For years, I have been writing that Renovation Uses Twice As Much Labor, Half as Much Material as New Construction and that In Hard Times It's Time For Renovation and Preservation. I summed it all up in Heritage is Green.
Now Emily Badger provides more ammunition with an article in Atlantic Cities, Another Reason to Stop Building New Homes: Job Creation she writes:
Rehabilitating old buildings is more labor-intensive than new construction, since much of the cost of new construction goes literally to bricks and mortar. But we asked Heidi Garrett-Peltier, an economist with the Political Economy Research Institute at the University of Massachusetts Amherst, for some data to back this up. She ran some estimates based on national 2009 data, the most recent numbers available. And it turns out that repairing existing residential buildings produces about 50 percent more jobs than building new ones.
Nationally, about 41 percent of the cost of residential repair goes to labor. For new construction, that number is just 28 percent, meaning considerably more than half of any investment in a new home goes not to construction jobs, but to materials, equipment and things like trucking services.
Our data were even higher; the late Toronto developer Paul Oberman estimated that on his projects, restoration and renovation ran to 75% labour, although he was doing a very particular kind of high end restoration.
This labor intensity affects a local economy on two levels. First, we buy an HVAC system from Ohio and lumber from Idaho, but we buy the services of the plumber, the electrician, and the carpenter from across the street. Further, once we hang the drywall, the drywall doesn’t spend any more money. But the plumber gets a hair cut on the way home, buys groceries, and joins the YMCA – each recirculating that paycheck within the community.
With over 18 million empty houses in America, there are a lot of places to fix. Except it isn't easy in this market. Emily Badger writes:
“Unfortunately, the real estate industry isn’t really designed that way,” says Uwe Brandes, ULI’s [Urban Land Institute] vice president for initiatives. “In so many different ways, the real estate industry is designed to produce new buildings, and so recapitalizing old buildings, especially in a state-of-the-art way, is not something that collectively we’re particularly good at.”
That's because most of the real estate business is about converting cornfields to big box stores and sprawl, upgrading land rather than improving buildings. The real estate industry is brilliant at taking advantage of the massive subsidies that the road system provides, and the low taxes of the suburbs, rather than the hard work of adding value through upgrading. That era is over; time to learn new skills.
Read Another Reason to Stop Building New Homes: Job Creation