Renovating, remodeling, and redecorating is a popular trend for American homeowners. Just turn on your television, and you can take your pick of home renovation shows on HGTV. It’s a trend that is picking up steam as Americans continue to see the value of home improvements.
The home improvement industry was already experiencing significant growth in 2019, with a forecasted revenue of $680 billion by 2025. Then, COVID-19 forced Americans to shelter-in-place and work from home, which provided an abundance of time for home improvement projects. According to a Bank of America study, “more than 70% [of Americans] have decided to tackle home improvement projects.” Home improvement stores, such as Lowes and Home Depot, had earnings that far exceeded expectations.
Whether you have decided to tackle a home improvement project because of quarantine or simply a desire to upgrade your space, it is necessary to get answers to the big questions before you begin. For example, did you know that many home improvement projects require permits or that you may be able to find a grant to fund your project? We’re answering the most commonly asked questions about home improvement so you can start your project on the right foot.
Table of Contents:
- 1. What kind of home improvements require permits?
- 2. What grants are available for home improvements?
- 3. What home improvements increase property taxes?
- 4. Should I get the home improvements contract?
- 5. To Do a Home Improvement Project or Not – That is the Question
1. What kind of home improvements require permits?
Yes, many home improvements require permits. Before you start to complain about the added hassle to get a permit, it is important to understand that permits are actually good for homeowners. They are designed to protect you. With a permit, it means that the work will be overseen to make sure it is safe for your family and anyone who lives in the home after you move.
A building permit is written authorization by a city or county, allowing you (or your contractor) to carry out a building project at your home. They are designed to make sure the work is safe and meets building, construction, and zoning codes. Where you live will generally determine if you need a permit for your home improvement project since different cities have different codes. For example, there may be regional codes, such as fireproofing measures for those who live in areas prone to wildfires, with unique requirements.
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While it does vary from one municipality to the next, the following lists will give you an idea of whether or not your home improvement will require a permit.
A. Typically Requires a Permit:
b. Changing the roofline or general re-roofing
c. Expanding the home or building on to the home (including garages)
d. Installing certain kinds of fences, such as 6 feet tall privacy fences
e. Demolishing, as well as the dumpster required for demolished materials
f. Building decks above a certain height
g. Anything involving the sewer
h. Installing new circuits or electrical wiring
i. Installing windows that require new openings
j. Adding a new fireplace or chimney
k. Converting a garage to a living space
l. Installing new HVAC systems
m. Adding a pool (in-ground or above-ground)
n. Renovating basements
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B. Sometimes Requires a Permit:
b) Replacing doors and windows – even one at a time
c) Landscaping, such as cutting down trees or building retaining walls over four feet
d) Changing the soil grading of your property
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C. Probably Doesn’t Require a Permit:
b. Changing flooring (such as carpet to hardwood)
c. Upgrading and replacing fixtures, such as sinks or countertops
e. Updating siding (without making structural changes)
f. Replacing light fixtures that do not require new electrical wiring
g. Adding decks that reside at low heights
h. Installing storage sheds without the need for electricity
i. Building small tree houses
j. Replacing appliances, such as refrigerators and dishwashers, without making changes to plumbing or electric wiring
In short, you should contact your local building and permit office to see if your home improvement project requires a permit. If you are working with a licensed, professional contractor, he or she should know if permits are required for your project and will pull the permits for you.
As the person who pulls the permit, the contractor is the one held responsible for completing the project according to code. In contrast, if this is a DIY project and you pull the contract, the city sees you as the contractor and can hold you liable if you do not follow code.
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Fortunately, the steps to getting a permit are clear and pretty much the same from one city to the next.
b. Share what you plan to do. For some projects, such as add-ons, you may need to share blueprints.
c. Get your plan approved. Depending on the type of project, it can vary from one day to several weeks.
d. Pay the permit fee. This will vary from place to place, as well as the type of project.
e. Get the permit and post it. Once you obtain the permit, you want to place it where the inspector can see it.
f. Schedule inspections throughout the project.
g. Once the project is complete, you will request final approval.
So, what if you skip the permit? Yes, getting a permit costs money and time, but you’ll wind up wasting more time and money if you get caught doing home improvement projects without a permit. For example, if your home is reassessed and the property assessor notices changes, you could get stuck paying a big fine. Or, if you try to sell your home and an inspector notices renovation done without permits, it could prevent the sale of your home from going through.
Moreover, if government officials become aware you have started a home improvement project without seeking a permit, they can fine you, halt the project, or even make you destroy what you’ve already done. To put it simply – it’s a risk you don’t want to take.
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2. What grants are available for home improvements?
Yes, there are grants available for some home improvements. Unlike a loan, a grant is a financial aid that you are not required to pay back. The Balance explains, “A home improvement grant also called a ‘home repair grant,’ is a type of financial aid issued by the government at the federal, state or municipality level. It’s designed to help homeowners in that region make select improvements to their properties.”
However, grants are competitive, so even those who qualify may not receive the grant. That’s why it is important to apply for the grant as soon as you start thinking about doing a home improvement project.
USDA Home Improvement Grant – If you live in a rural area, you may qualify for a home improvement grant up to $7,500 from the Rural Development arm of the U.S. Department of Agriculture. This grant applies specifically toward making health and safety improvements to the home. According to USDA, these are the eligibility requirements:
❖ Be unable to obtain affordable credit elsewhere
❖ Have a family income below 50 percent of the area median income
❖ For grants, be age 62 or older and not be able to repay a repair loan
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HUD HOME Investment Partnerships Program – Low-income households may qualify for grants to improve their homes. The HUD HOME grants apply toward improvements relating to emergency repairs, health, and safety.
To find out if you are eligible for a home improvement grant, check with your local government office, specifically the Housing and Urban Development (HUD) department, to see what grants are available. You can also contact the National Residential Improvement Association to see if you are eligible for any available home improvement grants. Generally, you will be eligible based on your income level, age, property type and condition, and your location.
Unfortunately, not everyone who qualifies for a grant will receive one. But the good news is there are other ways to fund your home improvement project, such as loans and energy star credits. The Federal Housing Administration offers a 203K improvement loan to be used for home improvements, and both the USDA and HUD offer affordable loans for those who do not receive grants. Plus, if you are making eco-friendly home improvements, you may be able to get green energy grants or tax credits on top of saving money monthly on your utility bills.
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3. What home improvements increase property taxes?
When people take on a home improvement project, they are hoping to improve their homes. As a result of home improvements, the home’s value will also increase. Since your home is now worth more, you should also anticipate an increase in your property taxes.
Your property taxes are based on the assessed value of your home multiple by the local tax rate. For instance, let’s say you finish your basement and turn it into an entertainment room. You may have increased the value of your home by $20,000. With such a significant increase in your home’s value, your property taxes will also increase.
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In addition to finishing a basement, there are other home improvements that tend to cause an increase in property taxes. Generally, anything that adds square footage to your home or significant add-ons, such as pools, will increase your home’s value and your property taxes as a result. Also, major remodels will lead to your home being reassessed. A reassessment means changes to your property taxes.
Your property taxes will only increase after your home has been reassessed. When you get a permit for a home improvement project, the permit goes to your local assessor’s office. If your home improvement permit signifies new construction or major renovations, you will likely have your home reassessed.
Ultimately, it is up to the homeowner to determine if the cost of the home improvement and the increased value are worth the increase in property taxes. Just be sure you include the potential property tax increase into your expenses for the home improvement project so that you won’t be surprised.
Ideally, you want a return on your investment when it comes time to sell, but you need to make sure you will see a return and not a loss. Calculate how much the actual project will cost you. Then, calculate what you think how much you think the improvement will increase your home’s value and property taxes.
The goal should be for the increased home value to make up for the property tax increase. If the cost of completing the project won’t leave you with enough to pay the property taxes, you may want to wait or look for funding.
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4. Should I get the home improvements contract?
The short answer is yes. If you are working with a contractor on your home improvements, a home improvements contract protects both you and the contractor. We’ve all heard horror stories about people doing home renovations who had contractors disappear before the job is complete. As the homeowner, you may not have as much knowledge about home improvements as a contractor, which puts you in a position to be taken advantage of. But with a clear home improvement contract, you can avoid these types of nightmare scenarios.
Since oral promises are hard to prove and enforce, many states require home improvement contracts because a well-written home improvement contract sets clear expectations and makes it easier to avoid disputes. The requirements for home improvement contracts vary from state to state, so you will need to check to see the requirements for your state. For example, in California, contractors must provide the homeowner with a written Home Improvement Contract (HIC) for all home improvement projects over $500 per state law.
Essentially, a home improvement contract should state who, what, where, when, and how much. As the homeowner, you want to be sure to read the contract in its entirety before signing on the dotted line. You should also see if you need to make any negotiations about cost or time estimates.
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The following should be included in a home improvement contract:
b. The homeowner’s name and contact information
c. Estimated start and end dates
d. Clarify who pulls permits
e. Description of the project
f. A detailed materials list with costs included
g. The total cost of the project with a stipulation of a dollar amount the project cannot go over
h. Down payment amount
i. The project payment schedule
j. Contractor warranties
k. Stipulate how change orders will be handled
l. Spell out contractor responsibilities, such as clean up and trash hauling
m. Include any oral promises
n. A right to cancel or termination clause
o. Penalties for missed completion dates (and specify amounts)
p. Notice of whether any work will be subcontracted
q. Signature for both the contractor and the homeowner
Many homeowners have an attorney look over their home improvement contracts to make sure it meets state requirements.
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5. To Do a Home Improvement Project or Not – That is the Question
To decide whether you want to do a home improvement project, you should start by considering your purpose. Are you doing this for your benefit and enjoyment, or are you doing this as an investment in your home’s value?
When it comes to home improvement projects, you have to decide if the improvement will be worth it. For instance, will building a beautiful deck that you can enjoy all year long be worth the cost of the project and the potential property tax increase? Many homeowners would say yes. With home prices increasing (as of July 2020), more Americans are looking for ways to stay in their homes while upgrading them to meet their currents needs and wants.
If you feel like your home needs a little TLC, then start by making improvements that don’t require permits or won’t increase your property taxes. Paint your walls, change your furniture, and upgrade your light fixtures. Small improvements like these can make a big difference – and will help when it comes time to sell.
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If you are set on doing a major home improvement project to increase your home’s value, make sure to calculate the cost of the work, plus the potential home value increase and property taxes, to see if you can afford it.
But before you start taking down walls, it’s important to know that home improvement doesn’t actually happen as it appears in a thirty-minute HGTV show. They require a lot of time, work, and money. Many types of home improvement projects require permits, which adds time and money to the project. This is true whether you plan to do-it-yourself or work with a licensed contractor.
You’ll start by applying for a permit if needed. Then, you should see if you qualify for home improvement grants or affordable loans. Lastly, if you choose to work with a contractor, you must have a home improvement contract signed before any work begins.
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