Program, the homes serviced by Rebuilding Together were so in need after years of deferred maintenance, that the average value of the rehabilitation and repair projects undertaken by Rebuilding Together was in excess of $6,000 per home, or twice the annual amount spent by the typical homeowner in the U.S.

Home improvement expenditures under the Rebuilding Together program in 2011 were heavily oriented toward exterior replacements and kitchen and bath improvements—projects that would produce the greatest gains in key program objectives such as health and safety concerns, accessibility, and savings in energy use. Typical projects included additions or replacements of steps, ramps, railings, grab bars, windows and doors, roofing, insulation, energy-saving appliances, as well as painting and plumbing and electrical repairs. In the end, Rebuilding Together participants reported significant improvements in health and safety concerns, improvements in accessibility, and energy use savings as a result of nonprofit involvement. 

Source: 2011 Harvard JCHS-Rebuilding Together Household Survey

While a more precise estimate is unavailable, hundreds of millions of dollars are spent each year by nonprofits such as Rebuilding Together, community organizations, and public agencies. Their contributions not only improve conditions for residents, they also help preserve badly-needed affordable housing opportunities, stabilize and revitalize deteriorating neighborhoods—of special importance in recent years—and encourage neighborhood stability by helping long-term residents of the community to remain safely in their homes.

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LIRA Predicts Strong Growth Into 2013

Remodeling activity in the U.S. is likely to see accelerated growth for the rest of 2012 and well into 2013, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

This positive outlook is largely due to the uptick in home sales as well as a sunnier future for many U.S. contractors. The LIRA predicts that U.S. remodeling activity will increase by 12.2% to $128.9 billion by Q1 2013, more than doubling the predicted Q4 2012 growth of 5.9% at $120.7 billion.

“It looks like we’re finally starting to see some improvement in the residential sector of the economy and that’s going to spillover to remodeling fairly soon,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “We think we’re going to see market improvement by the fourth quarter of this year and strengthening as we move into the first quarter of next year.”


Ebb & Flow

There have not been abundant gains since the market hit its low in the 2009–2010 time frame, Baker says, causing most remodelers to have seen a bit of an ebb and flow of business conditions over the last couple of years. “It looks like finally we’re seeing enough momentum behind the residential sector that we’re going to pick up off of that base and move into some reasonably healthy growth,” he says, adding that with the solid, single-digit number gains in the market this year, there is the potential for double-digit gains next year “as long as we don’t have any setbacks in the economy.”

Despite the current obsession with the upcoming presidential election, Baker feels that it will have very little, if any, impact on the economic outlook regardless of the election outcome. “I don’t see a dramatic influence of the election on the industry,” he says. “I think there’s a certain amount of the ‘let’s sit tight’ attitude but that’s more with businesses than homeowners.”

An added positive may take place in the election’s aftermath since it will give businesses one less excuse in delaying decisions that they would have otherwise made. “We have a divided government now; we’ll have a divided government after the election,” Baker says. “I don’t think there’s going to be a lot of dramatic changes, but it will remove that one piece of uncertainty that will allow folks to move ahead with their plans.”—Mark A. Newman, senior editor, REMODELING.

About the LIRA

The Leading Indicator of Remodeling Activity (LIRA) is designed to estimate national homeowner spending on improvements for the current quarter and subsequent three quarters. The indicator is measured as an annual rate-of-change of its components and provides a short-term outlook of homeowner remodeling activity. It is intended to help identify future turning points in the business cycle of the home improvement industry. Read more about the development of the LIRA. (In July 2008, the LIRA was re-benchmarked.)

The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing. The next LIRA release date is Oct. 18, 2012.

The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the U.S. The program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.

The Harvard Joint Center for Housing Studies advances understanding of housing issues and informs policy.   Through its research, education, and public outreach programs, the center helps leaders in government, business, and the civic sectors make decisions that effectively address the needs of cities and communities.  Through graduate and executive courses, as well as fellowships and internship opportunities, the Joint Center also trains and inspires the next generation of housing leaders.

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