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Housing downturn lessens cost of home expansion

 

Last updated 2/26/2009 at Noon



The decline in the housing market is actually beneficial for those who plan to remain in their residence and have funding to expand their homes.

Not only can such remodeling take place at a lower cost, but the assessment value for property tax purposes will be based on the lower cost of construction.

“We only assess the new construction. We don’t assess the rest of the property,” said County of San Diego’s Assessor’s Office supervising appraiser Sandra Woodhouse. “It’s assessed on the market value that it adds to your construction, to your existing property.”

Under Proposition 13, the assessed value of a home is based on its purchase price.

In the event of a home expansion, the assessed value of the land and of the initial home square footage is unchanged.

“We’re only going to look at the new construction,” Woodhouse said. “We’re going to put a dollar per square foot cost on it.”

Thus lower land values won’t lower the property tax obligation for an expansion, but the depressed market may lead to lower construction costs and thus a lower assessed value for the house itself.

“It might be a good time to do that. The main savings would be in the actual cost that you paid,” Woodhouse said.

The decrease in construction costs is not proportional to the decrease in land values. “I don’t know that we’ve seen construction costs coming down a lot,” Woodhouse said.

The county’s Department of Planning and Land Use (DPLU) has been seeing building permit applications for such work.

“A higher percentage of the permits that we do process are those kinds of permits,” said DPLU director Eric Gibson. “Over 90 percent of what we’re seeing is that right now.”

Overall building permit applications have dropped, which creates an opportunity for the building industry to focus on home expansions and an opportunity for homeowners to take advantage of that potential focus.

“If they have the money to do it, they obviously think it’s the time,” Gibson said.

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