[lunaru]

Just offering up a food for thought, as I recently did some research in the cost of construction (for the Bay Area, California): I see a lot of comments denouncing NIMBY-ism for the lack of construction or other reasons to answer the question of "Why not just build more housing?" but I suspect this, as true as it is, is the most popular talking point because it's politically a juicy topic to talk about. However, at least in HCOL places like the Bay Area, there is also another very basic economic reason: Construction is simply too expensive.

The cost per square foot of standard construction (wood frame, slab foundation, nothing fancy in terms of doors and windows) is about $450-$550 per square foot. This sets a real hard lower bound on the price of net-new housing. If you're talking larger buildings (more concrete, steel frame, drilled pier foundations in consideration of soil conditions and structural weight) the costs start sky rocketing to unbelievable numbers. Sure we can point at bureaucracy and the permitting process, but when we're talking about large scale construction of SFH and multi-unit residential buildings, the permitting and legal barriers are a small slice of the overall cost pie.

In the Bay Area, and I suspect soon in various geo areas, labor is simply too expensive. (And labor is an input to a lot of costs along the supply chain as well, like wood, concrete, steel, and glass.) In a culture where we all strive to be white collar workers abstracted away from the real physical reality that our world still runs on physical objects, most importantly housing, perhaps "learn to code" is not the universal answer and there needs to be just as much "learn to plumb" or "learn to concrete". And I know this last point is politically touchy, but big buildings housing hundreds and thousands of residents simply don't get built by an all-middle-class society. You need cheap labor (or better yet cheap automation?) so that this housing problem is tractable at an economic level.

[fbdab103]

From 2014-2018, Santa Monica issued permits allowing 12 multifamily units[0]. Since the builder's remedy is forcing the city's hand, applications for over 4000 new units have been submitted.

Construction costs are a thing, but the blocking of new construction is absolutely real.

[0]: https://smdp.com/2022/11/07/santa-monicas-builders-remedy-ex...

[lunaru]

I think everyone understands this barrier already, it's well discussed and my point was not to diminish the well-known challenges to the problem. The economic reasons I mentioned are another (much less discussed) angle that most people just aren't even aware of and is absolutely a barrier to large scale housing development.

[twblalock]

Construction costs are a much bigger deal than NIMBYism or anything else anyone has mentioned so far.

We had easily affordable housing in California, including in Silicon Valley, until probably the 1990s. NIMBYism and property taxes (including Prop 13) have existed since the 1970s at least, zoning hasn't changed much since then, and geographical constraints are eternal. We also didn't have a Georgist land-value tax or any other nonsense; housing was affordable without all that stuff.

So why was housing cheaper then?

Well, consider the case of a friend of mine who recently built an ADU and was told it had to have solar panels because of a new state law. At least $25-30k is added to the cost of any residential construction just because of that one thing. That is only one of the many things that new buildings need that were not required in the past.

When you try to provide housing to other people the government makes you suffer for it.

We are regulating ourselves into this corner. Quite a lot of the building codes have nothing to do with safety or habitability.

[mixmastamyk]

Many moved out to the high desert by the mid 80s, because SoCal was already too expensive for working class folks.

Parking requirements are a big cost I've read.

[twblalock]

Parking requirements apply to multi-unit housing.

There are a ton of other silly requirements that get piled on top of each other and burden all new construction.

For example, if your house in California needs a new electrical panel to charge an electric car? $700+ permit for the panel, plus parts and labor. Adds up to several thousand.

There are definitely building codes that should exist -- earthquake safety, fire safety, etc. But quite a lot of them are just the state interfering in things it has no business dealing with, like the solar panel requirement that lets politicians feel better about themselves while making homes more expensive.

[lnsru]

Building cost of 5000€ for a square meter just blows my mind. Especially for wood frame building. What’s so special about it? Maybe you have a source how these costs divide into materials/salaries/permits/etc? I would say prefab panels is a solution. That’s how houses are built in cheap labor countries in Europe and then moved on the trucks to expensive Scandinavian countries. Assembly takes couple weeks.

[lunaru]

> What’s so special about it?

Nothing. That's exactly what I mean when I say the cost is labor. The quoted price $450-$550 per square foot does not include land, permitting, soft costs, etc. That's just labor and materials.

[lnsru]

Thanks. Looks like the building costs are really out of control.

[otterley]

Prefab and manufactured housing exists in the USA and it's not significantly less expensive than on-site construction.

[urthor]

$450 to $550 seems like the price for detached homes.

For a 2BR apartment at 850 sqft, that's $425,000. In the Bay Area I presume,

Anecdotally, from memory, the price of high quality apartment, globally, varies around the $125,000 to $200,000 USD mark. Depending as you say, on materials. The interesting fact I was told is this price scales linearly with high rise, for quite a long time.

85 stories can and will average out to the magic $200,000.

Even presumably adding a Bay Area markup, a $300,000 cost of construction is eminently affordable.

For 2BR apartments for childless couples, $300,000 is a excellent.

To me, the obstacle is purely zoning and supply side constraints for large high rises. Singapore style high rises given proper zoning would provide umpteenth $250,000 two bedroom apartments, on Singapore sized parcels of land.

Providing sufficient land, construction of high rise units would grossly improve the housing affordability situation.

It's purely a zoning/public services provisioning issue.

[lunaru]

To clarify, this math doesn't work because the price I mentioned is just labor and materials. Land is not included nor are soft costs like architects.

That 2BR apartment for $300,000 can't happen because the land and soft costs, as well as considerations like developer margin are additive to that.

[urthor]

True. Ultimately we can't know until we quantify the costs for high-rise apartments.

All I'll say is that, yes labor's an input. You have to quantify that cost per square foot.

But, given the number of property developments that have been attempted in the Bay Area and blocked, my (guess) is the economics stack up. Otherwise, developers wouldn't have attempted it.

[random314]

You might be mixing cause and effect. Expensive housing drives out blue collar labor. The remaining workers are expensive and push up construction cost.

I was not able to convince a plumber to visit my house in the bay area last year, even after offering several hundred dollars.

[concordDance]

Why is construction so much more expensive than 70 years ago?