If housing construction remains depresed, many Americans will find themselves living in single-family homes that have been split into several smaller units, or older buildings that have been renovated or converted to housing, according to a new report by the Department of Housing and Urban Development.
The contribution of so-called "conversions" to the housing supply has almost tripled from the 1950s and 1960s--when they accounted for just 10 percent of additions to the housing stock--to the latter 1970s, when they provided 28 percent of the units added to the stock.
Conversions will become even more important in the 1980s, especially those involving the subdivision of single-family homes, according to the report. "It is probable that only a fraction of the possible conversions of existing residential and nonresidential structures have taken place," the report says. "The potential for future conversions is very high."
Single-family homes are an important source of conversions, accounting for 58.3 million housing units, or about 68 percent of the inventory. While the size of the homes has increased from under 1,000 square feet in the 1940s to about 1,760 square feet in the 1970s, the average number of occupants has dropped from 3.67 in 1940 to less than 2.8 in 1980. "As a result, many owner occupants have homes with excess space," according to the report. "Economic conditions, market opportunities and other considerations may encourage many to develop a separate rental unit."
There are no data on the stock of nonresidential buildings suitable for conversion to housing, but the reports says changes in land-use patterns in many urban areas suggest "a substantial supply of potential candidates from this source as well."
The importance of conversions has been underestimated, largely because they are not reflected in data on housing starts and building permits. Between 1973 and 1980, an average of 1.76 million newly constructed units and 672,000 converted units were added to the housing stock. The report does not say how the units were converted, but estimates are that an average of 318,000 single-family units were subdivided into two or more units each year, including a substantial number of conversions that violate local zoning laws. An average of 682,000 were lost from the inventory each year, but roughly 60 percent of them could have been restored, it adds.
The report also found that the number of conversions and general investment in existing housing increased as the level of new construction fell. "Investment in the existing residential inventory usually increases when expenditures on new units decline, as households make more intensive use of older housing units to make up for the reduced supply of new units," according to the report.
In 1980, American households were spending almost as much on existing housing as they were spending on new housing. Spending on existing housing has increased from 20 percent of total housing expenditures in 1960 to 42 percent of the total in 1980.
The report bolsters the Reagan administration's efforts to cut back federal assistance for new housing production and to emphasize less-costly subsidies for existing housing and rehabilitation. "Experience in the 1970s has shown that these conversions are compatible with the continually improving quality of housing in the United States," the report says. "The expectations and housing preferences of today's households should continue to ensure that, as long as the housing market is able to function, these quality standards will be maintained."
The report does not say whether conversions have helped meet the total need for housing, including units affordable to low- and moderate-income families.