8 ms·

Do you have any evidence or are you just pulling this out of thin air? All sources I can find estimate pre construction costs between 3 and 10% depending on typ

Do you have any evidence or are you just pulling this out of thin air? All sources I can find estimate pre construction costs between 3 and 10% depending on type of infrastructure and where it is (the US according to [1] is on the lower end with 3-5%). To put this in perspective the profit margins on construction projects is 7% according to [2], which also does attribute skilled labour shortages as the main factor behind increasing construction cost. [1] https://srgexpert.com/wp-content/uploads/2023/07/The-cost-of-consenting-infrastructure-projects-in-New-Zealand-July-2021.pdf https://srgexpert.com/wp-content/uploads/2023/07/The-cost-of... [2] https://publications.turnerandtownsend.com/international-construction-market-survey-2024/global-construction-cost-performance https://publications.turnerandtownsend.com/international-con...

nickff 1y ago
Construction costs are not the only costs relating to development and redevelopment. Financing and project risk are also quite significant. Issues that push back the start of construction vastly increase financing costs, and increase construction costs. A delay in getting a permit, or a stop work order because of an environmental lawsuit runs up the interest payments on the loan used to purchase the real estate, as well as increasing the impact of inflation, delaying the revenue, and impacting trades’ schedules, all of which reduce the ROI of the project. These are just some of the issues caused by delays.
- jaggederest 1y ago
  But how often do those things actually happen, and is it a substantial enough difference to actually affect the cost of building housing at a fundamental level? Remember that houses have more than tripled in cost this century in most places. A few percent is not going to substantially affect something that has increased in price 340%.
  - _alternator_ 1y ago
    That’s only a 5% rate of return over the last 25 years, which is pretty lackluster. Won’t cover the interest rate on a loan today.
  - deleted 1y ago
    [deleted]
mogwire 1y ago
Honestly do you not think what he is saying isn't true? Do you think they count the items he mentioned in the total costs? Every major project in America has undocumented costs to go along with the miles of red tape. Just look at California's High Speed Rail. Where I live they wanted to extend the expressway and it was overwhelmingly supported. So why, 6 years later hasn't it happened? The environmentalist sued to get a survey done that took 2 years to find.... no impact. The county commissioners got voted out and now the new ones want certain promises. The company that got the original no bid contract is owned by a brother of a former commissioner so that led to law suits. People sued because they don't want the new exits to be too close to their house. Others sued because they felt the exits would targets towards higher end homes and didn't equally consider everyone. Then you have the demands that we use ONLY AMERICAN LABOUR!!! and ONLY AMERICAN MATERIALS!!! A state representative said they would boycott the expansion unless a certain percentage of his constitutions were hired to do the work regardless of their qualifications. Another said they would block it due to road noise and complaints from his constitutions unless compensation was made. It goes on and on and each one costs money they don't count in the official budget.
- slt2021 1y ago
  this stuff needs to be made illegal. If state gives approval to build stuff according to spec, then nobody should be able to block, unless there is major deviation from spec
  - wongarsu 1y ago
    In many countries that's basically how it works. You file for permission, hand in all the paper work, maybe have a hearing or a period where the public can bring concerns, and once the project is approved it can go ahead and is very difficult to stop. But doing it that way means the approval process now has to capture all the nuances, bloating the process. Big projects go a lot smoother, but small projects nobody would care to object to become more expensive It's an interesting trade off, and getting the right balance is difficult
- bryanlarsen 1y ago
  That's not red tape. That's politics. Europe is notorious for red tape, yet can do large transit projects for an order of magnitude less cost than America can. America needs more red tape. Red tape is explicit rules and procedures. In Europe you can make sure your project follows all of the explicit rules and procedures and then you can proceed. Nobody can come and try and stop you because you just say "I followed the rules", and continue. OTOH in America the rules and procedures aren't explicit. They're embodied in court precedent (like the environmentalist who sued) and in gatekeepers like the county commissioners.
EliasLittle 1y ago
I’m curious if this is an example of survivorship bias though. I don’t have any data, but I can easily imagine lots of projects not getting built at all due to zoning laws or the red tape cost being too high.
- zdragnar 1y ago
  I've worked for two companies who would have done business with governments but ended up refusing to do so because the regulatory burdens exceeded the value of the contract. The first was intel analysis software (DOD contract), and the second was in mental health (medicare and state medicaid contracts). In the first case, they even considered hiring a company who exists solely to help other companies navigate the government procurement process.
  - alexjplant 1y ago
    > The first was intel analysis software (DOD contract), and the second was in mental health (medicare and state medicaid contracts). In the first case, they even considered hiring a company who exists solely to help other companies navigate the government procurement process. Indeed. You can get a FedRAMP AWS account pretty easily but I've been told that getting a FedRAMP Moderate environment for production use is a year-long, half-million-dollar project. On top of this you have to continuously deal with the Joint Approval Board (JAB) and Third Party Assessment Organization (3PAO) for any non-trivial changes to information flow or infrastructure. As a kicker the Cost Plus Fixed Fee (CPFF) and Time & Materials (T&M) contracts that are so prevalent in the space mean that your upside is limited and you have to do stuff like get your employees' resumes approved by the government before you can bill for their time. I don't blame anybody for taking a look at this and saying "not for me".
eagleinparadise 1y ago
I work in commercial real estate. There are massive amounts of monopoly/duopoly interests in construction. Want to build affordable housing? Well if you are taking public dollars, you have to work with certain vendors which are approved and meet certain qualifications. Guess what, only 2 electrical vendors are approved! And so they work together and act as a racket to hold your project hostage unless you meet them on their terms. Actually had a call today with an exec with one of the largest construction general contractors and this topic of "we can't do XYZ project [e.g. compete in that type of project type... driving costs down through competition] because we hire ABC union labor and it would screw us and our relations with the unions we work with." Every developer has a war story of getting burned exactly in some way by being beholden to political or labor issues. This results in higher costs... which ultimately is one of the main issues among others.
- andrekandre 1y ago
  > we hire ABC union labor and it would screw us and our relations with the unions we work with would maybe an industry-wide union fix that issue?
  - Eji1700 1y ago
    Doubtful. People get starry eyed at the idea of unions and I get why. Employees need more protection. But power patterns are the same everywhere and rather than having corrupt corporate bullshit you get corrupt union bullshit. It just might benefit you if you work in the industry and might very much be at the cost of everyone else. Police unions are the infamous example alongside the teamsters , but almost everyone who’s worked with or for one has stories. I know someone who works for one and what do you know the people at the top get preferential treatment and there’s all sorts of bullshit going on. It’s still almost certainly better for him but it’s probably not ideal for the projects. Ignoring cost overruns and hand waving things that fall under “look let’s just let people be people not perfect” you still get a lot of problematic behavior. For example my friend is very good at his job because he was taught by someone very good and as a result has high standards for his work. This has gotten him targeted because he sets expectations too high which sure feels like a crock of shit. And that’s just the work related bullshit. There’s still the classics like someone higher up the chain being friends with the right people and throwing others under the bus when they shit the bed.
hollywood_court 1y ago
I work for a home builder. Our single biggest problem is finding and hiring quality contractors that have enough skilled tradesmen. There are dozens of electrical contractors in my area. But only two that perform work to our standards. There is only one HVAC company that can meet our standards. Same for all of the other skilled trades. Our framing crew is the best within a 75 mile radius. Other builders are constantly trying to poach them from us. We keep throwing money at them to prevent them from going to another builder. Non skilled labor like landscaping and pest control are a dime a dozen. I just fired our main pesticide and herbicide contractor today because they couldn’t get it together. Of course I had them replaced before I fired them but I had almost 20 options to choose from. Unfortunately I can’t say the same about all of the skilled contractors.
- msgodel 1y ago
  Well yeah you've practically done the same thing that's been done with software where juniors need education plus three years of experience for their first job so you have no juniors.
  - HeWhoLurksLate 1y ago
    I think the difference is that the pipelines for becoming a junior software developer are well-documented online, where the pipeline for being a "Junior Developer" in the trades is generally accomplished by calling and walking into places and asking for a job still.
    - Loughla 1y ago
      Not accurate, even slightly. You might get hired as a gopher and spend 5 years trying to do other work if you just blunder in without training or skills. Now, there are certificates and other training that most places expect for blue collar workers starting as apprentices. The days of walking off the street to get an apprenticeship in the trades is over. You'll get one after proving you're not on drugs, can show up, and are willing to do bullshit jobs for minimum wage for a three to five years beforehand.
aaron695 1y ago
Where I am it's $90,000 - $240,000 to subdivide land from one to two. Not including costs post-subdividing like selling the empty lot and tax's. Obviously the new buyer has building costs, but you might have to demolish the existing house to divide, good chance it was in the middle. On top of all this is the years to divide the property. On top of all this you can't then build what you want on the new property. On top of all this is the years to build on the empty lots. These all have a $$$ cost. $240,000 to quickly divide and rebuild high density, no one would care about that cost, that's ~$0. So the houses you can end up with can't be tight practical buildings, it's $$$$$ for permits and land and time. So this robot will help build mega mansions for single families.
mmmBacon 1y ago
You need look no further than the poster child of red tape delayed construction projects: California High Speed Rail. https://www.nytimes.com/2025/05/04/us/high-speed-rail-california.html https://www.nytimes.com/2025/05/04/us/high-speed-rail-califo...
appreciatorBus 1y ago
That 7% is for the projects that actually happen. This misses all the projects that don’t when start because they don’t pencil due to the phenomenon that the original poster mentioned. If you want to see it up close and personal, go to any Public Hearing in your city for any new construction of any kind, and watch 100 of your neighbours who have already benefitted from past construction lineup to oppose the prospect of any additional construction for anyone else. It’s not just that it adds a few percent costs, it’s that it drastically reduces the number of projects people even try to build.
reactordev 1y ago
In the US, it’s vastly different. Just look at Ryan Homes.
jahewson 1y ago
> promises to only work 8 hours a day, only use union labor, hire x police officers for y hours in overtime security positions a month, use xyz contractor etc. Those are not pre-construction costs are they? Massive differences in labor costs described there.
Dig1t 1y ago
I have myself physically tried to build housing and can confirm that this is definitely the case. Zoning is probably the single biggest block to affordable housing in this country. I was raised in a construction friendly household, I have the ability to build housing. I saw there was empty land in my city that could nicely fit about 5 houses on it (it was a 5-acre plot). I noticed that housing had become extremely expensive in my city and thought well heck why not try to be the change I want to see in the world and try to increase the housing supply. Problem was that my 5-acre plot was zoned as “single family” which meant that I was legally allowed to build 1 house on it and not 5. So I tried to get the plot rezoned to a classification that allowed more than one house. Had to pay an engineer over 50k to create a plan for the city that was acceptable, including environmental impact study and drainage plans. The zoning board committee said they would approve 2 houses to be built on the site but didn’t want to allow more because they were worried there wasn’t enough public transport available in the area (even though each planned house would have its own garage and road access). And literally I’m not kidding one of the members even mentioned that he was worried about this zoning change being motivated by a desire to (in his words): “enrich yourself”. There are so many bureaucratic barriers to building housing in the US. Zoning is just one layer of bureaucracy that can be tens of thousands of dollars and years of back-and-forth with the city. There are even more layers with their own set of costs. Trying to actually build something is a radicalizing experience. It really feels the system is set up to intentionally limit supply and slow people down.

nickff 1y ago

Construction costs are not the only costs relating to development and redevelopment. Financing and project risk are also quite significant. Issues that push back the start of construction vastly increase financing costs, and increase construction costs. A delay in getting a permit, or a stop work order because of an environmental lawsuit runs up the interest payments on the loan used to purchase the real estate, as well as increasing the impact of inflation, delaying the revenue, and impacting trades’ schedules, all of which reduce the ROI of the project. These are just some of the issues caused by delays.

jaggederest 1y ago
But how often do those things actually happen, and is it a substantial enough difference to actually affect the cost of building housing at a fundamental level? Remember that houses have more than tripled in cost this century in most places. A few percent is not going to substantially affect something that has increased in price 340%.
- _alternator_ 1y ago
  That’s only a 5% rate of return over the last 25 years, which is pretty lackluster. Won’t cover the interest rate on a loan today.
- deleted 1y ago
  [deleted]

mogwire 1y ago

Honestly do you not think what he is saying isn't true? Do you think they count the items he mentioned in the total costs? Every major project in America has undocumented costs to go along with the miles of red tape. Just look at California's High Speed Rail. Where I live they wanted to extend the expressway and it was overwhelmingly supported. So why, 6 years later hasn't it happened? The environmentalist sued to get a survey done that took 2 years to find.... no impact. The county commissioners got voted out and now the new ones want certain promises. The company that got the original no bid contract is owned by a brother of a former commissioner so that led to law suits. People sued because they don't want the new exits to be too close to their house. Others sued because they felt the exits would targets towards higher end homes and didn't equally consider everyone. Then you have the demands that we use ONLY AMERICAN LABOUR!!! and ONLY AMERICAN MATERIALS!!! A state representative said they would boycott the expansion unless a certain percentage of his constitutions were hired to do the work regardless of their qualifications. Another said they would block it due to road noise and complaints from his constitutions unless compensation was made. It goes on and on and each one costs money they don't count in the official budget.

slt2021 1y ago
this stuff needs to be made illegal. If state gives approval to build stuff according to spec, then nobody should be able to block, unless there is major deviation from spec
- wongarsu 1y ago
  In many countries that's basically how it works. You file for permission, hand in all the paper work, maybe have a hearing or a period where the public can bring concerns, and once the project is approved it can go ahead and is very difficult to stop. But doing it that way means the approval process now has to capture all the nuances, bloating the process. Big projects go a lot smoother, but small projects nobody would care to object to become more expensive It's an interesting trade off, and getting the right balance is difficult
bryanlarsen 1y ago
That's not red tape. That's politics. Europe is notorious for red tape, yet can do large transit projects for an order of magnitude less cost than America can. America needs more red tape. Red tape is explicit rules and procedures. In Europe you can make sure your project follows all of the explicit rules and procedures and then you can proceed. Nobody can come and try and stop you because you just say "I followed the rules", and continue. OTOH in America the rules and procedures aren't explicit. They're embodied in court precedent (like the environmentalist who sued) and in gatekeepers like the county commissioners.

EliasLittle 1y ago

I’m curious if this is an example of survivorship bias though. I don’t have any data, but I can easily imagine lots of projects not getting built at all due to zoning laws or the red tape cost being too high.

zdragnar 1y ago
I've worked for two companies who would have done business with governments but ended up refusing to do so because the regulatory burdens exceeded the value of the contract. The first was intel analysis software (DOD contract), and the second was in mental health (medicare and state medicaid contracts). In the first case, they even considered hiring a company who exists solely to help other companies navigate the government procurement process.
- alexjplant 1y ago
  > The first was intel analysis software (DOD contract), and the second was in mental health (medicare and state medicaid contracts). In the first case, they even considered hiring a company who exists solely to help other companies navigate the government procurement process. Indeed. You can get a FedRAMP AWS account pretty easily but I've been told that getting a FedRAMP Moderate environment for production use is a year-long, half-million-dollar project. On top of this you have to continuously deal with the Joint Approval Board (JAB) and Third Party Assessment Organization (3PAO) for any non-trivial changes to information flow or infrastructure. As a kicker the Cost Plus Fixed Fee (CPFF) and Time & Materials (T&M) contracts that are so prevalent in the space mean that your upside is limited and you have to do stuff like get your employees' resumes approved by the government before you can bill for their time. I don't blame anybody for taking a look at this and saying "not for me".

eagleinparadise 1y ago

I work in commercial real estate. There are massive amounts of monopoly/duopoly interests in construction. Want to build affordable housing? Well if you are taking public dollars, you have to work with certain vendors which are approved and meet certain qualifications. Guess what, only 2 electrical vendors are approved! And so they work together and act as a racket to hold your project hostage unless you meet them on their terms. Actually had a call today with an exec with one of the largest construction general contractors and this topic of "we can't do XYZ project [e.g. compete in that type of project type... driving costs down through competition] because we hire ABC union labor and it would screw us and our relations with the unions we work with." Every developer has a war story of getting burned exactly in some way by being beholden to political or labor issues. This results in higher costs... which ultimately is one of the main issues among others.

andrekandre 1y ago
> we hire ABC union labor and it would screw us and our relations with the unions we work with would maybe an industry-wide union fix that issue?
- Eji1700 1y ago
  Doubtful. People get starry eyed at the idea of unions and I get why. Employees need more protection. But power patterns are the same everywhere and rather than having corrupt corporate bullshit you get corrupt union bullshit. It just might benefit you if you work in the industry and might very much be at the cost of everyone else. Police unions are the infamous example alongside the teamsters , but almost everyone who’s worked with or for one has stories. I know someone who works for one and what do you know the people at the top get preferential treatment and there’s all sorts of bullshit going on. It’s still almost certainly better for him but it’s probably not ideal for the projects. Ignoring cost overruns and hand waving things that fall under “look let’s just let people be people not perfect” you still get a lot of problematic behavior. For example my friend is very good at his job because he was taught by someone very good and as a result has high standards for his work. This has gotten him targeted because he sets expectations too high which sure feels like a crock of shit. And that’s just the work related bullshit. There’s still the classics like someone higher up the chain being friends with the right people and throwing others under the bus when they shit the bed.

hollywood_court 1y ago

I work for a home builder. Our single biggest problem is finding and hiring quality contractors that have enough skilled tradesmen. There are dozens of electrical contractors in my area. But only two that perform work to our standards. There is only one HVAC company that can meet our standards. Same for all of the other skilled trades. Our framing crew is the best within a 75 mile radius. Other builders are constantly trying to poach them from us. We keep throwing money at them to prevent them from going to another builder. Non skilled labor like landscaping and pest control are a dime a dozen. I just fired our main pesticide and herbicide contractor today because they couldn’t get it together. Of course I had them replaced before I fired them but I had almost 20 options to choose from. Unfortunately I can’t say the same about all of the skilled contractors.

msgodel 1y ago
Well yeah you've practically done the same thing that's been done with software where juniors need education plus three years of experience for their first job so you have no juniors.
- HeWhoLurksLate 1y ago
  I think the difference is that the pipelines for becoming a junior software developer are well-documented online, where the pipeline for being a "Junior Developer" in the trades is generally accomplished by calling and walking into places and asking for a job still.
  - Loughla 1y ago
    Not accurate, even slightly. You might get hired as a gopher and spend 5 years trying to do other work if you just blunder in without training or skills. Now, there are certificates and other training that most places expect for blue collar workers starting as apprentices. The days of walking off the street to get an apprenticeship in the trades is over. You'll get one after proving you're not on drugs, can show up, and are willing to do bullshit jobs for minimum wage for a three to five years beforehand.

aaron695 1y ago

Where I am it's $90,000 - $240,000 to subdivide land from one to two. Not including costs post-subdividing like selling the empty lot and tax's. Obviously the new buyer has building costs, but you might have to demolish the existing house to divide, good chance it was in the middle. On top of all this is the years to divide the property. On top of all this you can't then build what you want on the new property. On top of all this is the years to build on the empty lots. These all have a $$$ cost. $240,000 to quickly divide and rebuild high density, no one would care about that cost, that's ~$0. So the houses you can end up with can't be tight practical buildings, it's $$$$$ for permits and land and time. So this robot will help build mega mansions for single families.

mmmBacon 1y ago

You need look no further than the poster child of red tape delayed construction projects: California High Speed Rail. https://www.nytimes.com/2025/05/04/us/high-speed-rail-california.html https://www.nytimes.com/2025/05/04/us/high-speed-rail-califo...

appreciatorBus 1y ago

That 7% is for the projects that actually happen. This misses all the projects that don’t when start because they don’t pencil due to the phenomenon that the original poster mentioned. If you want to see it up close and personal, go to any Public Hearing in your city for any new construction of any kind, and watch 100 of your neighbours who have already benefitted from past construction lineup to oppose the prospect of any additional construction for anyone else. It’s not just that it adds a few percent costs, it’s that it drastically reduces the number of projects people even try to build.

reactordev 1y ago

In the US, it’s vastly different. Just look at Ryan Homes.

jahewson 1y ago

> promises to only work 8 hours a day, only use union labor, hire x police officers for y hours in overtime security positions a month, use xyz contractor etc. Those are not pre-construction costs are they? Massive differences in labor costs described there.

Dig1t 1y ago

I have myself physically tried to build housing and can confirm that this is definitely the case. Zoning is probably the single biggest block to affordable housing in this country. I was raised in a construction friendly household, I have the ability to build housing. I saw there was empty land in my city that could nicely fit about 5 houses on it (it was a 5-acre plot). I noticed that housing had become extremely expensive in my city and thought well heck why not try to be the change I want to see in the world and try to increase the housing supply. Problem was that my 5-acre plot was zoned as “single family” which meant that I was legally allowed to build 1 house on it and not 5. So I tried to get the plot rezoned to a classification that allowed more than one house. Had to pay an engineer over 50k to create a plan for the city that was acceptable, including environmental impact study and drainage plans. The zoning board committee said they would approve 2 houses to be built on the site but didn’t want to allow more because they were worried there wasn’t enough public transport available in the area (even though each planned house would have its own garage and road access). And literally I’m not kidding one of the members even mentioned that he was worried about this zoning change being motivated by a desire to (in his words): “enrich yourself”. There are so many bureaucratic barriers to building housing in the US. Zoning is just one layer of bureaucracy that can be tens of thousands of dollars and years of back-and-forth with the city. There are even more layers with their own set of costs. Trying to actually build something is a radicalizing experience. It really feels the system is set up to intentionally limit supply and slow people down.