Contractors wanting to secure their financial independence this 4th of July need look no further than a recent report from Harvard University. The report shows several emerging markets contractors can capitalize on including aging in place retrofits, home performance enhancements and rental property improvements.
Here are the opportunities for future growth highlights from Harvard’s Joint Center for Housing Studies report:
- The aging population presents a key opportunity for further growth in home improvement spending. Most homes owned by those age 55 and over lack key features that promote accessibility.
- A large mismatch exists between where aging households
live (with slightly higher concentrations in Frostbelt states) and where more
accessible homes exist (in the Sunbelt). Even if every new home projected to be
built over the coming decade in the Northeast and Midwest had basic
accessibility features, the shortfall between supply and demand would still be
almost a million homes.
- Sustainable home improvement projects are on the upswing,
generating about 30 percent of revenue at full-service remodeling firms. Around
20 percent of homeowners reporting improvement spending in 2012 or 2013
indicated that at least one of their projects was for energy efficiency
The growing involvement of younger households in the home improvement market also holds out promise that sustainable home improvements will continue to be one of the fastest growing market segments.
Spending on projects related to healthy homes and indoor air quality is increasing. Almost a quarter of homeowners indicate some degree of concern about the health impacts of their homes, and one in 20 expressed major or moderate concern over whether their homes negatively affected the health of household members. Renters are even more apprehensive, with over a third conveying some level of concern.
Capital investment in the aging rental stock is finally on the rebound owing to soaring demand for rental units. Capital improvements amounted to $31 billion in 2013, and maintenance and repairs an additional $23 billion.
- 3.6 million single-family homes were added to the rental stock from 2006 to 2013 and many of these homes were likely under-maintained as a result of the foreclosure crisis, suggesting another round of rental improvement spending is likely to come.
Possibly the biggest surprise from the findings is the
growth of the home performance and energy efficiency markets, said Kermit
Baker, Program Director for Remodeling Studies with Harvard’s Joint Center for
Housing Studies. “We’re very bullish on this market,” Baker said. “Most
homeowners would feel that contractors are a valued third party resource.”
Kermit added that researchers are also impressed at the magnitude and speed of interest in this market, especially among younger households. All told 15 million to 20 million households have expressed concern about sustainability and home health.
That trend bears out in the number of contractors using energy efficient products compared to 15 years ago, said Paul Emrath, National Association of Home Builders’ vice president of survey and housing policy research. For example, 89 percent of contractors use energy efficient windows and 70 percent install high efficiency HVAC systems.
Baker and Emrath also see big opportunity in the rental market, half of which is composed of single-family homes, Baker said. During the housing boom, falling rents meant rentals were neglected. As the multifamily and rental market booms again, “there’s a lot of makeup now for that period of under development,” Baker said.
Emrath added that the work contractors do for homeowners — say a kitchen or bath remodel — is often similar to multifamily units. The challenge is to make your services known to the rental market. Baker suggested contacting property management firms in local areas.
When it comes to the aging in place, Emrath said NAHB research shows bathroom accessibility is the fastest growing market. Remodelers report that 87% of their customers request bathroom grab bars; 81% ask for higher toilets; and 71% want curbless showers. Both experts recommended contractors get an NAHB Certified Aging in Place Specialist or similar certificate to tap this customer base.
But while these markets show promise, Emrath said contractors would do well to remember their core business. “There’s a difference between something that’s growing and what accounts for the bulk of your market,” he said. “Whenever we ask remodelers what reasons people give for doing a remodeling job the top two are a desire to for something new and better, and a need to replace something old and worn out.”