Tax Reform May Boost Residential Roofing Market

While it’s still too early to determine the long-term ramifications of The Tax Cuts and Jobs Act (signed by President Trump in December 2017), Freedonia analyst Matt Zielenski expects that one of the more immediate effects of the law will include a boost in demand for residential roofing products in the US.  The Tax Cuts and Jobs Act offers tax savings to consumers in a number of ways, including:

• Increases in the standard deduction
• Lower marginal tax rates
• The continuing deductibility of interest on home equity loans

As detailed by this report, many homeowners are likely to use these savings to invest in home renovation projects. Given that home equity loans are one of the more popular ways of financing major home improvement projects – including new roof installation – those homeowners looking for ways to fund renovations will take a closer look at the tax incentives offered by the Tax Cuts and Jobs Act.

Growth in Homeowners’ Equity in Residences in 2017 Did Not Necessarily Lead to Investments

Many homeowners saw sharp increases in home equity in 2017, which made them more likely to consider undertaking large-scale renovations, such as roof repair. This is because:

• Many consumers put off home improvement projects until their finances are on a more favorable footing; and
• Those homeowners looking to tap into home equity lines of credit could – due to the average increase in home equity in 2017 – fund either fully or in part – a roof replacement or repair project.

However, many consumers chose to put off home improvement projects until after the full effect of tax reform was made clear. 

Preservation of Home Equity-Related Tax Credits May Boost Reroofing Activity

The IRS’s ruling that interest paid on home equity loans for home improvements was fully deductible (up to $750,000) should alleviate the concerns of many homeowners about funding reroofing projects.  While these costs vary, the average expense of a reroofing project can be the same as – if not less than – the interest expenses on a home equity loan:

• Asphalt shingle roofing (project costs between $5,000 and $14,000)
• Metal roofing (project costs between $1,600 and $20,000)
• Roofing tile (project costs between $30,000 and $40,000)

This ability to deduct the interest on home equity loans may play a key role in spurring homeowners to replace older or worn roofs. Indeed, the US faces a shortage of affordable single-family homes as builders have been unable to meet demand for lower-priced housing in many parts of the country.  Furthermore, a number of homes now on the market are in need of substantial repairs or upgrades.  In many cases, homeowners may find it a more affordable proposition to upgrade their existing residence, rather than enter the overheated housing market.

To Learn More

Organized by the National Roofing Contractors Association, National Roofing Week is an annual summer event intended to increase awareness in the US about the importance of roofs to homes and businesses. For more information on Matt Zielenski's outlook for the roofing industry in the US, check out the Freedonia Group’s wide range of roofing studies, which include:

• Liquid-Applied Roof Coatings in the US by Product & Subregion
• Roofing: US Forecasts by Product, Market, & Subregion
• Low-Slope Roofing in the US by Product, Market, & Subregion
• Asphalt Shingles in the US by Product, Market, & Subregion
• Roofing Distribution Market in the US by Sales Channel, Market, & Product
• Roofing Underlay Market in the US by Product, Market, & Region

About the Author:

Matt Zielenski  is a Senior Analyst at the Freedonia Group, where he covers trends in the use of building materials and related construction products in the US market.