More homeowners are turning to home equity lending — especially home equity lines of credit (HELOCs) — to pay for home renovations instead of buying another home.

However, home maintenance projects undertaken in retirement can be a significant drain on cash reserves and upend retirement budgets, according to a study published in September by T. Rowe Price Insights.

Some variation in spending during retirement is expected and even beneficial. This is especially true if a retiree has planned for a vacation or a dream purchase of some kind, writes study author Sudipto Banerjee, VP of retirement thought leadership at T. Rowe Price.

But when the spending is unexpected, that’s where budgeting problems enter the picture, the analysis found. For this study, larger shares of spending variation came from this category, which included home maintenance costs.

The study found that 30.5% of spending volatility was driven by nondiscretionary spending and 13.5% came from discretionary spending. Within those categories, 25.1% of nondiscretionary spending volatility was driven by home-related costs, while health and transportation accounted for only 5.3% and 3%, respectively.

“[I]f volatility arises from unplanned increases in nondiscretionary or essential spending, then it could become a true liquidity event and a cause of concern,” Banerjee said. “In our study, a larger share of the variation in total spending for retirees was due to changes in nondiscretionary or essential spending.”

Some seniors may want to renovate their homes in retirement to age in place, which is the source of some reverse mortgage business.

Aging in place is a stated priority of the Biden administration’s housing policy for seniors. The U.S. Department of Housing and Urban Development (HUD) in recent years has launched grant programs designed for renovations that make aging in place possible.

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