s 2027 budgets are finalized, residential operators are locking in the renovation and capital plans that will shape unit quality, turn speed, and NOI for the year ahead. A year ago, Lessen's Renovation Forecast 2026 flagged rising costs, a persistent skilled trades gap, and supply chain risk as the forces to plan around. All three are still in play heading into 2027, but the balance between them has shifted, and budgets built on last year's assumptions are likely to come up short.
Material costs are rising faster than the market
The most significant change is the pace of cost growth. According to Associated Builders and Contractors, construction input prices rose 11.2% year over year through September 2026, including a 2.2% jump in September alone. ABC Chief Economist Anirban Basu noted that prices for tariffed materials like iron, copper, and other metal products continue to rise rapidly. For residential portfolios, that pressure shows up in the categories that drive renovation budgets: plumbing fixtures, appliances, HVAC equipment, electrical components, and hardware.
Rent growth is not keeping pace. As Lessen noted in its analysis of the hidden cost of a slow make-ready, national advertised rents were up just 0.1% year over year as of March 2026. When renovation costs climb faster than achievable rent premiums, the margin for error on every upgrade decision gets thinner.
Demand is flat, but labor is still tight
On the demand side, the broader remodeling market has cooled. Harvard's Joint Center for Housing Studies projects annual remodeling spending to hover around $525 billion through the third quarter of 2027, with year-over-year growth of just 1.5%. That data reflects owner-occupied homes, but softer homeowner demand does not translate into an easier labor market for rental operators. The National Association of Home Builders' Remodeling Market Index held at 62 in the third quarter of 2026, and remodelers continue to report high material costs and difficulty finding enough labor to finish projects on time. NAHB linked those shortages to immigration enforcement and competition from data center construction. ABC estimates the industry will need to attract 456,000 new workers in 2027, up from 349,000 in 2026.
For operators, the practical takeaway is that labor relief should not be built into the plan. Vendor capacity for renovation work still needs to be secured early, especially in markets where turn season and renovation season overlap.
Where renovation dollars work hardest in 2027
In a high-cost, low-rent-growth environment, the strongest upgrades are the ones that reduce future spend as well as improve the unit. Repair and maintenance already accounts for 5% to 15% of rental income, according to Lessen's Single-Family Rental Repair & Maintenance Benchmark Report, with annual costs ranging from $1,000 to $3,100 per home. Upgrades that lower that recurring cost, such as durable flooring, standardized fixtures and finishes, and planned replacement of systems nearing end of life, compound in value every year the home is occupied. They also shorten future turns, because standardized materials are easier to source, price, and install.
Premium cosmetic upgrades deserve closer scrutiny in 2027. They can still make sense in markets with strong demand, but they should be tied to a clear rent premium or renewal benefit rather than applied across the portfolio by default.
How AI is changing renovation planning
When material prices rise 11% in a year, one of the hardest questions for an operator is whether a higher bid reflects the market or simply a higher price. AI is becoming the most practical way to answer it. In the AI Insights 2026 report from IREM and AppFolio, 58% of real estate management professionals said they now use AI in their roles, up from 45% in 2025, and 48% of users reported a positive impact on NOI or profitability.
For renovation programs, the payoff comes from pairing that intelligence with deep work order history. Aiden, the embedded intelligence in Lessen360 and One by Lessen, is trained on more than 40 million real work orders. It supports asset-based scoping and repair-versus-replace recommendations, checks vendor proposals against historical pricing to flag line items outside the expected range, and matches invoices to the approved scope before payment. It also spots recurring issues in a home's service history, which helps teams decide where a renovation dollar will prevent future work orders rather than just refresh a finish. Aiden narrows the options, and the operator makes the final call.
Using the winter window
Timing may be the most controllable variable in the 2027 plan. Apartment List research shows moves stay quiet early in the year before ramping in March and peaking in August. That makes the next few months the best window to complete renovations in vacant units, before leasing demand and turn volume compete for the same crews. It is also the right time to finalize standard scopes, confirm material specifications, and place orders for items with longer lead times, so price increases and shortages do not stall projects once spring arrives.
A strong 2027 forecast uses that data to segment the portfolio by asset age, condition, service history, and last upgrade, applies current cost escalation rather than last year's, carries a realistic contingency, and sequences work by market so crews can move efficiently between homes. Lessen's approach to prioritizing and executing multifamily capital projects offers a useful framework for that sequencing.
Renovation budgets in 2027 will be tested by higher material costs and a labor market that has not loosened, and the operators who plan early, standardize scopes, and focus spend on upgrades that reduce future costs will be best positioned to protect NOI. Lessen helps single-family and multifamily operators plan and deliver renovations across their portfolios with standardized scopes, a national vendor network, and Aiden's embedded intelligence guiding scoping, pricing review, and real-time visibility into project status and spend.
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