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Regional Matters

July 2, 2020

Home Repair Costs in Baltimore

Introduction

A good home can create a foundation for happiness, productivity, and success. Repair needs can form a roadblock to well-being if left unaddressed. In addition to signaling financial distress, housing disrepair can contribute to a wide range of health conditions such as asthma, respiratory infections, lead poisoning, physical injuries, and mental ailments. Still, over one-third of occupied American housing units report having at least one repair need, ranging from heating malfunctions to leaks, mold, and structural issues.

The U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD) provide data on housing conditions through the American Housing Survey (AHS), but these data do not capture the costs associated with repair. To fill this gap, the Federal Reserve Bank of Philadelphia and PolicyMap combined AHS data with an industry standard dataset of repair costs to estimate the cost of restoring the nation’s occupied housing supply. The estimated aggregate cost exceeded $125 billion in 2018, with over $900 million of that total attributed to the Baltimore Metropolitan Statistical Area (MSA). Nationally, Black Americans and low-income individuals were more likely to need a home repair. These gaps were even larger in the Baltimore MSA than in the United States overall.

The COVID-19 pandemic has put housing stability at the forefront of public policy discussions, particularly with federal, state, and local forbearance policies for homeowners and eviction moratoriums. But COVID-19 may also impact housing repair. Household financial uncertainty and high unemployment may inhibit people’s willingness or ability to spend on home repairs, and social distancing may make it difficult to have a contractor complete repairs. Rent relief, which helps support individual renters — particularly those that are low income — may cause landlords to dip into their reserves and forgo repairs. Conversely, low interest rates through the pandemic may allow homeowners and landlords to leverage equity for repairs. While the longer-term impact of COVID-19 on housing repair remains unknown, this Regional Matters post helps to establish housing repair needs in Baltimore prior to the outbreak.

2018 Baltimore Housing Repair Needs

We estimate that the total cost of addressing repair needs in occupied units (both owner- and renter-occupied) in the Baltimore MSA was $934 million in 2018. This represents the one-time cost of all necessary repairs on the 36.3 percent of Baltimore residences in disrepair. The median cost to restore a unit with a repair need in the Baltimore MSA is $1,333 — slightly below the national median of $1,449. About 5 percent of all housing units in the region require repairs over $5,000.

Older structures can become expensive to maintain. Units built prior to 1939 account for 14.8 percent of the housing stock in the Baltimore area and are most in need of repair work. More than 50 percent have a repair need at a median cost of $2,411. By contrast, only 26.8 percent of homes built after 2000 are in need of repair with a median cost of $1,178. (See chart below.)

Leaks and/or mold were the most commonly reported issue: 17.4 percent of all occupied units reported a problem in this area. Structural issues were the most costly category and accounted for more than half of total estimated repair costs in the Baltimore MSA at nearly $500 million. (See chart below.) They had the highest average repair cost at $2,971 — more than double that of any other category. Structural issues are critical to attend to, but residents may be more likely to defer these repairs due to their high cost. Though not specifically captured by the repair cost data, lead paint remediation remains a major repair need in Baltimore. Despite decades of efforts and steady progress to reduce lead poisoning, children in Baltimore are continually poisoned by chipped lead paint, most often found in rental homes built prior to 1950.

Households Most Affected

There will always be a certain percentage of homes in need of repair at any given time, but not all residents of the Baltimore MSA have equal ability to respond to a housing problem. Households that are unable to afford a needed repair may face persistent or worsening challenges by leaving them unaddressed. Home repairs are often unforeseen expenses and are therefore not necessarily well forecasted into the average American’s budget. Those living paycheck to paycheck may be more likely to defer repair due to income insufficiency, and lower-income households may struggle with loan access or repayment for home repairs. A resident of a suburb like Columbia, Maryland, where the median household income is $105,815, may have an easier time expediently completing a repair than someone in the city proper, where the median household income is $48,840. Low-income renters may also find it challenging to have repairs completed. Baltimore currently has a shortage of affordable rental units. With high demand and low supply, renters have fewer housing alternatives, and there may be less of an incentive for landlords to address needed repairs in a timely manner.

In 2019, the Richmond Fed published an issue of Community Scope detailing Baltimore’s unique and troubled history of housing policy that isolated and impoverished communities of color. Similar to most other American cities, Baltimore has been riddled with both explicit and de facto racial segregation. After the Great Baltimore Fire of 1904 engulfed and destroyed most of the city, a racial divide would become enshrined in the newly constructed grid system. City blocks came to form quasi barricades between white and Black neighborhoods. When a Black civil rights attorney purchased a house in a white neighborhood, the Baltimore Sun deemed it a “negro invasion,” and the city council enacted ordinances to ensure formal zoning restrictions. After World War II, wealthy residents abandoned the city and flocked to the suburbs. Maryland voters then approved a state constitutional amendment, which effectively sealed the boundaries of Baltimore. All of this culminated to form what is still largely visible today: an impoverished city with no ability to tax the affluent suburbs for support of critical services.

The persistence of racial and economic disparities in housing are reflected in the Baltimore area today. Almost half (48.1 percent) of housing units occupied by those living below the FPL in the Baltimore MSA were in need of repair in 2018. This compares to only 33.8 percent of units with occupants earning more than 200 percent of the FPL. Black residents of the region were 12 percentage points more likely to need a home repair than white residents.

Takeaway

Social and economic shifts in response to the COVID-19 pandemic will affect consumers’ ability to respond to preexisting housing repair needs. Low interest rates and federal economic impact payments give homeowners easier access to capital, which might normally generate an increase in housing repairs. Furthermore, Maryland and other Fifth District states offer affordable home repair loan programs that help lower-income residents access capital for repairs. However, this may not be enough to offset the harmful effects of unemployment and lost income that have occurred since the beginning of this year. And, additional capital does little to help renters who rely on their landlord for timely completion of repairs.

Housing quality is an important aspect of maintaining stability during the pandemic. By identifying critical needs, assisting with capital access, and raising awareness of existing resources, governments and housing practitioners can help support households and reduce health hazards. If executed with racial equity in mind, these efforts can also serve to mitigate one of many repercussions from a legacy of discriminatory housing practices.


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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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