As Rents Rise, Remodeling Activity Falls
Markets where rents are rising rapidly are seeing less home-improvement activity, translating to rental properties that aren't being upgraded or properly maintained, suggests a new study.
In many ZIP codes where rents have climbed by some of the highest amounts, remodeling and other home-improvement activity are at their lowest, according to a new study by BuildZoom, which analyzed housing-cost and building-permit data.
The study found that from 2011 to 2013, a 10 percent increase in rents in a ZIP code was accompanied by an average 9.7 percent decrease in the number of homes undergoing permitted improvement, says Issi Romem, chief economist for BuildZoom.
Romem speculates that with rents rising, particularly in high-dollar places like San Francisco, landlords likely are facing fewer vacancy periods, which may leave them less time to make home improvements. Also, "when eager renters are lining up at the door, landlords have less incentive to renovate," Romem says. "If one can make top dollar renting a place out as-is — why not?"
On the flip side, remodeling and home improvement activity tended to rise more in ZIP codes with greater increases in home values as opposed to rents, Romem found.
"From 2004 to 2013, we estimate that, on average, a 10 percent increase in home values was associated with a 4.3 percent increase in the number of homes undergoing improvement," he says.
Source: "Home Improvement Patterns in San Francisco Suggest a Growing Divide in the Living Standards of Owners and Renters," BuildZoom (Nov. 14, 2014) and “Rising Rents Correlate with Less Home Improvement Spending,” HousingWire (Nov. 12, 2014)