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What It Actually Costs to Maintain An Older House

AKRON, Ohio—The national media often reports about housing prices in red-hot real estate markets. There are stories aplenty about affluent newcomers displacing existing lower-income residents, and driving up housing prices, rents, and property taxes to stratospheric heights.

This is not the case where I live in Akron, and in many other cities around the Great Lakes. We have the opposite challenge: large numbers of lower-income, working-class urban homeowners, living in deteriorating homes, with no foreseeable prospects for property appreciation.

In San Francisco, ordinary working-class people don’t own houses. In a city like Akron, they do—and many of them simply do not have the money to properly maintain them.

The median sales price of a house in Akron is about $64,000. Many houses routinely sell for less than $40,000.

Sometimes people hear about these low prices, and they talk about what a bargain they are. Most people who say this have never owned an older house, and have unrealistic expectations about what it actually takes (in terms of time, money, and effort) to properly maintain it.

People have proposed many well-intended, but unrealistic, solutions to the problem of low-property values in urban neighborhoods with older houses that are falling apart.

It has been suggested to me, on more than one occasion, that indebted, college-educated Millennials could be lured back to the city by selling them these old, poorly-maintained houses for $1.00, and having them “fix up the house.”

People who say this do not have a realistic idea of what “fixing up” an old house entails—neither in terms of the scope of the rehabilitation work that would be required, nor in terms of the level of skill, time, and/or money needed to do the work.

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Even in a low cost-of-living market like ours, $40,000 houses are generally not a “good deal.” They are almost always a liability. They are a ticking time bomb of deferred maintenance. They are an albatross.

The median housing unit in Akron was built in 1952. Over 36 percent of all of the housing units in the city were built before 1940. In a high-demand metropolitan area with a lot of in-migration, these older residences would command a higher price. But in our low-demand metropolitan area, with net out-migration, and negative growth sprawl, the overabundance of older housing can present a real challenge.

When a neighborhood gets to be around 50 years old, it reaches a crossroads. The patina of newness has completely worn off. The houses are now well into their second life-cycle of exterior maintenance, and many are in need of significant and costly interior updates. Will existing homeowners be willing to shell out the money for needed upgrades, or will they sell cheap, and move on to greener pastures? The answer to that question depends a lot on anticipated resale value, and can determine the fate of the neighborhood.

Most of the neighborhoods built in the 1910s, when Akron gained 140,000 residents in one decade (and was America’s fastest-growing city), reached this crossroads back in the 1960s. Some of these neighborhoods, like Highland Square, remained attractive and in high demand. Many others did not, and began a long period of protracted decline. This is exactly the point at which the city hit its peak of 290,000 residents, and then began to inexorably lose population.

The houses built during our next big wave of residential construction, in the immediate aftermath of World War II, later reached this half-century crossroads right before the Great Recession began in the early 2000s. These neighborhoods, which generally commanded higher property values, were hit hard by the collapse of the housing market. Some have rebounded. Many have not.

Approximately 25 percent of Akron’s neighborhoods are comprised primarily of homes that are valued at $100,000 or more. In these neighborhoods, where older houses have weathered the recession, and generally held their value, there are still strong market incentives to rehabilitate the structures.

For example, there is a house right around the corner from me, here in Wallhaven, that sold for $12,025 in 2015. It was a foreclosure, and the entire foundation needed to be replaced.

Someone bought it, replaced the basement, put on a new roof, new siding, new windows, built a front porch, and sold it for $135,000 in 2018.

Why? Because houses in this neighborhood typically sell in the $125,000 to $150,000 range. If property values were less than that, that house would have been demolished. Instead of a nice-looking, renovated Cape Cod, we’d have an overgrown vacant lot.

In 75 percent of Akron’s neighborhoods, that rehabilitation scenario would never have happened. The house would have moldered away, probably in the hands of an absentee owner, until it was condemned and demolished at public expense.

Apples-to-Oranges

In 2017, Akron Mayor Dan Horrigan created a 15-year, 100 percent, citywide property tax abatement program [1]. I am proud to say that it is attracting new residents, investors, and home builders to Akron. In 2015, only 10 houses were built in our entire city. Today, there are over 1,000 housing units in some stage of development.

Many of the proposed new houses are in the $180,000 to $250,000 range. The median sales price of a house in Akron is around $64,000. Some people hear about the price of the new houses, and instead of seeing it as a good thing, they see it as a bad thing. They compare a brand-new $200,000 house to a 100-year-old house that costs one-third of that, and say “This is Akron…that’s way too much!”

People who say that don’t understand real-estate market economics. They are comparing apples to oranges. When you factor in what it costs to properly maintain an old house, with its unforeseen headaches down the road, and compare that to an initially maintenance-free new house, with a property tax abatement, the price differential disappears. A $200,000 house built in 2019 suddenly doesn’t sound so expensive, and a $60,000 house built in 1919, with a huge backlog of deferred-maintenance doesn’t sound so cheap.

In many ways, people here in Akron live in a bubble, when it comes to housing costs. In most places in this country, and in our neighboring suburbs, it is completely normal to see new houses and apartments built. It happens all of the time. It is completely unremarkable. It is how communities revitalize themselves. It is how populations grow, and old housing is replaced.

A Personal Testimony

Example: My house, built in 1947, is 72 years old. I bought it back in 2003, and have owned it for nearly 16 years. It is currently valued by the county fiscal office at around $100,000.

I’ve tallied-up what I’ve spent on renovating it over the past 15 years. For the purpose of this calculation, I’ve stuck to core systems, exterior features, and structural elements, and eliminated expenditures on things like new appliances, interior cosmetic improvements (painting, flooring, wallpaper, etc.), and routine plumbing and electrical work.

I’ve divided the remaining expenditures into three categories: absolutely necessary, and could not wait; optional for the near-term, but could not have waited much longer; and completely discretionary/nice thing to have.

These are the expenditures that were absolutely necessary and could not wait:

·       Replacement of the sewer line under the basement floor
·       Replacement of the structural columns holding up the beam
·       Replacement of the hot water tank
·       New roof (complete tear-off and replacement of shingles)
·       Masonry work on the chimney to stop water leakage

Total cost:  $19,200

These are the expenditures that were optional at the time, but could not have waited much longer:

·       New high-efficiency furnace
·       New 200-amp electrical box
·       Bathroom renovations
·       New windows
·       New siding
·       Reconstruction of the front entryway

Total cost:  $36,700

These are the expenditures that were nice things to have*:

·       Sunroom addition
·       New concrete patio

Total cost: $37,500

(*The sunroom and patio replaced a wooden deck that was 20 years old and beginning to rot. While the sunroom addition was optional, I would have needed to tear out the deck and replace it with something – new landscaping at a minimum, or another deck, so not all of this cost was entirely optional.)

All told, I have spent $93,400 on improvements to this house over the past 15 years. This works out to an additional $502 per month, above what I was paying in mortgage, taxes, and insurance. When you add all of that together, the total monthly cost works out to $1,439.

My house is attractive and in extremely good shape, but keeping it that way has come at a significant price.

I mentioned that my house is valued at just about $100,000 by the county fiscal office. Now, let’s compare that to a newly-constructed house in the City of Akron, valued by the county fiscal office at $200,000.

The brand-new house will have a much higher mortgage payment, but it will have no initial maintenance costs, and it will also receive a 100-percent property-tax abatement, meaning that the owner will pay no taxes on the value of the dwelling for the next 15 years.

The total monthly cost for the brand-new house? $1,444. Which comes out to exactly $5.00 per month more than my 72-year-old house.

So, really a lot of this comes down to what a person is looking for. The older house will cost you less money up front, but it is also going to cost you a lot more money in maintenance and home improvements. The older house will have more “character” (hardwood floors, wood-burning fireplace, crown molding, plaster walls, etc.), but it will also be a lot more hassle to maintain, in terms of time (if you’re handy, and if you have it), or in terms of money (if like me, you’re not handy, and don’t have the time).

The thing with home maintenance is that ultimately, none of it is optional. You can let it slide for a while—until you can’t. At that point, you either figure out how to pay for it, or if you can’t, or won’t, you walk away, and it becomes your community’s problem.

The other thing that people forget about routine home maintenance is that it doesn’t scale with the value of your home. Putting a new roof on a $1,000,000 house in San Francisco is not going to cost you that much more than it would cost you to put a new roof on a $40,000 house in Akron. The difference is that the roof in San Francisco might represent 1 percent of the value of that property, while the roof in Akron might represent 25 percent of the value. It doesn’t take many repairs in a market like Akron before you’ve eclipsed what the house is even worth.

Like many of my fellow Akronites, I have a passion to see older houses rehabilitated in this city. But the most effective way for that to happen is for housing to become more valuable in this city. And that starts with new construction that gradually raises comparable prices and makes rehabs of older houses more cost effective.

For what it’s worth, I love my older house, and personally prefer owning an older house to owning a newer one.

But what I happen to personally prefer is irrelevant. And, as I hope I have demonstrated, keeping my house in good shape has come at a steep price—a price that many people may not be prepared for.

My house is around the 80th percentile in terms of home values in Akron. What about the houses at the 20th percentile? The return-on-investment for making these types of improvements just isn’t there. That’s why thousands of houses in this city are sitting vacant and abandoned, and are on their way to the landfill.

The median sales price of our housing needs to increase. I’m not talking about it going into the stratosphere. I’m talking about it going from $64,000 to something like $90,000. A $90,000 house is still extremely affordable, even for a working-class household with a modest, but reliable source of household income.

The first step to revitalizing a city like Akron is to understand supply and demand, and how it drives the real estate market. Without that understanding, the decline will continue.

Jason Segedy is director of planning and urban development for the city of Akron, Ohio. Segedy has worked in the urban-planning field for the past 23 years, and is an avid writer on urban development issues, blogging at Notes from the Underground [2].

18 Comments (Open | Close)

18 Comments To "What It Actually Costs to Maintain An Older House"

#1 Comment By sally On January 17, 2019 @ 10:46 pm

this is a great informative article – and more of what TAC should be doing

#2 Comment By Cornel C Lencar On January 17, 2019 @ 11:40 pm

I moved to North America from Europe (Mitteleuropa) and I will end up, hopefully, living most of my life here. But there will be one thing I would not be able to get used with are how the houses are being built here.

Except the old time East Coast (I really loved old Charleston and those Mediterranean houses close to the water) building out of 2×4 etc is sick. There will not be a sense of community with so little permanence. And on the long run, if one thinks generations, it is wasteful.

#3 Comment By Dan Green On January 18, 2019 @ 9:13 am

Good article and many real facts. Another side effect of our decade long implementation of so called globalization. I coin globalization, much like that of being prescribed a medication.. Side effects are usually not known for several years. Opening up the vast available number of inexpensive Asian workers, void of benefit cost simply changed our society. I can attest to this fact, as I experienced first hand working as an executive for a fortune 500 US multinational. Prior to what is called outsourcing direct labor job descriptions, we had some 90 factories throughout the US and Canada. Most in rural towns for lower taxes and other goodies. Most, over a short period of time, were closed. The reasonably good salaries with benefits, of employees who’s skills they acquired on the job, were let go. Next we incorporated off shore, while being a 100 year old American corporation, which in itself is rare. Reality is of course, our economy is primarily driven by consumption , buying imports . I took it upon myself to take some trips on Amtrak to witness the devastation of middle America , most of which folks never see.The US south, void of Unions, has survived better than any other region. Foreign auto makers have built specialized what we call cube factories to build cars closer to the US market. Of course the mega car plants are now in Mexico as those logistics . The so called millennial generation of course know their predicament and work to be educated for jobs in the digital world and healthcare. As soon as young folks find a way they leave these small dysfunctional communities.

#4 Comment By mrscracker On January 18, 2019 @ 9:47 am

I’ve read TAC articles that are similar to this but I’d just mention that newer construction is often quite shoddy compared to older homes-especially those built before WWII. Many things are built these days with an expectancy of 15 years before they decline & need to be replaced or completely renovated.

New construction may have less initial maintenance expenses but it’s seldom built to last.

#5 Comment By Local Resident On January 18, 2019 @ 1:40 pm

I’m with Mrs. Cracker. But I also wonder why the author assumes new houses defer expensive maintenance costs. Unless you’re certain that your builder used the highest quality materials, employed skilled and honest carpenters, paid exacting attention to subs, and cares as much about the workmanship as the profit, your new house can be as expensive to maintain as one built 100 years ago. Just ask my sister, who paid tens of thousands of dollars for new siding and windows to replace the ones poorly installed on her three-year old house in an upscale development.

#6 Comment By Sheepdog On January 18, 2019 @ 2:42 pm

In 2002 my husband and I bought a 2 year old home in a newer subdivision of Oceanside, CA. Mrscracker is right. The new homes being built are crap.
The windows were falling apart in about 5 years. Lighting was minimal and desperately needed upgrading. Anyone want fiber board cabinets in their bathroom? Even after living there two years, I could still pick up the sod since the roots couldn’t penetrate the packed soil left by the contractor. So lots and lots of expensive water was needed in drought stricken CA to keep the lawn alive.
I was told that even even million dollar homes were built the same.
By the time we sold it last year, we had put over $35,000 into that house and that doesn’t include basic maintenance. Fortunately, CA home values had skyrocketed so we did recoup the costs plus. Good luck to the buyers of the new homes in Akron since they might not be so lucky.

#7 Comment By JWJ On January 18, 2019 @ 2:57 pm

Mr. Segedy:

You basically spent $193,400 (assuming your initial cost of the house was close to the taxable value of $100K).

Another person spent $200K on a new house.

Why wouldn’t the price per month be similar?? The total cost is similar.
In fact, if the new house does not have property taxes, I am surprised your cost per month is not higher than the $200K new house.

#8 Comment By john On January 18, 2019 @ 3:36 pm

Another man for gentrification. Great. But, who can afford rent or a home after that occurs? An old house is better than living on the street. In an economy run by the Federal Reserve that provides welfare to the banks, Corporations, and Wall Street, while it’s austerity for the rest the cost of owning a home or affording rent in a gentrified area is prohibitive, for anyone who is not part of the elite new robber baron class. The elite should take a lesson from what is happening in France. It won’t be long until it happens in America.

#9 Comment By Wayne Lusvardi On January 18, 2019 @ 5:38 pm

Mr. Segedy

Planners have a tendency to looking a property values that are static instead of dynamic and elastic.

Since you are talking about global or regional comparisons, I would suggest you need to adjust for what is called tax capitalization (the effect of property taxes on home values).

If the median home value in Akron, Ohio is $64,000 for an older house, that may equate to land value only. Moreover, if the base property tax rate in Akron is 1.767% and the base property tax in, say, California is 1%, then a home in California will sell for higher all other things being equal.

Adjusting for the tax rate differential, the Akron home would be worth at least $113,088 in its AS-IS condition (not fully renovated – $64,000 x 0.767 = $49,088 + $64,000= $113,088).

In Phoenix, Arizona with a base property tax rate of 0.8%, the commensurate home value would be $115,200 ($64,000 x 0.8 =$51,200 + $64,000 = $115,200.

I have oversimplified the calculations above for learning purposes. The better way to calculate the tax/value relationship would be to capitalize (convert) market rent into a value. Market rent for an old house might be $0.50 per square foot of building area per month; for a new house, say, $1 per square foot per month. But this is difficult to conceptualize so for learning purposes I have just used multipliers.

This is why in your report the City of Akron is experiencing a new construction boom; because property taxes have been reduced. By the way, the loss of property tax revenues by lowering the tax rate would be offset by higher property values that would, theoretically, result in the same tax revenues as prior to lowering the tax rate.

This is one reason why California has such high home values (of course there are many other factors such as supply of buildable land).

This is why conservatives often say it is better to lower taxes because it does not lower tax revenues but increases the economy.

#10 Comment By Susan Davis On January 18, 2019 @ 5:47 pm

What you wrote is the ideal plan, but unfortunately, most people can’t afford the initial outlay to buy a new house. They have to buy an old one and then struggle to maintain it — sometimes with duck tape.

#11 Comment By John_M On January 18, 2019 @ 6:09 pm

First – a point for Cornel Lencar, If you live in an earthquake zone, brick and block construction are dangerous – you want reinforced concrete with a lot of steel and a solid foundation if you don’t use wood frame. Note that in a fire zone like much of California, you don’t want wood frame – so the only really safe construction is reinforced concrete – You can do woodframe if you then wrap the house in cement fiber board and cement fiber siding, add fire shutters, shield the exposed roof edges with cement fiber, and use fire resistant shingling. I am in the Seattle area and am starting to look for an older outlying house for retirement. I will not consider brick or concrete block. Once I buy, I will have the house strapped down to the foundation, which will add a few thousand dollars.

I have done full rehab – I am handy and an engineer, rehabbing houses built in 1890 and 1933. It is a LOT of work and even if you do the work, the materials cost a lot. I just sold my house built in 1997, and to get it ready for sale cost me ~$40K – which you could view as maintenance and cleanup to have it looking new. I didn’t have time to do all of it myself this time and I am old enough that I don’t do roof work anymore.

#12 Comment By Jeffrey On January 18, 2019 @ 8:18 pm

Quality new construction is possible and not uncommon. It’s just more expensive. I’m building a new house for myself in the PNW it’s about 1900 sq. ft. with a 1300 sq.ft. detached shop/garage. I designed the house and drew the plans and I’ll work solo and do everything except the insulation, drywall, and heating. My cost, with virtually no labor or overhead will be about $350,000 not counting the building lot- $98,000 and the water/sewer connection- $28,000. So for sure a $200,000 new home in any market is is not going to be very well constructed.

#13 Comment By cka2nd On January 19, 2019 @ 2:48 am

Fascinating article and an interesting series of comments, including the critical ones.

#14 Comment By JonF On January 19, 2019 @ 7:41 am

I lived in Ajron, Highland Square, 2000-03. The house was very grand, high ceilings, a formal dining room, etc. But tissue thin insulation if any at all, and I can’t imagine the landlord made any money since he was CV instantly h as bing to fix things

#15 Comment By Rock S On January 19, 2019 @ 2:20 pm

Very educational! Thank you. Comments from mrscracker and others were useful too, as a counterbalance.

#16 Comment By Andrew On January 20, 2019 @ 11:57 am

I would like to add that everything withstanding, the author’s subsequent article might discuss the impending “crappy housing bubble”. That is, that so many buildings built after 1965 or so were built so poorly that that they are falling apart not from age but the very nature of how they were built; Disposable.
I see this especially in McMansions built in the 80’s and 90’s, supposedly valued over $500k but are also ticking time bombs of maintenance. Often, storms tear these homes apart and it was simply their terrible construction at fault.
There will be thousands of suburbs who’s homes simply fall apart and owners will only be left with the value of land under a tear-down property.
We bought a lovely 1947 Cape Cod, nothing to look at. Its so sturdy and well built. We agree with the author that old homes are more beautiful but they are also built to last, despite their repairs.

#17 Comment By Nelson On January 22, 2019 @ 5:33 pm

Sounds like a metaphor for infrastructure spending. You can only defer maintenance so long before things come crashing down.

#18 Comment By Hal Fiore On April 21, 2019 @ 1:48 pm

First of all, 100% tax abatement on new construction, and none on existing property is just crappy policy. The only purpose I can think of for this is to reward reward developers and big construction firms, which is the only game these days for new construction. And, a giant middle finger to small-scale contractors.

Second, if you are comparing an old house built with true dimensional lumber, plaster and lath interiors, hardwood trim, etc., to anything since the 70s, that is, stapled together nominal framing, drywall interiors, particle board sheathing, etc., it’s clear to me where the bargain is.