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How much do construction costs matter to the price of housing?

constructionphysics.substack.com

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Re: How much do construction costs matter to the price of housing?

#11

Post by buscoquadnary »

actuator wrote: post #7
arcticbull wrote: post #3

It's a question of supply and demand. In areas with high supply or low demand, the price of housing approaches the cost of construction. In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.

London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.

From everything I've heard London has some of most restrictive, bureaucracy laden, red tape filled city building processes out there. I've heard that all of England has "councils" at the local level that basically operate as HOAs with the full force of the law. I don't know that I'd pick anywhere in the UK as a shining example of ease of building.

Re: How much do construction costs matter to the price of housing?

#12

Post by timerol »

arcticbull wrote: post #3

It's a question of supply and demand. In areas with high supply or low demand, the price of housing approaches the cost of construction. In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.

In places with very high supply or very low demand, the price of housing can be far below the cost of construction, which comes with its own issues

Re: How much do construction costs matter to the price of housing?

#13

Post by giantg2 »

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

Not sure why you are being down voted. This seems like a legitimate question that I would like to see the opposite side of.

For example, if I was permanently remote, I would like to move to a cheaper area. I can't because my wife doesn't want to leave the current county (because "It's the best county in the world"). Although I'm also not in a heavily populated area, more so on the edge of being rural.

Re: How much do construction costs matter to the price of housing?

#14

Post by jefftk »

actuator wrote: post #7
arcticbull wrote: post #3

It's a question of supply and demand. In areas with high supply or low demand, the price of housing approaches the cost of construction. In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.

London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.

In London, if someone purchased all the properties on a block could they level the block and build something 15 stories tall? No: it has lots of regulations that restrict construction.

(Not saying that allowing this is necessarily good or bad, but it's definitely something London has)

Re: How much do construction costs matter to the price of housing?

#15

Post by tristor »

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

No.

I'd argue that choosing to live in any area for any reason does not in any way make you morally responsible for the externalities of that choice. What you do while living there you are morally responsible for, but merely the choice to move does not bear any responsibility.

So, yes, NIMBYs bear some moral responsibility for the housing situation, but simply relocating does not create responsibility or moral hazard.

Re: How much do construction costs matter to the price of housing?

#16

Post by twblalock »

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

No, because you as an individual are not morally obligated to provide housing to society.

If such an obligation exists, it's the government's obligation, not an individual one.

The best thing an individual can do to provide housing to other people (aside from build it) is to support the loosening of regulations which make it difficult to build new housing. Those regulations tend to be worst in the major employment centers.

Re: How much do construction costs matter to the price of housing?

#17

Post by actuator »

buscoquadnary wrote: post #11
actuator wrote: post #7

Earlier quoted context omitted.

London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.

From everything I've heard London has some of most restrictive, bureaucracy laden, red tape filled city building processes out there. I've heard that all of England has "councils" at the local level that basically operate as HOAs with the full force of the law. I don't know that I'd pick anywhere in the UK as a shining example of ease of building.

But then councils can compete with each other, the ones outside even do so. There are tons of high rises coming far from Central London but still reasonable commute to center, but that doesn't necessarily reduce the price of properties inside.

Area has a lot to do with prices and unless these outer areas become self sufficient so much that Central London or rich boroughs lose lustre, the inner areas will command a high price.

Re: How much do construction costs matter to the price of housing?

#18

Post by Erik816 »

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

Nope. If you can afford to live on the waterfront and enjoy the view, but never use your boat, are you morally obligated to sell your house to someone who will be out there fishing or skiing every day?

Land is bought and sold on an open market. Everyone can decide for themselves what is most important to them and what they can afford. One factor behind living in a major city is certainly easy access to in-person employment. But there are a ton of other factors (restaurants, culture, sporting events, community, etc.). If you are willing to pay a lot of money to be close to those things even if you don't use all of them, that's your choice and it's perfectly ethical.

Re: How much do construction costs matter to the price of housing?

#19

Post by com2kid »

giantg2 wrote: post #8

It's all about consumer preference. It seems this article largely misses this. People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. Policies can make this worse, but the problem will still manifest itself to some degree. (Potentially as affluent people, especially in suburban areas, buying up more land to create setbacks, or simply buying because…

> For a personal example, my wife complains that an 1800 sqft house is too small.

A modern blueprint 1800sqft house, yeah, for sure.

But somehow a 1960s split level at 1800sqft is spacious.

We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small.

The recent trend towards 4 story narrow houses doesn't help. A literal 1/3rd of the house is taken up by stairs!

I'm in a 2300sqft house that has 4 bedrooms and 3 bathrooms and an office. There is still a bit of wasted space, but not much!

Meanwhile, I've seen new houses, 3000sqft, 3 bedrooms, 4 bathrooms, 1.5 million.

"Oh you want 4 bedrooms? Those start at 1.7 million" <-- Said by an actual house developer

Re: How much do construction costs matter to the price of housing?

#20

Post by VikingCoder »

Going off on a tangent here:

There's a sci-fi novel I want to write some time...

You know how some countries have mandatory military service?

Well, what if all of the "Essential" jobs, all had mandatory service?

I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-bodied person in a country would need to do each job, in order to satisfy all of the needs of everyone in that society (able-bodied, or not.)

And then build up a story around some people who are finishing their Essential Jobs, and are deciding whether to Retire into living off the dole, or whether to transition into some Skilled labor to live in more luxury.

And then there's the fact that automation is making it so that less and less actual manual effort is required for the Essential jobs. So, does the society start categorizing new jobs as Essential, or do people end up with more discretionary time?

I feel like this would have made a pretty okay Star Trek culture to encounter...

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