Harvard Remodeling Study Predicts
Builder Gets Jail Time for Worker's
High-end projects account for lion's
share of spending
After five years of unprecedented growth, consumer spending on
home improvements softened in 2006. But a recent study by the
Joint Center for Housing Studies at Harvard University predicts
that the industry will rebound just fine.
"The 2006 slowdown in the broader housing sector was reflected
in the remodeling industry, with many homeowners putting their
improvement activity on hold until the market stabilizes," says
Joint Center director Nicolas P. Retsinas in a press release.
Declining sales of existing homes also put a dent in remodeling
activity, because people often fix up their homes right after
buying them, or before selling them.
Reasons for optimism. So why the
sunny forecast? Several factors bode well for the industry's
growth, say the study's authors, beginning with the nation's
aging housing stock — two-thirds of existing homes are
more than 25 years old — and aging population of boomers,
many of whom plan to stay in their homes but want modifications
to suit an older, child-free lifestyle. Further demand for
remodeling services is expected to come from homeowners who
want to make their houses more energy-efficient and landlords
who badly need to upgrade their rental properties.
In all, the study projects that spending on home improvements
will increase at a 3.7 percent annual rate (adjusted for
inflation) over the next decade.
In 2005, the 5 percent of U.S. households that spent the most
on remodeling accounted for more than 60 percent of all
home-improvement spending, an increase of 15 percent since
Greatest growth at high end. In further good news
for remodelers, the Joint Center predicts that the
professional-contractor share of the remodeling market will
grow by 46 percent (compared with 36 percent for the DIY
segment). As in the past, much of that growth will be in the
high-end sector. In 2004-2005, the study notes, the 5 percent
of households who spent the most on home-improvement services
accounted for more than 60 percent of all remodeling
expenditures during that period.
In stark contrast, 31 million owner-occupied homes in this
country (almost 45 percent of the total) received less than
$1,000 per year in maintenance or home improvement spending
between 2000 and 2005, according to the study. Eventually most
of those homes will become candidates for overdue improvements
Small local firms predominate. The Joint Center
study also addresses the fragmented nature of the industry
itself. Unlike the home-building industry, where widespread
consolidation has resulted in a proliferation of nationwide
companies and supply houses, the remodeling industry still
consists almost entirely of small firms that serve limited
Between 1997 and 2002, in fact, the number of self-employed
remodelers increased twice as fast as the number of firms with
an actual payroll. Among remodeling firms with payrolls, almost
three-quarters reported gross earnings of less than $500,000,
and only one-tenth claimed earnings that exceeded $1
Specialization. Authors of the study
see little evidence of large firms dominating the remodeling
field in the near future, but they do note a trend among
successful players toward specialization. From 1999 to 2005,
design/build firms and companies that offer "single line"
services, such as roofing, siding, or window replacements,
experienced revenue growth that exceeded that of the industry
as a whole, say the study's authors.
The full report, "Foundations for Future Growth in the
Remodeling Industry: Improving America's Housing 2007," can be
downloaded at www.jchs.harvard.edu— Tom
• Housing starts in January plunged to their lowest
levels since 1997. According to Commerce Department statistics,
construction on new homes fell 14.3 percent from December and
37.8 percent from the same period last year. Although harsh
winter weather may have contributed to the drop-off, economists
mostly blame a glut of unsold homes that's slowing down demand.
Applications for building permits were also down sharply in
January, an indication that housing starts are unlikely to
rebound significantly in coming months.
• The Massachusetts Department of Environmental Protection
has issued conditional permits for a demonstration facility
designed to convert construction and demolition debris into
high-quality synthetic natural gas. Ze-gen Inc. hopes to have
its waste gasification plant operational by late spring of this
year. The company has been given one year to prove that its
technology can generate significant amounts of renewable energy
without emitting any pollution. The facility is designed to
process 500 tons of waste per month.
• The U.S. Supreme Court threw out a $79 million antitrust
award against Weyerhaeuser in February. The U.S. District Court
in Portland, Ore., ruled in 2003 that the company had violated
federal antitrust laws by deliberately overpaying for logs in
an attempt to drive up prices (see In the News, 1/07). The suit
was brought by a small mill in Washington state, which claimed
it was driven out of business by the lumber giant's predatory
tactics. Weyerhaeuser was supported in its appeal by a number
of large corporations — among them Coca-Cola, Microsoft,
and Dow Chemical — who worried that their ability to bid
competitively for supplies would be hampered if the lower
court's ruling was allowed to stand.
• Australian Prime Minister John Howard has announced that
his government plans to outlaw the sale of energy-wasting
incandescent light bulbs by 2012 and replace them with more
efficient compact fluorescent bulbs. Since much of the
country's electricity is coal-generated, such a move could
reduce Australia's emissions of greenhouse gases by 4 million
tons per year. Here in the states, legislators in California
and New Jersey have introduced bills designed to encourage the
use of fluorescent lighting, but the federal government has not
taken a stand.
• Experts in the home building industry were scratching
their heads last November, wondering if Microsoft founder Bill
Gates knew something the rest of us didn't (see In the News,
1/07). At the time, the Bill & Melinda Gates Foundation was
loading up on shares in seven of the country's largest home
builders, while everybody else was selling as fast as possible.
In its latest quarterly filing, released in February, the
foundation revealed that it has in fact unloaded those shares.
During the intervening few months, the overall value of the
stocks fell 4 percent.
• Laundry rooms are multiplying. A recent article in the
Wall Street Journal reports that well-heeled buyers are
equipping their homes with more than one. Statistics on the
trend are scarce, but the paper cites a number of high-end
developers who offer dual laundries as standard fare. The
article features a couple who own an 11,000-square-foot home in
Utah with a washer and dryer in every bedroom's closet. Not
having to lug a laundry basket around probably gives them more
time to drive to the gym and work up a sweat on the
A new guide from Simpson Strong-Tie aims to make it easier
for builders along the Gulf Coast to comply with newly adopted
building codes and build dwellings capable of withstanding wind
gusts of up to 150 mph.
The "High Wind Framing Connection Guide" is meant to be used in
conjunction with the American Forest & Paper Association's
Wood Frame Construction Manual (or WFCM), which is the IRC's
approved source of prescriptive-design guidelines for home
building in regions where design wind speeds exceed 100
In addition to illustrations showing various methods for
transferring high-wind forces through framing members to the
foundation, the new booklet contains corrosion information,
shear-wall details, and fastener guides. Simpson is conducting
related workshops as part of its distribution of the book to
builders and code officials throughout the Gulf Coast
To download the 56-page document or to request a free hard copy
by mail, go to www.strongtie.com/hw. The booklet is also
available for purchase at
Builder Gets Jail Time
for Worker's Death
A Staten Island, N.Y., contractor pleaded guilty in February
to criminally negligent homicide in connection with a 2003
trench collapse that killed one of his workers and injured
According to court records, the victim, Lorenzo Pavia, was
ordered by the contractor, Kenneth Formica, to hook up a sewer
pipe inside an unshored trench at a point 12 to 15 feet below
street level. When Pavia complied, the vertical earthen walls
collapsed, asphyxiating him and burying a co-worker up to his
neck. At the time of the accident, Formica was operating the
excavator used to dig the trench.
OSHA regulations require that a trench deeper than 5 feet be
shored or sloped to prevent cave-ins. During testimony before a
grand jury, Formica admitted that he was aware of the
Earlier that same year, his company, Formica Construction of
Port Richmond, N.Y., had been cited by New York City Department
of Transportation inspectors for sending workers into an
unsupported 10-foot-deep trench. Work on that job was halted
until the trench was properly shored.
Formica was originally charged with a seven-count indictment
that, in addition to criminally negligent homicide, included
assault, reckless endangerment, and manslaughter. Conviction on
all charges could have lead to a prison sentence of up to 15
Under his plea agreement, he will spend 16 weekends in jail and
pay a fine of $5,000.
Formica Construction faces further fines from OSHA as well as
civil actions brought by the victim's family and the city of
New York. — T.O.