Housing Preservation Gone Wild

A comparison of the change in the housing stock between 2000 and 2010 , as reported in the decennial census, with the number of units built over that period indicates losses from the stock averaged 94,201 housing units, or 0.08 percent of the stock, per year.  If only 0.08 percent of the housing stock were lost each year in the future, the majority of today's homes would still be standing and habitable 850 years from now.

The total number of housing units as of April 1, 2010, was reported as 131,704,730, compared to 115,904,640 on April 1, 2000.  The increase of 15,800,090 compares to 16,742,100 new units produced (15,424,800 conventional units completed and 1,317,300 mobile homes placed).  The residual, 942,010, is the implied number of net losses.  For the period from 1990 to 2000, the comparable numbers (115,904,640-102,263,678 vs 13,359,200+2,854,029) translate into an implied net loss of 2,572,267.

The small number of apparent net losses is probably due, at least in part, to measurement problems.  There could have been fewer units missed, or more units double-counted or erroneously included, in 2010 than in 2000.  An analysis by the Census Bureau of housing unit coverage in the 2000 Census estimated that there was a net undercount of 0.61 percent, or about 700,000 units, in 2000.  There were some refinements in the address lists and procedures for the latest count.  If that meant that the net undercount  in 2010 was zero, the implied number of net removals would be higher by about 70,000 per year.

If the reported volume of new construction was less than actually occurred, that would also bias the implied net removal value downward.  In general, data for housing starts and completions are among the more reliable economic statistics.  There was, however, a change in the methodology for estimating the number of new units that produced lower numbers during the latest decade than would have been reported without the change.  The most important change, applied to estimates of single-family construction in permit-issuing areas beginning in January 1999, was to remove a 3.3 percent upward adjustment that had been incorporated to account for the possibility of units built (illegally) without permits.  If the previous methodology had remained in use, the estimate of construction during the latest decade might have been higher by about 35,000 units per year.

It should be noted that on a previous occasion the inconsistency between the growth in the stock, as measured by the decennial census, and the estimates of construction led to a massive revision in the construction estimates.  In 1964, the data for housing starts from 1945 to 1958 were restated, raising estimates for the years from  1945 to 1949 by 48 percent, with estimates for other years subject to smaller revisions.  If there is an underestimate in recent data, however, the magnitude is almost certainly small.

Net losses reflect a number of factors beyond the destruction of houses by demolition and natural disasters.  Vacant units that are no longer characterized as habitable are not counted in the stock, even though they haven't actually been destroyed.  Some will be demolished later, but others may return to the housing stock.  Other losses from, and additions to, the stock occur as structures move between residential and nonresidential use, or are subdivided or merged.  Most studies in the past have indicated that changes in use tend to cancel out at the national level, and that net losses are largely driven by permanent removals through demolition and disaster, but that may not have been the recent experience.  There are no good, direct measures of either net losses or of demolitions.

One type of addition to the stock that is particularly overlooked in the available data consists of the conversion to residential use of structures that had never previously been used for housing.  Although conversions of schools, factories, or other nonresidential structures to housing often require extensive construction work, they are not counted in housing starts or completions or in most other measures of residential construction.  For California, where the state reports data from the Construction Industry Research Board that includes permits for such conversions, total permits for 2001 to 2010 were 2.6 percent higher than the Census Bureau permit data show.  For states like New York the relative share of such reconstruction may be even greater.

Even taking all the possible measurement and definition issues into account, it appears that the rate at which units have been removed from the housing stock in recent years has been remarkably low.  Along with a rate of new construction that is smaller, relative to the size of the stock, than during most periods in the past, this has meant relatively more older housing.  The median age of the stock, as reported in the 2009 American Housing Survey, was 35 years.  Although that's a long way from the extrapolated value of 850 years suggested above, it's probably more than at any previous time in U.S. history.  As recently as 1985, the median age of the stock was about 23 years, down from 28 years in 1950.

With the current large number of vacancies and the lack of maintenance provided to many distressed properties caught up in the foreclosure crisis, as well as the seeming proliferation and severity of natural disasters, losses from the stock might be expected to rise.  Indeed, that may be a key part of the process by which supply and demand come back into balance.  For assessing the economy, planning business activities, and formulating public policy, it would help if we had some way of tracking this.

It has been almost 3 years since I have written anything for this blog.  I actually forgot how to do so, and managed to get caught up in various projects.  At the moment I have fewer commitments.  I only mention this so you know that the reason why the previous post was in 2008 is not a problem with your computer.

June 8, 2011 -

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