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The Opportunity  A well-crafted rescue program could save US homeowners $2 trillion dollars over a decade. This proposed program averts a growing housing crisis, creates 300,000 good jobs that last a decade, generates an additional $200 billion in property taxes, and more. Best of all, it costs government nothing.  

The Specifics   Because of the economic downturn homeowners are deferring home maintenance. Thus an increasing number of dwellings will fall prematurely into the dilapidation/dereliction/demolition cycle. Foreclosed homes also can fall into this cycle. In Detroit, for example, 60,000 homes now lie derelict. Detroit’s Mayor Dave Bing now has the “Residential Demolition Program” to demolish 3,000 homes per year.

Analysis of US Census data suggests that US housing has an average lifespan of 72 years. Premature loss of housing is a blow to America’s balance sheet. The total value of the US housing stock is $16.6 trillion. The usual annual housing loss is $60 billion. This additional accelerated loss could swell from $30 billion in 2011 to a peak of $140 billion in 2015 and decline gradually across the five following years. This represents a staggering potential total loss of $1.2 trillion of assets in one decade, impacting 15% of the total US housing stock. But the true loss is closer to $2 trillion, as explained below.

Fortunately, this is a crisis only if it is ignored. This represents an ideal opportunity to rescue dwellings, create jobs, and stimulate the economy. This crisis can be largely averted if the Federal government or state governments act soon. An effective federal remedy might take a total outlay of $23 billion total across ten years. This would rescue 20 million dwellings. Outlays, however, would be entirely recovered from beneficiaries of the program—the property owners. Government benefits because houses remain on the tax roles, producing $200 billion taxes across 20 years.

Why Houses Fail  Perhaps the largest single cause of failure is water damage resulting from leaking roofs. Water damages ceilings, walls and floors as well as dwelling contents. Repairs can cost tens of thousands of dollars. In perhaps a third of all instances this damage is so great that the dwelling is abandoned and later demolished.

How Many Houses Affected  The National Association of Realtors reports the total number of US dwelling units in 2010 was 131 million. While there are no ready figures, analysis of Census data suggests that 800,000 dwellings are demolished each year. This, by itself, represents a terrible drain on the US economy and should be addressed. Because dwellings typically go through dilapidation before failure the true value of the loss is depressed, partly hiding the true scale of loss to the nation. If the dwellings were not dilapidated, this loss might total $100 billion annually (800,000 units times $125,000 each). The value of the annual loss including the dilapidation is estimated at $60 billion ($75,000 per dwelling, 60% of the average US price $126,000, times 800,000.). Thus the true annual loss may exceed 0.71% of the US gross domestic product ($14.1 trillion for 2009). Here can be seen also that the total potential rescue could amount to $2 trillion. Note that commercial properties are also subject to dilapidation and failure at similar or greater rates and the total value of the US commercial properties is $5.3 trillion, according to the Fed.

Evidence   Perhaps readers themselves notice more houses lacking paint or looking unkempt. Analysis of US Bureau of Labor Statistics data for the past decade (1999 to May 2009, the latest available data) shows that the number of roofers deployed per roof declined to 75% of 1999 levels. Quantities of roofing materials sold has declined similarly. Note these figures are two years old, from the trailing edge of the stimulus package which kept many roofers employed. Numbers probably have declined significantly since. This also matches the on-the-ground anecdotal reports of home contractors struggling to stay in business with a tiny fraction of the business volumes of a decade ago.

The Looming Crisis: Deferred maintenance could result in a swell in housing failures peaking at perhaps triple the current rate by 2015. The first signs of this are showing up nationwide. This represents the loss of 16,000,000 dwelling units over a decade, 12.2% of the nation’s total housing. These losses could be even larger if nation’s economy takes more than five years to fully recover.

Averting the Crisis: Fortunately, it is easy and cost-effective to prevent this slow-motion calamity. Fix the roofs. Here a governmental approach has advantages over a free-market approach. Many homeowners simply can’t pay for repairs now. What is needed nationally is a 20-member crew for each population unit of 30,000 (13,000 dwelling units). This would be 10,000 crews nationwide. These crews would identify at-risk dwellings, replace the roofing, repair gutters, paint the exterior, and repair windows and doors as appropriate. They could use 50-year recycled roofing materials, 15-year rated paints, and install materials to specification so owners enjoy a transferable warranty. One crew might do 200 dwelling units annually, an average of one unit per working day. This amounts to the rescue of 2 million dwellings annually—extending their lifespan by 20 years or more on average. The average cost per unit, though use of dedicated crews, quality equipment, centralized purchasing, and rigorous quality assurance, could be $5,700. Recall that one roof job out of three requires the roof plate be removed in addition to the old roofing.

The Economics  Initial funding of $22 billion across 10 years would launch the program. If crews were paid on average $19.81 per hour for 9 months work per year (the average pay in the industry) this amounts to $7 billion per year nationwide. Materials might cost $4 billion annually. Finally, administrative overhead, materials, and depreciation on equipment might contribute an additional $1 billion annually to program expenses. A collection effort would recoup costs and keep government outlays to the $22 billion total. Costs could be largely recovered through several possible mechanisms: a lien that would be paid off at the time of sale of the property, through withholding of state income tax refunds, through additional property taxes, or other such mechanisms. The $22 billion to rescue $2 trillion of assets represents an initial leverage of 91-to-1. But when including the good likelihood of repayment, the leverages are far greater. If a modest profit margin is included the program breaks even. In this case the benefits to the nation come without any cost at all. Note the funding for wages, equipment, and materials would be spent in the US. This produces yet further financial leverage of perhaps three-to-one, since the money circulates through the economy. The program, as outlined, would directly create 200,000 jobs and would create another hundred thousand jobs manufacturing materials and equipment, delivering materials, in government and in retail. The increased availability of housing means brings stability for the economy and less inflationary pressure in housing prices and rentals.

This is a rescue package that creates good jobs and makes good economic sense.

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Comment Preferences

  •  New home construction is a (3+ / 0-)
    Recommended by:
    mwm341, greenkrete, erush1345

    major driver of jobs. Not only are people put to work building the homes, but the durable goods orders (for refrigerators, stoves, AC's, etc.) also are a big boost to the economy. If you patch roofs in order to extend the life of existing housing, you absolutely will hurt new home construction. Every action has both intended and unintended consequences. I also think you have some real issues with liability; having unlicensed government contractors repairing homes would lead to countless lawsuits (and likely many injuries as well).

    I like new ideas, but I honestly don't think you can send crews of government-paid workers into peoples' private homes without causing real problems.

    Don't tell me what you believe. And don't tell me what you do. I barely know you.

    by doc2 on Mon Aug 29, 2011 at 05:33:36 AM PDT

    •  Yes but... (7+ / 0-)

      I had the same thoughts you as you listed in your comments.  However, I am not ready to dismiss the diarist's idea just yet.  This person put a lot of thought and research into this diary and I believe it has some very good points.  Just because I do not know exactly how to solve the issues does not mean there are not solutions.  Let's brainstorm some ideas...

      Maybe it could only be offered to households current on their mortgages (so we do not offer the banks another subsidy fixing roofs for houses they are going to take anyway).  This would reward homeowners who have fought hard to keep their mortgages up even if they had to let routine maintenance slide in the process.

      Maybe instead of government employees, we contract the work through bonded and insured local roofers requiring the money only be given directly to communities to hire the contractors and no national contracts.

      I'm sure that these solutions are inadaquate to fix all the issues but by trying to work through the issues logically rather than dismissing them at the first hint of an obstacle is how new, progressive solutions are obtained.  When we first said we wanted to send a man to the moon, people were lined up the explain in great detail why it could never be done.  Big ideas and small steps all offer challenges if they are innovative.  

      I am a fan of those who offer solutions rather than those who say they won't work.

      "Perhaps the sentiments contained in the following pages, are not YET sufficiently fashionable to procure them general favour..."

      by Buckeye Nut Schell on Mon Aug 29, 2011 at 06:02:56 AM PDT

      [ Parent ]

      •  There is a municipal program in the city (7+ / 0-)

        where I used to live that allowed owners below a certain income level with older housing apply for tax free loans to make repairs to their homes.  A lien was placed against the home and the city got its money back when the home was sold.

        My Mom borrowed money on 3 occasions.  Once to put on a new roof, once to replace old rotted wooden gutters with replacements, and once to replace her 80-year old windows with efficient replacement windows.

        My mom is 81 years old and in poor health.  The house will be put on the market in the not-too-distant future.  Upon its sale the city will get its money back.

        In the meantime the neighborhood has benefited from the work done on my mother's house, as a dilapidated home would have reduced property values for the whole neighborhood.  

        The city gains by keeping its housing stock in good condition and keeping values (and ultimately the property taxes collected) from going further into the pit.

        The city did not provide the workers, but it did have an approval process in which the project was reviewed and approved and the application process did require quotes from 3 contractors.

        I fall down, I get up, I keep dancing.

        by DamselleFly on Mon Aug 29, 2011 at 07:06:02 AM PDT

        [ Parent ]

    •  We Could Require They'd At Least Knock and Ask. (4+ / 0-)

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Mon Aug 29, 2011 at 06:57:42 AM PDT

      [ Parent ]

    •  Thanks for articulating this concern (3+ / 0-)
      Recommended by:
      lazbumm, FarWestGirl, doc2

      Thanks doc2 for taking the time to write this reply. I appreciate it. As I envision it, the program would comply with all the details of licensure and certifications for the communities where they would be doing the work. Probably a lot of the roofing professionals in each community would be the people doing the work. The remodelers and roofers I know have seen a huge drop in volume of work--everybody seems to be afraid to spend money fixing up their house because of the economy. Here is a way to get these pros back to work, and simultaneously boost the economy. I think the market for new houses is going through a shake-out--many people I talk to have excellent credit but can't meet the terms for new construction. The impact of repairing existing housing on the market for new housing is a subject that could be explored separately. My main concern with the diary is to alert people about this potential threat to housing that no one appears to have thought about--and the remarkable opportunity to save the assets of the US.

      •  add some solar to that new roof (2+ / 0-)
        Recommended by:
        greenkrete, FarWestGirl

        or a wind turbine and create anther 10000 jobs to that list. this will help the environment as well.

        "If there is a war on drugs, then many of our family members are the enemy. And I don't know how you wage war on your own family. " Traffic

        by lazbumm on Mon Aug 29, 2011 at 11:15:44 AM PDT

        [ Parent ]

        •  Excellent suggestion (1+ / 0-)
          Recommended by:
          FarWestGirl

          In a few locations around the US the utility companies will do an installation and maintain it for you. A friend on Long Island was telling me that his utility had done that for his house. Otherwise, it would be the rare homeowner who would be willing to do the tinkering necessary to keep such an installation working properly. I speak from experience as I owned a company some years ago selling towers for wind generators, and often exhibit at the renewable energy shows in the midwest. I'm hoping more utility companies nationwide will begin to offer this arrangement to their customers.

  •  The cost would be way more than zero. (2+ / 0-)
    Recommended by:
    SyntaxFeline, erush1345

    We can assume that as with any loan a good portion of those debts will go sour, and since the program is targeting people that couldn't otherwise keep up their houses, the default rate will be higher than average.  

    On top of that, it will require government resources to run and review the program.

  •  A small problem (2+ / 0-)
    Recommended by:
    Sychotic1, jmknapp53

    A large number of demolished homes are replaced by larger more modern homes.  In many cases the new homes are 3x the value of the one they replaced.  By extending the effective age of those homes you're actually throwing good money into something that is actually losing you money.  Those new homes mean jobs, they mean more taxes for the local communities if there is a property tax and it means new people coming into a community.  Not to mention that many of those old homes SHOULD be torn down.  They're either toxic with lead paint or asbestos or inefficient with poor hvac systems or poorly insulated.  

    Now that said, if you have homeowners who live in a home and can no longer maintain it then that's a different story.  I'm not advocating kicking people out to tear down their house.  If anything I fully support programs that help them upgrade their homes and for example make them more efficient via tax rebates, low interest loans or even straight up grants.  

    But I think you're painting with a broad brush as far as demolishing homes.  ALOT of abandoned old homes should be torn down.  I should know.  I probably see a dozen or so homes a week that are being demolished or have been.  9 out of 10 if them I leave there thinking 'good riddance'.  The 10th is usually a rich exec who is buying a waterfront home in perfectly fine condition to demolish and build a new one which suits his own needs every other weekend out of the year and during summers.

    This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

    by DisNoir36 on Mon Aug 29, 2011 at 06:59:35 AM PDT

    •  I don't think this is true at least in urban areas (5+ / 0-)
      A large number of demolished homes are replaced by larger more modern homes.

      Even if it is, the homeowner / tenant of the demolished home(s) is displaced.  While a home in disrepair is a blight on a neighborhood, a vacant lot is just as bad.

      Except in areas targeted for "gentrification", no one is going to rebuild in a blighted urban area.

      The diarist's idea has merit, and definitely has engineering integrity (roofing, water damage, and subsequent lack of occupancy being the biggest causes of building decay and eventual need for demolition).

      Tea Party manifesto: We're resigned to our collective fate because we don't want no stinkin' collective future with the likes of you

      by Richard Cranium on Mon Aug 29, 2011 at 07:22:14 AM PDT

      [ Parent ]

      •  It's very true (0+ / 0-)

        its actually a rule of thumb.  Talk to any builder, developer, investor or anyone involved in real estate.  Land costs are typically about 1/3 of total price of new construction.  Now what you're talking about here in many cases are homes that are near the end of their economic life if about 72-75 years.  That means most of the value in that property is in the land as homes near the end of their economic life contribute little in terms of value.  Actually many detract from value because a prospective buyer will have to pay for demo and cleanup which depending on whetheror not there is lead paint, asbestos or oil leaks can start at $15,000 and go up.  

        Now in urban centers it's a different story.  The ratio there may be closer to 50%.  Plus you have zoning to consider.  A dinky 4 unit apt can be replaced by a 20 unit high rise.  

        Bottom line is though that derelicts are better taken down.

        As for building in blighted areas most developers would take the risk if a return was guaranteed.  That's where govt comes in.  The most common form is tax abatements.  Of course eminent domain is used too in some larger cases.  That clears out the blight and gives the developer land to build on for a far cheaper price.  There's ALOT that can be done and in just about every case the resulting new construction is significantly more valuable.

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Mon Aug 29, 2011 at 04:42:02 PM PDT

        [ Parent ]

    •  The new houses are less affordable and require not (0+ / 0-)

      only a lot of new material, but they usually don't recycle the demolition detritus. Conservation is almost always more efficient than replacement. Rehabbing older homes is overall more efficient and a better source of affordable housing.

      Information is abundant, wisdom is scarce. The Druid

      by FarWestGirl on Mon Aug 29, 2011 at 01:36:06 PM PDT

      [ Parent ]

      •  Sure the new houses are less affordable upfront (1+ / 0-)
        Recommended by:
        FarWestGirl

        but if you rehab and old home and bring it up to code more often than notthe total costs end up being more.  

        As far as conservation is concerned it really depends on the construction.  You can build a quality home and be completely carbon neutral by using old materials or recycled materials.  

        I'm all for preserving old homes if they're architecturally unique, structurally sound or of quality construction.  Problem is ALOT of older homes are none if these and it makes no sense preserving old homes just because they're old.  

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Mon Aug 29, 2011 at 05:01:28 PM PDT

        [ Parent ]

        •  You CAN build a fairly carbon neutral house, but (0+ / 0-)

          most won't, they'll slap up stick built trash that's very likely the same or worse. Most contractors are cheap and kind of lazy and do what they've always done. And most areas don't have requirements for efficiency in new homes. It all depends on the building, condition and who's doing the work, either rehabbing or new construction, it can go either way in either case.

          Information is abundant, wisdom is scarce. The Druid

          by FarWestGirl on Tue Aug 30, 2011 at 03:30:46 AM PDT

          [ Parent ]

          •  Well thats where govt should step in. (0+ / 0-)

            there are minimum building codes most of which have not seen any kind of comprehensive updating in years.  Meanwhile in Portugal they recently redid ALOT of their requirements so that for example homes made of clay blocks have 2 layers with rigid foam insulation in between.  They also have to be presided for solar ands on.  

            Bit that's all pie in the sky talk.  In reality as you say builders slap anything up.  Truth is though even then today's homes are much more efficient and safer than homes slapped together 50-70 years ago.  Construction may be different and arguably crappies but reality is 50-70 years ago there weren't building codes or if they were are woefully inadequate by today's standards.  Our heating, ventilation and ac are better.  Insulation is better.  Windows are better.  Plumbing and wiring is better and safer.  Were not using lead paint or asbestos in our siding, insulation or floor tiles.  Lighting is better and more efficient too.  No more incandescent bulbs.  LEDs are the new thing and as prices come down we will see more of them.    

            The thing you have to understand us builders are not lazy.  They're business people.  They want to make money.  If that means using cheap materials they will, but the minute prospective buyers turn on them they will change.  That's why in my market a builder would NEVER use vinyl siding.  That house would not sell.  So they have to be aware of the demands of the market and pick and choose where to go cheap.  Inside the walls for example nobody sees do they can use cheaper lumber, provided the structure is built to code.  Plumbing?  Nobody uses copper anymore because its expensive and pex tubing takes less time to put in.  So they use pex tubing then once outside the wall connect copper.  Nobody sees the plumbing in the walls.  However the minute the market decides that for example they prefer recessed LEDs you can bet the builders will be doing that.  

            Bottom line is ALOT of old homes should be replaced.  They're inefficient and ineffective by todays standards.  Some can be upgraded but in mist cases the costs are more than new.  If done right, we could transform our homes in ways that will transform our society, for example by weening us off our reliance on fossil fuels to heat, cool and power our homes.  It can be done in a carbon neutral way which will create many jobs for years to come and save a ton of money in the long run while stimulating the economy.  We can transform our cities to be greener and make our rural areas more connected and modern.  The only thing lacking is the will.  

            This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

            by DisNoir36 on Tue Aug 30, 2011 at 09:01:31 AM PDT

            [ Parent ]

            •  I agree with much of what you say, though I (0+ / 0-)

              confess I did lol a little when you talked like being lazy and wanting money as though they were mutually exclusive. They're  competing impulses, certainly, but definitely not mutually exclusive. ;-)

              Oh, and I grew up a contractor's kid. The good ones are worth their weight in gold and the majority you have to keep a really close eye on. :-)

              Information is abundant, wisdom is scarce. The Druid

              by FarWestGirl on Wed Aug 31, 2011 at 11:01:07 AM PDT

              [ Parent ]

  •  Tipped for out-of-the-box thinking (4+ / 0-)
    Recommended by:
    Preston S, MKSinSA, Wee Mama, FarWestGirl

    I'm not going to run numbers, but any constructive thinking "outside the box" is good.

    Tea Party manifesto: We're resigned to our collective fate because we don't want no stinkin' collective future with the likes of you

    by Richard Cranium on Mon Aug 29, 2011 at 07:24:05 AM PDT

  •  This is certainly the time for good planning... (1+ / 0-)
    Recommended by:
    FarWestGirl

    ...and good budgeting and exploitation of beneficial public-private endeavors. Hopefully people lie you will keep on making the proposals and maybe we'll pass through this malaise without ever having to figure out why we're not doing initiatives like this anymore?  

    Eliminate the Bush tax cuts Eliminate Afghan and Iraq wars Do these things first before considering any cuts

    by kck on Mon Aug 29, 2011 at 07:50:15 AM PDT

  •  Thanks for describing local program (1+ / 0-)
    Recommended by:
    FarWestGirl

    Thank you Damsellefly for outlining that excellent local program for the diary.

  •  Owner participation would be vital (1+ / 0-)
    Recommended by:
    FarWestGirl

    Thank you Gooserock for raising that concern. As I envision it, owners would apply and enroll in some program to participate. I'd want the barriers to enrollment be pretty low--not lots of forms, etc. There are advantages to leaving the program open for foreclosed homes--prevent them from being demolished--but I envision the central focus on preserving homes for home-owners who occupy their own homes. Many people don't have the money and can't get the credit to take care of their home maintenance needs. The proposed program would help them especially.

  •  did you send this to the white house? (1+ / 0-)
    Recommended by:
    greenkrete

    or are you just another whiner....who whines about everything but never offers a solution......

    the white house has a website.....and accepts e-mails.....

    and people actually read them.....I think....because I have sent emails and several weeks later....received a email thank you reply......

    •  Sent to WH,WSJ,DMRegister,various reps (1+ / 0-)
      Recommended by:
      FarWestGirl

      Good question. I did send to WH on the http://www.whitehouse.gov/... a couple months ago. WSJ turned it down. DMRegister--my local paper--never responded. Also spoke to the United Union of Roofers and emailed them. I've sent it to various government agencies around Iowa. I'm hoping this concept can get some traction. This model could also be applied locally, as one of the commenters mentioned. It could be done for a state, or nationally.

    •  I started to rec for the first line, then read the (0+ / 0-)

      rest and decided not to. Unnecessary and unprovoked nasty tone, IMO.

      Information is abundant, wisdom is scarce. The Druid

      by FarWestGirl on Mon Aug 29, 2011 at 01:57:32 PM PDT

      [ Parent ]

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