The median age of owner-occupied homes is 40 years old, according to the latest data from the 2022 American Community Survey[1]. The U.S. owner-occupied housing stock is aging rapidly especially after the Great Recession, as the residential construction continues to fall behind in the number of new homes built. New home construction faces headwinds such as rising material costs, labor shortage, and elevated interest rates nowadays.
With a lack of sufficient supply of new construction, the aging housing stock signals a growing remodeling market, as old structures need to add new amenities or repair/replace old components. Rising home prices also encourage homeowners to spend more on home improvement. Over the long run, the aging of the housing stock implies that remodeling may grow faster than new construction.
New construction added nearly 1.7 million units to the national stock from 2020 to 2022, accounting for only 2% of owner-occupied housing stock in 2022. Relatively newer owner-occupied homes built between 2010 and 2019 took up around 9%. Owner-occupied homes constructed between 2000 and 2009 make up 15% of the housing stock. The majority, or around 60%, of the owner-occupied homes were built before 1980, with around 35% built before 1970.
Due to modest supply of housing construction, the share of new construction built within the past 12 years declined greatly, from 17% in 2012 to only 11% in 2022. Meanwhile, the share of housing stock that is at least 53 years old experienced a significant increase over the 10 years ago. The share in 2022 was 35% compared to 29% in 2012.
[1] : Census Bureau did not release the standard 2020 1-year American Community Survey (ACS) due to the data collection disruptions experienced during the COVID-19 pandemic. The data quality issues for some topics remain in the experimental estimates of the 2020 data. To be cautious, the 2020 experimental data is not included in the analysis.
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Both new construction and remodeling are hampered by several factors. Excessive single-family zoning that artificially constricts multi-family construction. And both new construction and remodeling are hampered by the upside-down incentives of the traditional property tax that penalize owners with higher taxes for constructing or improving buildings while rewarding owners who allow buildings to deteriorate. (One of the problems with the housing supply is the deterioration of older homes when maintenance and remodeling become too expensive.) And new construction is also hampered by high land prices. And land prices are higher than they should be because owners of vacant lots are often not motivated to sell. Owners of vacant lots pay much less tax than neighbors with buildings, even though it costs their communities about the same to construct, operate and maintain streets, sidewalks, sewers and water mains in front of similar-sized properties, regardless of whether they are vacant or improved.
Some communities are remedying excessive zoning restrictions by reducing the footprint of single-family zoning or by allowing matter-of-right development of duplexes and triplexes within them. And some communities are also remedying the upside-down incentives of the property tax by reducing the tax rate applied to privately-created building values while increasing the tax rate applied to publicly-created land values. For more info about the tax reform, see https://www.shareable.net/land-value-return-and-building-a-more-equitable-economy/ .
The aging U.S. housing stock underscores the demand for renovation and new construction projects, which can be supported by construction loans. As properties age, these loans play a crucial role in financing both the rehabilitation of existing homes and the development of new ones, ensuring the vitality and modernization of the housing market.
“Multi-family construction” housing in the US are almost entirely rental units (over 96%), so they aren’t even being discussed by this article, which covers owner-occupied housing stock. No one in America wants to still be renting when they’re 35+ and have a family, they aspire to single family zoned owner-occupied housing.
What is sorely needed is a better, more incentivized system of helping people in older, increasingly decaying and obsolescent housing stock (the majority now over 40 and thus over the designed lifespan of the major systems in the structure, from plumbing to electrical, concrete to roofing) obtain low cost funding to rehab, remodel, replace, and repair. Once a structure has been neglected sufficiently it becomes more cost effective to tear it down and replace.