15 ms·
Why Are Canadian Construction Costs So High? (2018)
- dang 7y agoRecent and related: https://news.ycombinator.com/item?id=21589204 https://news.ycombinator.com/item?id=21589204
- jondishotsky 7y agoThis is why (for U.S. at least) https://www.facebook.com/watch/?v=784223122033567 https://www.facebook.com/watch/?v=784223122033567
- markus_zhang 7y agoIf you want some fun, read the investigation reports about the corruption surrounding construction business and politicians in Montreal, QC. Not sure which year it was, could be 2015.
- thbr99 7y agoMontreal has a never ending construction. A colleague of mine says the mafia controls the construction business in Montreal. Seems like corruption is a tad high in Québec than Rest of Canada
- sysbin 7y agoThis may be indeed true. Some say the construction is the fault of the city being old but I’ve seen the same street being worked on throughout the summer for two consecutive years. There is construction everywhere as well compared to other cities I’ve visited.
- charrondev 7y agoMontrealer here. Constant construction of everything is the norm. The roadways are a nightmare of poor construction and tons of detours. The thing that bugs me the most is that they can’t seem to get the hang of painting lines properly on the roads. Lines painted last 2 months at most, then are gone. I was driving this weekend on 3-4 land highways, that curve around corners and have no lines painted. Luckily our public transit is decent so I don’t normally have to drive.
- kps 7y ago> Lines painted last 2 months at most, then are gone. This is due to federal environmental standards; the old oil paints that actually worked are banned.
- charrondev 7y agoI actually wasn’t aware of this. I was wondering why there wasn’t a better alternative, but it seems there are environmentally friendly paints more durable than what is in use in Montreal. It’s just more expensive. I don’t really understand how that can be the blocker in a city with strong economic activity, high income taxes, high fuel taxes, and high property taxes (>4% in our downtown core on non-residential properties).
- zentiggr 7y agoOf course not. The company uses the substandard paint to ensure that there's a future need thus future income. The fac t that the shorter lasting paint is cheaper just gives the company a leverage point in the bidding. Google 'mafia', 'phoebus cartel', and many other examples of skimming, profiteering, and collusion to fix prices.
- Nasrudith 7y agoI wonder why they don't shift to using non-paint markers like a plaster or something at that point. The advantage of paint seems throughly lost overall.
- MisterTea 7y agoIn New York City we have four seasons: almost winter, winter, still winter, and construction. Supposedly we're in autumn but the reality is it's the tail end of construction. We'll have a few months of crummy weather and then back to beautiful sunny construction.
- kitteh 7y agoAutoroute 20 has been under construction/repair since the 90s. Specifically the section between lachine towards decarie.
- markus_zhang 7y agoYeah the construction is pretty much in the families. The report explicitly shows how they deter others from bidding for contracts. First an engineer from the government who oversees the project will make a phone call to tell you that the contract has been already given to someone else so please withdraw your body which of course has a lower price. If you don't then some guys will throw garbage at your door. I'm not sure what's the next step.
- unreal37 7y agoDisappointingly, the answer from the article is "I don't know." This article could be condensed to a table.
- bluGill 7y agoStill raising the issue is important. I don't know, but that I know I don't know makes me a better, more informed voter than before when I didn't even know that it costs more to build here than other countries.
- awesomekid1234 7y agoUnlike most articles with a question. This person is actually asking a question.
- thisguyuknow 7y agoThe reason is that Canadians are spoiled, entitled, house-horny, financially illiterate morons who willingly enslave themselves to the banks that run the country. You're just not allowed to say that in print.
- dang 7y agoPlease don't post nationalistic flamebait here. We ban accounts that do that, regardless of which country they have an issue with. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- thisguyuknow 7y agoI knew I couldn't say it in print, thanks for confirming. Am Canadian, btw.
- dang 7y agoBetween this comment, your GP comment, and these two, it seems clear that you don't want to use HN as intended: https://news.ycombinator.com/item?id=21631138 https://news.ycombinator.com/item?id=21631138 https://news.ycombinator.com/item?id=21408887 https://news.ycombinator.com/item?id=21408887 I've banned the account accordingly. If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're at https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html if you want to review them.
- sytelus 7y agoThis is the same case in US. The cost of construction has far outpaced inflation by order of a couple of magnitudes while technology keeps getting cheaper and labor prices are still stagnant for decades. Amazingly, it's exactly reverse case in China where construction prices have fell through the roof.
- salvad0r 7y ago"fell through the roof"; I'm not sure whether that's high and went low or low and went high. From the context I'm assuming that means its gotten very cheap?
- frosted-flakes 7y agoIt means that construction prices used to be through the roof (very high). Now they've fallen back down through the roof to somewhere on the main floor, but not in the basement.
- NTDF9 7y agoWhen you really think about it deeply, better production should depress prices because of econ 101. However, the FED induced inflation in assets has made everything out of control.
- eru 7y ago> [...] and labor prices are still stagnant for decades. Labour's share of GDP has roughly stayed constant. GDP per capita has increased, both real and nominal.
- deleted 7y ago[deleted]
- Retric 7y agoIt’s fallen significantly: https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-... However, in the late 20th century—after many decades of relative stability—the labor share began to decline in the United States and many other economically advanced nations, and in the early 21st century it fell to unprecedented lows. PS: In terms of overall GDP a numbers (edit: not real data) 21% vs 17% may seem more or less stable but that’s a 20% drop or roughly all inflation adjusted per capita GDP growth over the last 20 years.
- larnmar 7y agoIn any market, there’ll be a limited number of contractors capable of doing a really big job like building a railway line (or constructing an aircraft carrier, or a fighter jet, or whatever). These contractors have a game theoretic choice to make: either they work hard to compete on price, or they inflate their budgets and count on their competitors to do so too, safe in the knowledge that there’s enoigh projects going around that everyone can have a nice fat slice of pie. Theoretically a new competitor could enter the market and eat everyone’s lunch, but... all the institutional knowledge on how to build a train line or aircraft carrier belongs to the big players and it’s too hard to enter. The difference in construction costs between various different markets seems to just be different game theoretic equilibria at work.
- eru 7y agoCareful design of regulation can lower the barriers to entry, and thus make colluding harder. You are right about the scale of the big players making it hard for upstarts to compete. One of the most straightforward ways to still get competition, is to make it possible (or even easy!) for foreign companies to bid.
- LegitShady 7y agothere are lots of companies that know how to build rail, and most use subs that can be hired by anyone rather than owning all that labour and risk themselves. Comparing rail lines to aircraft carriers is ridiculous and discredits your entire post. If everyone inflates their price the one who inflates it the least wins. That's not how the industry actually works. its far more common to bid low and try to make up the profit in claims. You know nothing about this industry and its obvious from your writing.
- moltar 7y agoAs I can see from living in Canada and travelling the world there can be several reasons: - corruption, especially in QC - over-the-top safety requirements, regardless of project size. E.g. in Toronto every road work sight has a police officer present who’s just standing there bored out of their mind. In Montreal it’d be two persons on each side holding a flag - a job in Europe replaced by a temporary semaphore. - lack of experience and expertise. Canada is a relatively young country with very few major infra projects under its belt. - lack of funding due to low density. You just can’t build ambitious infra projects for such sprawling city design. Every city, except Montreal to some degree, suffers from urban sprawl and low density. - lack of care by citizens. Most Canadians aren’t well travelled outside of Americas. They don’t know what good cities look and feel like. Even when they go on vacations it’s generally cheaper destinations in southern parts like Cuba, Mexico and Dominicans.
- totony 7y agoAgreed with the corruption and over-legislation, which in my experience coincide. Bidding on governement projects in QC is very painful to do and corruption is sky high so competition cant set in EDIT to add: example of QC bidding: most companies underbid the construction work to later postpone the deadline and request more money than originally bargained, and there doesnt seem to be any (enforced) legislation to consider that
- chopin 7y agoSounds like Germany...
- throw_m239339 7y agoSounds like any government procurement in France… especially construction works that is budgeted for 5 years and strangely ends up lasting 10,15 years…
- Symmetry 7y agoExtremely strict regulations can function as an asshole filter[1] where only people who intend to bypass the rules somehow get involved in bidding. [1]https://siderea.livejournal.com/1230660.html https://siderea.livejournal.com/1230660.html
- georgeburdell 7y agoStill lower than the U.S. I went to a couple of cities in Canada in the past year and there's construction everywhere, from skyscrapers to roads. My corner of the Bay Area has a couple of 5-story apartment complexes going up.
- adventured 7y ago> Still lower than the U.S. I went to a couple of cities in Canada in the past year and there's construction everywhere, from skyscrapers to roads NYC has had skyscrapers going up left and right the past decade: Central Park, 111 West 57, One Vanderbilt, 432 Park, 30 Hudson, 3 World Trade, 53W53, 35 Hudson, One57, 1 Manhattan, 220 Central Park South, 15 Hudson, 125 Greewich, 425 Park, etc. All of those are taller or nearly as tall as the tallest buildings in all of Canada. In one US city. What does that prove? https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_Canada https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_C... https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_New_York_City https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_N...
- altShiftDev 7y agoYou name dropping one of the largest and most urbanized cities in the world proves what?
- corporate_shi11 7y agoThe comment he was responding to is anecdotal. They were responding anecdotally in kind.
- smabie 7y agoNYC doesn’t even make it in the top 10 biggest cities in the world. In fact NYC comes just behind Chengdu in 38th place. And in terms of density, NYC isn’t even in the top 50.
- magduf 7y ago
- LegitShady 7y agoDesign, land, environmental permitting and remediation, noise and dust remediation, aboriginal/metis consultation, utility components on LRT/subway projects can span years and costs millions of dollars per utility and a given kilometer may have 100. and then you have to actually build whatever it is. Just doesn't seem like an analysis with enough detail.
- blaser-waffle 7y agoYeah, surprised no one mentioned environmental permits and aboriginal consults -- those were the two items that were/are holding up the big pipeline projects in Canada.
- LegitShady 7y agoI do t think the person who wrote the article or the average hm user know much about environmental permitting or indigenous consultation. Or building much either.
- mynegation 7y agoIn addition to the others reasons meantioned by others: NIMBYism, political projects, and suboptimal planning. Toronto has a whole subway line going through low density neighborhoods and it’s not like any densification plans are happening there soon. On the other hand Liberty Village was given to hi-rise developers because it was a wedge of industrial land squished between railway and a highway. Now it is a bustling neighborhood but pretty problematic to get in it out with the overloaded streetcar line bearing the brunt. It is not only about upfront costs, ongoing maintenance is important as well, and one needs certain level of density for the infrastructure to be a bit closer to self-sustainable
- acd 7y agoHere is a theory. Builders chargé maximum what they can. Home prizes has increased rapidly in Canada, some say possibly to a bubble level. Banks create new debt out of nothing through fractional reserve banking. Central banks support negative interest rates. A conseque of low interest rates is that many can afford to borrow to high real estate prices. The high real estate prices drive up building costs, since builders can charge higher prices. Ie want a piece of the cake.
- anovikov 7y agoWell, that could drive up the cost of land, sure. But how can it drive up construction costs too much? Competition must fill that gap quickly.
- cylinder 7y agoBuilders are actually in an extremely competitive marketplace, with a race to the bottom culture on costs. They also bear a huge amount of risk, usually committing to fixed fee contracts. The profits go to those who hold the money / land - the developer.
- xyzzy_plugh 7y agoExcept when the developer is also the builder, which is becoming more and more commonplace. And fixed fee contracts? What planet? I don't know of anyone who has built anything in the last decade or two that hasn't gone over budget. If you're buying materials through the developer they're taking a margin.
- bluGill 7y agoDevelopers are taking their margin on materials, but houses are easy to bid to an exact price. Many developers are building houses before there is a buyer. As soon as the hole is in the ground it goes to the real estate market, at any time you can buy it, and they will make changes per request - they assume you will choose paint color (any color is the same price), if you want to add a fireplace that will cost you. Often these houses are finished without before they are bought and go on the market at market price. Of course the point is no builder would take the above risk unless he could estimate his costs with enough accuracy to ensure that he makes a profit on the deal. Edit: Note that builders build enough houses to have processes and procedures to estimate them. If you build anything to a standard such that it is like everything else that is vastly cheaper than if you build something unique. There is a lot of ways to make a house custom within the standard, but if you want a round tower that will cost because builders don't know how to make round (but settle for octagon and suddenly you are back to standard)
- djmips 7y agoI'm going to guess that Canadian construction is inefficient because they just take their time. It feels like there isn't the drive to get things done quickly and consequently cheaper. The work is good but just takes longer.
- rb808 7y agoI think the main issue is why American costs are so low. It still amazes me how you can buy a big beautiful house in the sun belt for a few hundred thousand. If Canada is more expensive its probably sensible. I realize I'm being downvoted but you have to realize that most of the developed world has a great standard of living but a new build 4 bedroom house on a 1/4 acre of land is completely unaffordable for most people.
- hourislate 7y agoIn Canada general construction costs like home renovation/building are not that high. As soon as the government gets involved in a public construction/renovation project costs sky rocket. I can only attribute it to bureaucracy, corruption, and indifference since the tax payers pockets are endless. Contractors all have to be Unionized (good/bad?), it seems there is no urgency to do anything quickly or in a cost effective manner. When you look at the renovations on the subway taking place at Royal York Station, it's comical. The project shouldn't take more than 3-6 months but it seems they want to drag out the job so they can retire after it's complete in 20-30 years. Runnymede Station took about 5 years and I'm not sure they're finished. Something like pulling up 200 sq/ft of tile can take a 1-2 months of 2-3 guys working 8 hours a day. This is what happens when there is corruption with no oversight and the source of payment is the tax payers pocket.
- bumby 7y agoAlternate take: Large civil projects are more complex than home renovation projects and are thus less likely to be accurately assessed by our simple planning heuristics. (see "the planning fallacy"). Each gap in the actual vs. planned outcome requires change-orders that slow down schedules and cost more money. http://freakonomics.com/podcast/project-management/ http://freakonomics.com/podcast/project-management/
- MisterTea 7y agoIt's what happens when there are many contractors involved, each intertwined in a complex relationship, each needing to schedule around each other and each with half a dozen sub contractors under them with the same complex requirements. So 200 square ft of tile takes three months because the tilers are hired by the tiling company who is hired by the contractor hired to finish the walls who was hired by the main contractor who was hired by the construction company. Along this long chain someone schedules tiling on the same day the electricians are wiring up the lights. They reschedule and crew arrives only to find the materials are missing, no one knows who ordered them or who to talk to. Once they sort that out and get the materials delivered the project is put on hold because someone stubbed their toe on a box of tiles and a stop work order is issued. A safety inspector arrives with the cast of CSI miami to figure out who to blame. Meanwhile, while everyone is busy blaming each other, the tiling contractor steals the materials for another job and everything goes right back to square one. Now multiply this story by the number of individual items to be coordinated... All this while, the crew has to be paid for their time even though they couldn't work. Absolute madness.
- nasalgoat 7y agoI'm currently in the process of building a laneway suite building on my existing Toronto lot, which is typical of the city - 25 feet wide by 160 feet long. There's a driveway and a laneway at the back. I spent two years and $25,000 to just get to the point of having building permits. The most egregious part was that I had to pay the city around $3,000 to cut down a tree on my own property, because due to a city bylaw, I did not own the tree, the city did, and I had to pay them for their "loss". The bureaucratic nonsense and nickel and a dimeing people to death with multiple fees and taxes, added with the premium cost of materials, makes building far more expensive than it needs to be.
- aussiegreenie 7y agoFirstly, the cost of construction EVERYWHERE is going up. In America, every major construction is TWICE the cost per mile than it is in Europe. Australia is 50% higher again. eg Sydney purchased surplus trams from Spain. To create a tramline from Randwick to the city (25min bus trip) has already cost USD 2,100 Million (AUD 3,100 Million) and is years late. Spain did the whole line for USD 115 million.
- RowanH 7y agoWait till you cross the ditch to New Zealand, our materials costs are through the roof...