Approximately 7.7% of single-family home starts in 2015 were attributable to tear-down related construction, according to the latest estimates from NAHB. Tear-down starts refer to construction of a home on a site where a previous structure was torn down before the new home could begin development. NAHB estimates 55,000 total tear-downs for 2015.
Anecdotal evidence suggests that tear-down construction has become a significant modus operandi in some parts of the country. Due either to local topographic or political constraints, developable land in some places has become scarce. In such places, replacing older structures with new ones can potentially be an important option for builders and developers, and it would be desirable to be able to track the extent to which this is occurring.
Among other things, that means defining tear-downs in a way that can be measured or estimated. Relevant information is not available in the Census Bureau’s building permit and starts data. Because builders often obtain lots without knowing their full history, the Census Bureau has concluded that it’s impractical to ask builders about tear-downs. NAHB, however, has contended that, if a structure had been present on a building site recently, it would usually leave some evidence that a builder should be able to detect.
Thus, NAHB in February asked its panel of single-family builders for the NAHB/Wells Fargo Housing Market Index (HMI) about the number of homes they started in 2015, and the number built on a site where a previous structure, or evidence of a previous structure, was present before they started. The HMI panel is a sample of NAHB’s single-family builders stratified by size and geography.
Weighted by the number of homes they built, just over half of builders said none of their single-family starts were tear-downs, and 3 percent said all their starts were tear-downs. The weighted average was 7.73 percent.
Because the ultimate goal of the exercise was to estimate the total number of starts attributable to tear-downs, it was important to weight builders’ answers by the number of homes they built. Unweighted, a substantial share of builders said 100 percent of their single-family starts were teardowns, but these tended to be smaller builders, many of whom built only one home in 2015.
The weighted average of 7.73 percent works out to a total 55,200 single-family tear-down starts in 2015, divided across the four principal Census regions as shown below:
These tear-downs accounted for about 6 percent of single-family starts in the West, 7 percent in the South, and 8 percent in the Midwest. In absolute terms, the Northeast had about the same number of tear-down starts as the Midwest (8,000). But because there is less single-family construction overall in the Northeast, tear-downs accounted for 15 percent of starts there. Among the four regions, the Northeast has the oldest housing stock, and many of its desirable locations are in densely settled cities, or near the ocean, where buildable open space may be limited.
Keep in mind that, as defined above, tear-down starts are not the same thing as infill development (i.e., homes built in an already established neighborhood or community). Vacant land is often available within an established community, and a tear-down can easily occur in an outlying area—for example, if an isolated older structure simply becomes obsolete and needs to be replaced.