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Answer: The mishna (Berachot 54a) says that one who builds a new house or buys new "utensils" recites Shehecheyanu. While the gemara (ibid. 59b-60a) cites an opinion that this beracha is only for the first such acquisition, which would exclude the possibility of a beracha on renovations, we follow the opinion that it applies even if one built a second house (Shulchan Aruch, Orach Chayim 223:3).
But are renovations comparable to a new house? The gemara in Sota (mishna, 43a; gemara, 44a) discusses the halacha that one who builds a new house that he has not inaugurated returns from the battlefield. The first opinion identifies building projects on his property that do not qualify as building a house. Rabbi Yehuda says that even if one rebuilt the house on its previous site, he does not return from battle. However, the gemara posits that extending the house’s height does qualify. The Mishna Berura (223:12) says that this serves as a halachic precedent for Shehecheyanu as well. Contemporary poskim (see Halichot Shlomo 23:14 in the name of Rav S.Z. Auerbach and V’zot Haberacha, p. 166 in the name of Rav M. Eliyahu) assume the same is true for any significant extension of the house, even without acquiring new land. However, renovations that do not include expansion, but just improvement of the house’s appearance or functionality, are not comparable to building or buying and do not warrant a beracha (ibid.). The time for the beracha is when the new area is ready to be used, which coincides with the time for attaching a mezuza (V’zot Haberacha ibid.). (We are not relating to the new furniture that often accompanies renovations, which itself likely warrants a beracha.)
A few factors could raise questions about the beracha. The first is that there is a minhag cited by several Sephardi poskim to not make a beracha on a new house. It is hard to determine this minhag’s exact origin, reason, and extent. The Pri Megadim (223, Mishbetzot Zahav 4), who is Ashkenazi, suggest that there is a minhag to not make Shehechiyanu on clothes and utensils, and he suggests that these people must rely on the opinion that Shehechiyanu for such events is merely optional. The Ben Ish Chai (I, R’ei 5-6) is not impressed by this logic, but he confirms the minhag concerning a new house. He recommends solving the problem by following a different minhag. One makes a chanukat habayit upon entering the house, at which point he wears a new garment and recites Shehecheyanu with intention for the house in addition to the garment. I do not know if there is such a minhag of a chanukat habayit for renovations. However, those who want to follow the minhag, as opposed to the established halacha to make the beracha (Yalkut Yosef 223:2 and Birkat Hashem 2:57 do not believe the minhag should uproot it), can solve the issue with a new garment.
Rav Chayim Palagi and the Kaf Hachayim (OC 223:18) say that one who bought a house on credit does not make a beracha because of the trouble he may have paying up and the possibility he might have to return it to the seller. Besides the strong questions on the basic opinion (see Birkat Hashem 2:(250)), the situation is uncommon regarding renovations, as even one who takes loans for that purpose rarely is nervous about his ability to pay, and the renovations will not be "returned".
Is Shecheyanu the correct beracha? The rule is that for acquisitions that benefit more than one person, Shehechyanu is replaced by Hatov V’hameitiv (Shulchan Aruch, ibid. 5). The gemara talks about buying a house with a partner, but this also applies to family members (see Shulchan Aruch ibid. and Be’ur Halacha to 223:3). If there is a question of doubt between the two berachot, Shehecheyanu is the safer one, as it can work even when Hatov V’hameitiv is appropriate (Be’ur Halacha to 223:5). This is apparent from those (including above) who suggest using the beracha on new clothes to cover the beracha on a new house.
Bemare Habazak - Rabbis Questions (654)
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144 - Beracha on a Newly Renovated Home
145 - Beracha on Pureed Vegetable Soup
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Kuzari -Rabbi Ari Shvat Kuzari class 8- "Answering Questions on the Kuzari's Proof from Mass Revelation
Rabbis in Midrash
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