Building a home increases the costs of buying land, the process of obtaining permits and multiple inspections. The farther your plan moves away from a standard model, the more expensive it will be. Building lots in urban areas can be prohibitively expensive. The houses are large, bulky and built with many different parts.
In addition, a house contains a wide variety of materials and equipment. Housing construction encompasses practically the entire field of raw material production, while nearly 70 different industries process materials, such as wood, cement, brick, plaster, etc. In normal times, the builder has a wide variety of materials. You can get window frames made of wood, steel, bronze, or aluminum; wood, clay, stone, rubber, cork or fiberboard products; asbestos tiles or tiles, cement, bituminous materials, wood, clay, or stone. Sometimes a piece is made of many materials.
Therefore, asphalt roof tiles can contain felt, asphalt and pieces of stone; windows can have wooden frames, glass panels, steel clips for glass, putty, nails and screws, aluminum strainers, bronze hardware, iron weights, cotton cords, glue, and oil and lead paint. Construction prices increased like most items during the pandemic and for similar reasons. Delayed packages, lack of workers and inflation, in general, are to blame for the high prices that remain today. While building a home is expensive and the average cost has been increasing, the most important decision is who you work with to achieve your goals. Another way to look at it is that in the areas where we need housing the most, most housing costs are due to regulatory and zoning factors.
There is also a large amount of data available on single-family housing construction that doesn't exist (or is much less accessible) for other types of housing. Because of the way in which the costs are calculated, the value of the land will include the effects of any supply restriction on the home. This is a lever that developers have to work with when closing a development agreement: they could decide to take the risk and buy cheaper land that is divided into zones for a relatively small number of units, in the hope of obtaining permission to build more on it than is currently allowed. This doesn't even include the materials needed for siding, plumbing, electricity and other additional aspects of home construction.
The site alone, which is the lot and its improvements, represents a fairly large part of the total cost of a home. Most homes in the U.S. In the United States, they are single-family homes, so the costs of their construction are largely in line with the costs of housing in the United States in general. Due to the wide variety and quantity of parts, building a house is a long and difficult job, and the builder must hire many types of workers, both skilled and unskilled.
Considering the importance of regulatory restrictions on Internet housing (zoning, NIMBY vs. YIMBY, etc.), I think many people would be surprised that land only represents about 20% of the cost of a new home. Therefore, in general, fixed construction costs, the costs associated with the construction of the actual physical building, are the highest and most important cost of a new home. Only in dense urban areas does the cost of land begin to dominate the cost of new housing, due to regulatory and zoning restrictions that limit the number of homes that can be built in a given area.
However, in dense urban areas, where new housing construction is undoubtedly more important, this changes, and high land prices driven by regulatory restrictions become the dominant factor. I think this is also the reason why people intuitively reject the idea that solving something as complex as the housing crisis is something as simple as zoning reform. In fact, even in the largest cities, more than half of the builders obtained permits to build only one house within the city limits. However, when it comes to housing construction, there is little conclusive data on the reduction in costs for the industry as a whole as a result of major changes in materials or production methods.
