10 ms·

It's also surprising to me how much cost of construction has increased. I look at a new house plan, and I consider our centuries of building experience. Is this

by ehnto 3y ago

It's also surprising to me how much cost of construction has increased. I look at a new house plan, and I consider our centuries of building experience. Is this really the best value we can provide? After all the advancements in process and technology, and scale of resource farming, we now build houses from wood and plasterboard at 10x the cost of a bricks and mortar home from a few decades ago? Land is expensive for sure, but why isn't building dirt cheap? You could wax about the market, but does that matter if we as a society are this terrible at building homes for our citizens? There is a perversion of the economics, and society suffers for it, but it is still a social problem to solve. Something we could write policy to fix. But we are slaves to the dollar so we won't do anything until the market breaks entirely.

Dr_Birdbrain 3y ago
Construction is expensive because it requires labor, and labor is expensive.
- ehnto 3y ago
  I understand that, but it means that labour cost has increased faster than we have improved our process of building homes, even though the finished product uses cheaper materials and has worse outcomes. I would like to look into timeframes of home start to completion to know if we are faster at building now, my gut feeling from friends and family is that getting a home built takes as long if not longer, but I can't back that up. Regardless, still a major societal problem to fix. Are wages needing to be higher because housing is more expensive? If we had a cooler housing market, would people be happy being paid less as they could afford the same standard of living with less?
  - ip26 3y ago
    The Baumol Effect may be at play. If over time the average worker has become twice as productive (farm combines, computers, factory robots) but construction workers have only become one-and-a-half times as productive, then construction grows more expensive relative to other goods and services. It's very counter-intuitive, but in essence labor is reallocated to its most productive applications, so if a certain type of labor does not get more productive while others do, labor is moved to other applications (unless you are willing to pay more for less)
  - shiroiuma 3y ago
    I think it's because house construction techniques haven't improved. Look at cars: back in the old days, cars were hand-built, one at a time, and were horribly expensive. Then Henry Ford utilized the assembly line process and made car assembly much more efficient: instead of laborers sitting around waiting for other workers to get their part done, everything was organized to maximize labor utilization. Houses aren't like this: they're still made with the same primitive construction processes used centuries ago, by people who are all semi-independent contractors and not an organized labor force. If houses were made in factories the way cars are, you wouldn't be complaining so much about construction costs. Sears tried addressing this problem over a century ago with their famous kit homes, to an extent (by standardizing and factory-izing much of the carpentry work and then delivering the parts to the site to be assembled more quickly by local labor), but those are gone now for whatever reason and the industry returned to doing all the labor on-site.
    - petre 3y ago
      > If houses were made in factories the way cars are, you wouldn't be complaining so much about construction costs. Hopefully 3d printing could put pressure on housing labour pricing. This is probably our best hope.
    - jjav 3y ago
      > Houses aren't like this That's not surprising. Distributing the cars to the customers from that centralized assembly line is easy. Houses, not so much. Mobile homes can be built and distributed that way, but that's the hard size limit since you have to transport them via roads. With mass-produced houses they do put together cookie-cutter sections of walls and roof structures at the assembly line and truck those in to the site where they get assembled together. But you'll always face a hard size limit since no section can be larger than what can be trucked in. Even a tiny house is far larger than what a wide-load truck can take on the road.
- deleted 3y ago
  [deleted]
consp 3y ago
Usually it's labour cost but it depends wildly on location as sometimes it's materials.
innagadadavida 3y ago
You need to look up k at the labor cost and time taken to building a brick house in addition to material cost. My GC took a week to get the concrete foundation but did the sub floor and framing in a weeks time. It is incredibly fast to build and very efficient use of labor. The homeowner benefits as the labor cost is lower.
vlovich123 3y ago
Well, a brick and mortar home isn't as well insulated. You've also got major appliances that weren't common place a century ago (fridges, washer, dryer, dishwasher, etc), waaaay more lighting, HVAC systems, etc. Basically rising standards for what people want out of a home, rising land costs, + rising labor costs. Another not insignificant problem that people are aware of is that all the zoning/permitting also adds significant hidden cost to the process because builders have a lot of downtime waiting for that. There's also the hidden cost of improved safety standards & the compliance checks that come with it - 100 years ago you probably didn't have to have someone from the city come out & certify all the work was done to code. Sure the cost of the inspector is a direct cost, but the need for the inspector in the first place adds random delays for the contractor work & they then need to budget cost into their estimate because the person paying is paying a roughly fixed cost for the work to get done. What's the policy you want to write that would fix things?
- ido 3y ago
  Appliances etc are not part of the building cost (at least not here - in Germany you buy a home and then you buy appliances). The cost of the home without appliances is also much higher. And it’s not just compared to the 50s, it’s also compared to the ‘00s and ‘10s where we had more or less the same appliances we have today.
  - retube 3y ago
    I don't think the parent meant the cost of the actual appliances, but designing a house to accommodate them - the power, plumbing, ventilation, fire & smoke prevention and detection etc
  - nullindividual 3y ago
    In the US, it is expected that a home comes with a dishwasher, oven, and refrigerator. The other appliances would be post-purchase.
    - Kirby64 3y ago
      Outside of new construction where things are bundled, a fridge is not a standard thing to come with a house. Only things that are considered “built in” are legally part of a house sale. Fridges are almost never attached physically, outside of expensive built-in ones. Interestingly enough, this means that sometimes a cooktop/oven is not considered part of this if it’s movable and not bolted to the wall in some way. Sometimes they are sold with the house as part of a bundle, but that would be called a “conveyance” as it’s not considered “real” property (in the legal sense) and is usually a separate line item or form in a house sale contract.
daemonologist 3y ago
Construction labor productivity in the US has been _decreasing_ since the 60s (in contrast to pretty much every other sector)[0]; it's crazy and the subject of much conversation. Freakonomics Radio recently did an episode on the subject: https://freakonomics.com/podcast/why-is-it-so-hard-and-expensive-to-build-anything-in-america/ https://freakonomics.com/podcast/why-is-it-so-hard-and-expen... . [0] - https://bfi.uchicago.edu/insight/research-summary/the-strange-and-awful-path-of-productivity-in-the-us-construction-sector/ https://bfi.uchicago.edu/insight/research-summary/the-strang...
- AnthonyMouse 3y ago
  This isn't an unexpected result of political incentives: Property owners want housing prices to go up, so they want to limit supply. Builders want to make more money, and their two ways to do it are to build more housing or make more money per housing unit. The thing that satisfies both of them is regulations that increase the cost of construction. The builders get to put the money in their pocket (bill for more hours on the same house) while raising the price and so discouraging more housing from being built (so the landlords get to keep collecting high rents).
  - bratwurst3000 3y ago
    At the end it’s this. People who speculate have the money to pay lobbyists to encourage politicians to bring in regulation that drive prices higher.
    - rightbyte 3y ago
      The houses are made in a cheaper way though. Just look at old houses. I believe a more major cause is that people in general are not handy anymore. They don't do their cars and don't build their homes. Comparing housing prices today with the 50s is like comparing restaurant pricing to a home dinner. Regulations are probably not to blame (except zoning).
- maxerickson 3y ago
  I have not listened to the podcast. Do they talk about the value added going down because labor has disappeared into devices and systems? Like with spray foam insulation. If it is done at the right time, lower skill labor can install that better product a lot faster than carpenters can install batting.
deleted 3y ago
[deleted]
rootsudo 3y ago
1. Construction is “cheap” 2. It is semi unskilled labor. 3. There is land scarcity 4. There is great arbitrage between purchasing a lot, building and selling. If you can accomplish a few deals, wind and dine local (and I mean local local) investors and banks - money flows and you have a name for yourself.
- MattGaiser 3y ago
  At least in Canada, the cost to build a typical home is soaring. A friend in Victoria bought a year ago and wanted another for his parents. An extra 150K for an 800K (originally) home. Since 2019, construction costs are up 50%. https://thoughtleadership.rbc.com/proof-point-soaring-construction-costs-will-hamper-canadas-homebuilding-ambitions https://thoughtleadership.rbc.com/proof-point-soaring-constr...
  - richjdsmith 3y ago
    I do mostly construction financing for a living and can confirm, housing construction costs in BC are ludicrous. A major factor in the jump is the build code changes and new environmental and safety requirements. All those extra electrical circuits and that extra insulation is making houses significantly more expensive than they used to be.
jumploops 3y ago
New home construction costs are around 60% for labor + materials, with the rest associated with finishing the lot (17.8%), general overhead (5.1%), sales commission (3.6%), financing costs (1.9%), marketing costs (0.7%), and profit (10.1%).[0] IIRC construction costs are then split 40-50% labor and 50-60% material. So labor is roughly 24-30% of the overall cost. [0] https://www.nahb.org/blog/2023/03/60-percent-of-home-sales-price-goes-to-construction-costs https://www.nahb.org/blog/2023/03/60-percent-of-home-sales-p...
turtlebits 3y ago
Building is cheap. The expensive part is finishes - especially for bathrooms and kitchens. If you go with a barebones finish you could easily build for 50% of the cost, although you may find it hard to sell it in the future. The other problem is that since land is expensive, you have to build as large as possible to optimize resale value.
- Roark66 3y ago
  This, also, at least when I did my build there was a huge variability of the cost for the same thing (talking about putting up walls etc, not finishing). Some companies would quote 10x the price of others with a straight face...
coryrc 3y ago
We aren't allowed to start a home build and finish it over time. You aren't allowed to move into an "unfinished" house. You have to get a permit for every tiny thing. You don't really own your house the way you can own a car or a bicycle: the government treats you as a temporary custodian of its property and you must pay it dearly.
- Roark66 3y ago
  Haw can a government prevent you from starting a build and finishing it over time? I'm genuinely curious. Here in Poland it has been a very popular method of building a home. I myself used it and it took me 7 years from start to finish (ceramic blocks and concrete construction). Also the same about an unfinished house. How about finishing one "floor", moving in and then finishing the rest?
  - oivey 3y ago
    You can do that generally in the US. You’re not allowed to do things like move into a house without running water, toilets, etc.
    - coryrc 3y ago
      In most of the US (by population density) you are not allowed to do that type of work without a permit and permits would not be allowed to be open for 7 years. You would not be allowed to move into a house of any part of it did not meet current code, so the entire exterior would have to be complete, with insulation and insulation must be covered and every room must have so many outlets and so on that effectively almost everything except baseboards and casing needs to be complete before you could move in even to part of it. Hard to save money if you have to pay for two homes and permit renewals for years.
      - oivey 3y ago
        You would need to get a certificate of occupancy, yes. You would also need permits for some unfinished work, too. You brought up the exterior needs to be finished. Do you expect to move in with just the frame? It seems fair to me to have requirements of basic livability and safety. You could move in with things like some of the bathrooms unfinished, a kitchen unfinished if you have a kitchenette elsewhere, extra bedrooms unfinished, etc.
pandaman 3y ago
In the man*hours building is cheaper nowadays but the nominal cost of labor is much more thus the total cost is higher. The labor costs raises because supply has constricted. I figure the reason is that many choose degrees in random subject and retail work afterward instead of trades, which is understandable as trades are much harder and the degrees are subsidized.

by ehnto 3y ago

Dr_Birdbrain 3y ago

Construction is expensive because it requires labor, and labor is expensive.

ehnto 3y ago
I understand that, but it means that labour cost has increased faster than we have improved our process of building homes, even though the finished product uses cheaper materials and has worse outcomes. I would like to look into timeframes of home start to completion to know if we are faster at building now, my gut feeling from friends and family is that getting a home built takes as long if not longer, but I can't back that up. Regardless, still a major societal problem to fix. Are wages needing to be higher because housing is more expensive? If we had a cooler housing market, would people be happy being paid less as they could afford the same standard of living with less?
- ip26 3y ago
  The Baumol Effect may be at play. If over time the average worker has become twice as productive (farm combines, computers, factory robots) but construction workers have only become one-and-a-half times as productive, then construction grows more expensive relative to other goods and services. It's very counter-intuitive, but in essence labor is reallocated to its most productive applications, so if a certain type of labor does not get more productive while others do, labor is moved to other applications (unless you are willing to pay more for less)
- shiroiuma 3y ago
  I think it's because house construction techniques haven't improved. Look at cars: back in the old days, cars were hand-built, one at a time, and were horribly expensive. Then Henry Ford utilized the assembly line process and made car assembly much more efficient: instead of laborers sitting around waiting for other workers to get their part done, everything was organized to maximize labor utilization. Houses aren't like this: they're still made with the same primitive construction processes used centuries ago, by people who are all semi-independent contractors and not an organized labor force. If houses were made in factories the way cars are, you wouldn't be complaining so much about construction costs. Sears tried addressing this problem over a century ago with their famous kit homes, to an extent (by standardizing and factory-izing much of the carpentry work and then delivering the parts to the site to be assembled more quickly by local labor), but those are gone now for whatever reason and the industry returned to doing all the labor on-site.
  - petre 3y ago
    > If houses were made in factories the way cars are, you wouldn't be complaining so much about construction costs. Hopefully 3d printing could put pressure on housing labour pricing. This is probably our best hope.
  - jjav 3y ago
    > Houses aren't like this That's not surprising. Distributing the cars to the customers from that centralized assembly line is easy. Houses, not so much. Mobile homes can be built and distributed that way, but that's the hard size limit since you have to transport them via roads. With mass-produced houses they do put together cookie-cutter sections of walls and roof structures at the assembly line and truck those in to the site where they get assembled together. But you'll always face a hard size limit since no section can be larger than what can be trucked in. Even a tiny house is far larger than what a wide-load truck can take on the road.
deleted 3y ago
[deleted]

consp 3y ago

Usually it's labour cost but it depends wildly on location as sometimes it's materials.

innagadadavida 3y ago

You need to look up k at the labor cost and time taken to building a brick house in addition to material cost. My GC took a week to get the concrete foundation but did the sub floor and framing in a weeks time. It is incredibly fast to build and very efficient use of labor. The homeowner benefits as the labor cost is lower.

vlovich123 3y ago

Well, a brick and mortar home isn't as well insulated. You've also got major appliances that weren't common place a century ago (fridges, washer, dryer, dishwasher, etc), waaaay more lighting, HVAC systems, etc. Basically rising standards for what people want out of a home, rising land costs, + rising labor costs. Another not insignificant problem that people are aware of is that all the zoning/permitting also adds significant hidden cost to the process because builders have a lot of downtime waiting for that. There's also the hidden cost of improved safety standards & the compliance checks that come with it - 100 years ago you probably didn't have to have someone from the city come out & certify all the work was done to code. Sure the cost of the inspector is a direct cost, but the need for the inspector in the first place adds random delays for the contractor work & they then need to budget cost into their estimate because the person paying is paying a roughly fixed cost for the work to get done. What's the policy you want to write that would fix things?

ido 3y ago
Appliances etc are not part of the building cost (at least not here - in Germany you buy a home and then you buy appliances). The cost of the home without appliances is also much higher. And it’s not just compared to the 50s, it’s also compared to the ‘00s and ‘10s where we had more or less the same appliances we have today.
- retube 3y ago
  I don't think the parent meant the cost of the actual appliances, but designing a house to accommodate them - the power, plumbing, ventilation, fire & smoke prevention and detection etc
- nullindividual 3y ago
  In the US, it is expected that a home comes with a dishwasher, oven, and refrigerator. The other appliances would be post-purchase.
  - Kirby64 3y ago
    Outside of new construction where things are bundled, a fridge is not a standard thing to come with a house. Only things that are considered “built in” are legally part of a house sale. Fridges are almost never attached physically, outside of expensive built-in ones. Interestingly enough, this means that sometimes a cooktop/oven is not considered part of this if it’s movable and not bolted to the wall in some way. Sometimes they are sold with the house as part of a bundle, but that would be called a “conveyance” as it’s not considered “real” property (in the legal sense) and is usually a separate line item or form in a house sale contract.

daemonologist 3y ago

Construction labor productivity in the US has been _decreasing_ since the 60s (in contrast to pretty much every other sector)[0]; it's crazy and the subject of much conversation. Freakonomics Radio recently did an episode on the subject: https://freakonomics.com/podcast/why-is-it-so-hard-and-expensive-to-build-anything-in-america/ https://freakonomics.com/podcast/why-is-it-so-hard-and-expen... . [0] - https://bfi.uchicago.edu/insight/research-summary/the-strange-and-awful-path-of-productivity-in-the-us-construction-sector/ https://bfi.uchicago.edu/insight/research-summary/the-strang...

AnthonyMouse 3y ago
This isn't an unexpected result of political incentives: Property owners want housing prices to go up, so they want to limit supply. Builders want to make more money, and their two ways to do it are to build more housing or make more money per housing unit. The thing that satisfies both of them is regulations that increase the cost of construction. The builders get to put the money in their pocket (bill for more hours on the same house) while raising the price and so discouraging more housing from being built (so the landlords get to keep collecting high rents).
- bratwurst3000 3y ago
  At the end it’s this. People who speculate have the money to pay lobbyists to encourage politicians to bring in regulation that drive prices higher.
  - rightbyte 3y ago
    The houses are made in a cheaper way though. Just look at old houses. I believe a more major cause is that people in general are not handy anymore. They don't do their cars and don't build their homes. Comparing housing prices today with the 50s is like comparing restaurant pricing to a home dinner. Regulations are probably not to blame (except zoning).
maxerickson 3y ago
I have not listened to the podcast. Do they talk about the value added going down because labor has disappeared into devices and systems? Like with spray foam insulation. If it is done at the right time, lower skill labor can install that better product a lot faster than carpenters can install batting.

deleted 3y ago

[deleted]

rootsudo 3y ago

1. Construction is “cheap” 2. It is semi unskilled labor. 3. There is land scarcity 4. There is great arbitrage between purchasing a lot, building and selling. If you can accomplish a few deals, wind and dine local (and I mean local local) investors and banks - money flows and you have a name for yourself.

MattGaiser 3y ago
At least in Canada, the cost to build a typical home is soaring. A friend in Victoria bought a year ago and wanted another for his parents. An extra 150K for an 800K (originally) home. Since 2019, construction costs are up 50%. https://thoughtleadership.rbc.com/proof-point-soaring-construction-costs-will-hamper-canadas-homebuilding-ambitions https://thoughtleadership.rbc.com/proof-point-soaring-constr...
- richjdsmith 3y ago
  I do mostly construction financing for a living and can confirm, housing construction costs in BC are ludicrous. A major factor in the jump is the build code changes and new environmental and safety requirements. All those extra electrical circuits and that extra insulation is making houses significantly more expensive than they used to be.

jumploops 3y ago

New home construction costs are around 60% for labor + materials, with the rest associated with finishing the lot (17.8%), general overhead (5.1%), sales commission (3.6%), financing costs (1.9%), marketing costs (0.7%), and profit (10.1%).[0] IIRC construction costs are then split 40-50% labor and 50-60% material. So labor is roughly 24-30% of the overall cost. [0] https://www.nahb.org/blog/2023/03/60-percent-of-home-sales-price-goes-to-construction-costs https://www.nahb.org/blog/2023/03/60-percent-of-home-sales-p...

turtlebits 3y ago

Building is cheap. The expensive part is finishes - especially for bathrooms and kitchens. If you go with a barebones finish you could easily build for 50% of the cost, although you may find it hard to sell it in the future. The other problem is that since land is expensive, you have to build as large as possible to optimize resale value.

Roark66 3y ago
This, also, at least when I did my build there was a huge variability of the cost for the same thing (talking about putting up walls etc, not finishing). Some companies would quote 10x the price of others with a straight face...

coryrc 3y ago

We aren't allowed to start a home build and finish it over time. You aren't allowed to move into an "unfinished" house. You have to get a permit for every tiny thing. You don't really own your house the way you can own a car or a bicycle: the government treats you as a temporary custodian of its property and you must pay it dearly.

Roark66 3y ago
Haw can a government prevent you from starting a build and finishing it over time? I'm genuinely curious. Here in Poland it has been a very popular method of building a home. I myself used it and it took me 7 years from start to finish (ceramic blocks and concrete construction). Also the same about an unfinished house. How about finishing one "floor", moving in and then finishing the rest?
- oivey 3y ago
  You can do that generally in the US. You’re not allowed to do things like move into a house without running water, toilets, etc.
  - coryrc 3y ago
    In most of the US (by population density) you are not allowed to do that type of work without a permit and permits would not be allowed to be open for 7 years. You would not be allowed to move into a house of any part of it did not meet current code, so the entire exterior would have to be complete, with insulation and insulation must be covered and every room must have so many outlets and so on that effectively almost everything except baseboards and casing needs to be complete before you could move in even to part of it. Hard to save money if you have to pay for two homes and permit renewals for years.
    - oivey 3y ago
      You would need to get a certificate of occupancy, yes. You would also need permits for some unfinished work, too. You brought up the exterior needs to be finished. Do you expect to move in with just the frame? It seems fair to me to have requirements of basic livability and safety. You could move in with things like some of the bathrooms unfinished, a kitchen unfinished if you have a kitchenette elsewhere, extra bedrooms unfinished, etc.

pandaman 3y ago

In the man*hours building is cheaper nowadays but the nominal cost of labor is much more thus the total cost is higher. The labor costs raises because supply has constricted. I figure the reason is that many choose degrees in random subject and retail work afterward instead of trades, which is understandable as trades are much harder and the degrees are subsidized.