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>Builders have cited a shortage of affordable lots and labor as reasons to build fewer or bigger single-family homes I can't speak to the former, but the latte

>Builders have cited a shortage of affordable lots and labor as reasons to build fewer or bigger single-family homes I can't speak to the former, but the latter is definitely true in the Bay Area. I recently doubled the size of my once-modest house and it cost over $400/sqft. I speculate a few reasons: 1. There is a poor pipeline of Americans going into construction and the skilled trades 2. Because of (1), immigrants (illegal and legal) need to fill the gap, but immigration is being tightened at the national level 3. Competition with bigger projects (not really true this year, but was last year) 4. If we are to believe Nobel-winning economist Baumol, since house construction is a low productivity endeavor, it is subject to "cost disease" [1]. I don't think regulation played a big part in my addition's cost because building costs have been going up by 1% per month, roughly, and many of the most onerous regulations are decades old. [1] https://en.wikipedia.org/wiki/Baumol%27s_cost_disease https://en.wikipedia.org/wiki/Baumol%27s_cost_disease

quaquaqua1 7y ago
Your addition would have been very cheap if the process wasn't tightly regulated by local, state, and federal government. The materials themselves are probably 20% of the cost for the whole project, the rest of the overhead goes (rightly or wrongly) to fees and inflated wages.
georgeburdell 7y ago
Just wanted to correct myself but Baumol, although distinguished, did not win the Nobel Prize
mancerayder 7y ago
If you glanced upon my other comment in this thread, construction sticker shock got me too. My 2200 sf brownstone is now on the market because I couldn't afford renovation. Not building up or out (which I absolutely can add 1500 sf), but interior renovations would cost about 350K including permits, architect, etc. and so forth. It's simply not worth it, but it would be if I had family, friends or better, staff, to handle doing a renovation more cheaply. I feel terrible about selling but it's the best medium term business and quality of life decision. To respond to your comment, it's a mix of construction boom (NYC) min wage increase (good but should be mentioned) Trump tarrifs on steel and timber stricter oversight by current administration due to high profile accidents complicated bureaucracy

quaquaqua1 7y ago

Your addition would have been very cheap if the process wasn't tightly regulated by local, state, and federal government. The materials themselves are probably 20% of the cost for the whole project, the rest of the overhead goes (rightly or wrongly) to fees and inflated wages.

georgeburdell 7y ago

Just wanted to correct myself but Baumol, although distinguished, did not win the Nobel Prize

mancerayder 7y ago

If you glanced upon my other comment in this thread, construction sticker shock got me too. My 2200 sf brownstone is now on the market because I couldn't afford renovation. Not building up or out (which I absolutely can add 1500 sf), but interior renovations would cost about 350K including permits, architect, etc. and so forth. It's simply not worth it, but it would be if I had family, friends or better, staff, to handle doing a renovation more cheaply. I feel terrible about selling but it's the best medium term business and quality of life decision. To respond to your comment, it's a mix of construction boom (NYC) min wage increase (good but should be mentioned) Trump tarrifs on steel and timber stricter oversight by current administration due to high profile accidents complicated bureaucracy