During NAHB’s recent Spring Leadership Meeting in Washington, D.C., I spoke with two experienced remodelers who have served as association leaders for decades—Vince Butler of Virginia and Alan Hanbury of Connecticut.
Challenges
When asked about the challenges facing remodelers, Vince and Alan agreed that while the remodeling market is strong, there are significant headwinds. Vince first noted financing, for remodelers and their clients. With high interest rates, homeowners are not tapping their home equity. And as he said, decisions can be different when the customer pays cash.
Alan pointed to the vast array of local, state, and federal regulations, and the failure of regulators to recognize the special burden of regulatory compliance for small business owners. Building codes, for example, are more stringent than ever.
Vince observed that remodelers’ projects are larger and more complex than before. Remodelers face site, engineering, and review time issues.
Illegal Permitting
Both of these experienced remodelers pointed to a recent study from Stanford University that demonstrated just how much unpermitted residential building happens in California. The study looked at satellite imaging to determine the number of accessory dwelling units (ADUs) in San Jose, Calif. They identified 1,300 ADUs built between 2016 and 2020, but only 300 were permitted. This is an excellent example of the considerable competition remodelers face from people willing to build without a permit. This illegal construction harms small businesses that play by the rules.
People often circumvent the permitting process because it is cumbersome, unpredictable, and slow.
As noted in the Stanford research article, many local jurisdictions across the country have liberalized their ADU statutes to make it easier to have an ADU. But many jurisdictions do not have the permitting processes necessary to keep pace with demand. These projects should be subject to city or county permitting and inspection requirements.
Vince and I agree that local governments need to be more diligent about sanctioning people and enterprises that do not pull permits. It’s neither safe for consumers nor fair to legitimate firms.
The permit system exists to make sure homes are safe and built to code. To do so, some areas of the building code are overly burdensome and don’t significantly improve homes. But, while expensive, for the most part, code compliance does yield better homes. Yet when hundreds of buildings are constructed without a permit, it makes the permit system look powerless and pointless. If not handled properly, small, infrequent transgressions can lead to more consequential violations of the permitting process.
People often circumvent the permitting process because it is cumbersome, unpredictable, and slow. NAHB is working to address that problem through our 10-point plan to address housing affordability.
Opportunities
Both Alan and Vince noted that even with the challenges, market conditions remain favorable for remodelers. High mortgage interest rates lead more homeowners to invest in their current residences. And, as Alan pointed out, the nation’s aging population cannot be overlooked.
There is an ever-growing market for remodels that enable folks to stay where they lived for years. A big part of that effort is NAHB’s Certified Aging-in-Place program and other efforts to make sure more people can age in place.
These two experienced pros see challenges and opportunities for remodelers. Firms that built strong teams and good business and processes are well-situated to overcome the former and take advantage of the latter.