Eye On Housing
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.
It’s great to see NAHB come up with some numbers….however, the task of gathering this data is incredibly difficult. There are thousands of vibrant communities undergoing reinvigoration (teardown and replacement) within their older, mostly obsolete housing stock and some are remote lakeside and resort communities where data gathering would be an overwhelming undertaking.
I know in the community where I live, Hinsdale, IL, new demo permits come in every few days. The community is running at about 60 teardowns per year, down from the 2006 high of over 100.
It would almost take a direct feed from zoning and building departments throughout the country to get the real numbers and unfortunately, some communities are still in the paper and file cabinet stage…but again, thanks for bringing the often over looked sector to the forefront.
Thanks,
Brian
I agree, great to get some statistics on this growing change in the real estate market. We have seen a lot of tear downs in the South Minneapolis, Edina, Highland Park, areas of Minnesota and expect it will continue. Good schools and locations are driving much of the activity in replacing old housing stock.
How is it that infill development is differentiated from tear-downs? And is there any sort of situations where tear-downs are more likely to occur– like unfinished subdivisions, or extremely rural/low population areas?
I’ve defined tear-down in a practical way, as building a home on a site where the builder can detect evidence of a previous structure. This is pretty much the only way you can collect relevant data on which to base an estimate. For infill, there’s no official definition. It’s fairly common to use the term in reference to building within the confines of a neighborhood or community, rather than the site for an individual structure. But, as is often the case in the absence of a published definition, people may use the term with only a vague idea of what they mean by it. Any information I have on where tear-downs are more likely occur is anecdotal and usually involves a place where land is very scarce–on an island, for instance.
Or found in, and around, every major metro market; Sydney, Vancouver, LA, Dallas, Denver, Minneapolis, Chicago, The Greater Capital Area, Boston, NYC, Boston, suburban CT, NJ, the Florida coastline etc., etc.
Another stat that helps understand the trend is the fact that 31% of the housing stock in the U.S. is 55-95+ years old and a lot of that was not built to last forever when it was built.
Thanks,