With tax credits gone and the HST adding to costs, renos slow down

Steve Barkhouse recently won Renovator of the Year at the Housing Design Awards, a glitzy annual affair organized by the Greater Ottawa Home Builders’ Association.

Over the past few years, Barkhouse has scooped up a slew of other local and national awards. His company, Amsted Design/Build ( www.amsted.ca ),established in 1989, has blossomed to offer renovation design and execution, custom home building, insurance restoration and other services. He employs 82 people and has revenues of roughly $5 million a year.

He’s also made a name for himself in the growth-driven green building industry, winning the green renovation category at the recent design awards with co-submitter Chuck Mills Residential Design and Development.

And, at 46, Barkhouse is still the boyish-looking, ultra-enthusiastic fellow he’s always been.

So why is he singing the renovation blues, laying off staff and wondering just how much further his industry is going to tumble before it gets back on its feet?

Look to our elected officials for the answer, say Barkhouse and others in Ontario’s beleaguered reno industry. Over the past nine months, the federal government has allowed the Home Renovation Tax Credit (HRTC) — a boon to the renovation industry — to expire with no replacement. The Harper government then axed the ecoENERGY program that provided grants for upgrading residential energy efficiency (Ontario’s sister program still exists). For good measure, McGuinty’s Liberals this summer introduced the 13-per-cent harmonized sales tax (HST) to Ontario.

“Three strikes and you’re out,” says Barkhouse. “That’s after (governments) rode the renovation industry to a healthier economy and helped keep us out of the situation in the States.”

He says he thought the cumulative effect of those three strikes would be gradual. Instead, it came like a “landslide.” Thanks to pre-booked orders, Amsted was kept hopping until late October. Then the well went dry.

“It breaks my heart,” Barkhouse says. The renovation portion of his business has tumbled roughly 50 per cent and he had to lay off 13 employees. He has just rehired them, but to work on insurance restorations.

The 30 resumes sitting on the corner of his desk tell him he’s not alone in the business spiral.

“The industry’s taken a damn hard hit,” agrees John Herbert, executive director of the Greater Ottawa Home Builders’ Association. His association has 41 registered renovators, although he says there are many more, including those working in the underground economy, in the Ottawa region.

In 2009, Canadians spent more than $40 billion in home renovations. In Ontario, Herbert says, the market was particularly busy because of its large stock of older homes. As well, sections of the provincial economy were battered by the recent recession, making home improvements more feasible than upgrading to new digs.

Now, legitimate renovation business in Ontario is reportedly down as much as 50 per cent, and more contractors are reportedly accepting cash instead of charging HST. Even before the new tax, the Ontario Renovators’ Council estimated that more than half of renovators in the province were operating underground. Since the introduction of the HST, “It’s guaranteed 75 (per cent) and maybe even higher.” says council chair Michael J. Martin, owner of a luxury renovations company in Ottawa and a nominee for this year’s Renovator of the Year award.

Martin points to an Environics Research poll recently commissioned by the council. It found 56 per cent of Ontarians had paid cash and avoided tax for a renovation or repair. More than two-thirds surveyed said that they would be less likely to pay cash if they were to receive a provincial or federal tax credit.

Armed with those numbers, the council hopes to convince the provincial government to institute a tax credit for homeowners on renovation projects.

“It’s the worst on big jobs,” says Martin. “No one wants to pay taxes on those.”

Considering the structural and other complexities typical of major renovations, they are the last ones that should be given to underground contractors working without permits, insurance or written contracts.

To assure themselves that they are dealing with a legitimate renovator who will meet expectations, homeowners should hire a RenoMark contractor. RenoMark is a national program that includes a code of ethics and performance standards. To belong to GOHBA, a renovator must join the program.

While Barkhouse and others are being squeezed, he’s quick to point out that business booked for the spring of 2011 is picking up, and that there’s no better time to renovate than now: “the cost of materials is still low, and there’s lots of better-quality guys available.”

In fact, Barkhouse can’t help but turn upbeat — and a bit competitive — at every opportunity. “We don’t want to be the biggest, just the best,” he says.

That “we” is also typical of Barkhouse, who grew up in the construction business.

“You don’t hear a lot of ‘me’ and ‘I’ when he talks,” says Chris Hewett, co-ordinator of architectural technology and green architecture programs at Algonquin College and a judge at this year’s Housing Design Awards. The judges interviewed nominees as part of the awards process.

“He really stresses a whole-team approach. And he’s so enthusiastic that he looks like he has to hold himself down or he’ll jump right out of the chair. That’s the kind of renovator people want, who will do whatever he has to do to gain their trust.”

It’s an approach that should help Barkhouse weather the current market. That and his willingness to take on any project — from a small bathroom upgrade to a major rebuild of a mid-20th century bungalow in Old Ottawa South.

The former was one of the four projects that Amsted submitted to the housing design awards this year, along with a new stone-and-stucco exterior to a Rockcliffe Park home and an interior makeover that turned a Rothwell Heights house from a dark, chopped-up space into a “brighter, more open place for the way we live now.”

Barkhouse says he’s also added a new service. His staff is available on a short-term basis — the rate is roughly $75 an hour — for those “Honey-do lists” of household chores like caulking and minor roof repairs that homeowners never seem to quite get to.

All of which means that we should count on seeing Steve Barkhouse in the running for housing awards for years to come.

“If we can make ends meet, we’re happy,” he says. “We’re all pretty modest.

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RENOVATION TIPS:

– Have a clear idea of what you want before you talk to renovators. For major makeovers, hire an interior designer first (some renovators have their own design service). Think long-term and flexibility.

– Have a budget and stick to it. You can add frills later.

– Get bids from at least three companies. In each case, check three references, the company’s rating with the Better Business Bureau and online buzz about the renovator.

– Insist on proof of insurance. Membership in RenoMark, a national quality assurance program, is a good thing.

– Get a written contract that details completion date, warranty, materials and the like. Ensure you have a building permit before any work starts.

– Keep your down payment to about 10 per cent of the total estimate. Know your rights on withholding portions of payment until project completion.

HANDY WEBSITES:

– Canadian Home Builders’ Association ( www.chba.ca ): Tips on planning, hiring, contracts and more.

– Ontario Ministry of Consumer Services ( www.sse.gov.on.ca and search “home repairs and renovations”): Offers suggestions on hiring a renovator, lists businesses with a record of consumer complaints and ministry action.

– RenoMark ( www.renomark.ca ): Industry program has RenoGuide and lists member contractors by city.