It’s been 15 years since we launched our original Residential Construction Cost Cheat-Sheet, and since then it continues to be one of the most searched and read posts in the history of the BUILD Online Magazine. We originally developed the cheat-sheet after seeing many shifting and shifty budget conversations; subsequently, we decided to tackle the topic of construction costs head on. Since the cheat sheet’s introduction, we’ve been having ever-more informed conversations about construction costs with current and potential clients. Escalating construction costs and protracted permitting timelines from most building departments in the Pacific Northwest have made the Cheat Sheet more useful than ever. As an architecture firm with both feet on the ground, discussing the finances of design and construction couldn’t be more important. The goal was simple and far-reaching: we wanted to create a straightforward baseline for discussing project costs (simple), and one that our industry could start using to help compare apples to apples (far-reaching).
We released The Residential Construction Cost Cheat-Sheet 2.0 in 2014 during a booming economy, which continued until 2019. A roaring economy had its own challenges, however, and the sharp acceleration in construction costs surprised many architects, builders, and homeowners in the Pacific Northwest.
In 2019, version 3.0 of The Residential Construction Cost Cheat Sheet was released. The market was beginning to slow down, significant economic challenges were surfacing, and the ongoing political turmoil began in earnest. During this time, the affordable housing crisis hit severe levels in cities like Seattle, and the reality of homelessness has since reached DEFCON-1 in many cities across the nation. Despite the challenges, the process of permitting in most jurisdictions continued to increase in complexity, duration, and expense. In 2020, this minefield of issues collided with the Covid-19 pandemic, which flipped the design and construction industry on its head. The pandemic didn’t necessarily halt design practices, but construction was significantly impacted by limited resources, a protraction of supply chains, and a complete restructuring of jobsite protocols. While historically different variables push and pull regional construction costs, the pandemic pitted all regions against each other for the same inadequate resources.
Still, there continues to be demand for housing, and firms like BUILD LLC, with our 25 years of experience, can guide the process for grateful clients. We have staunchly maintained that being candid from our first conversation with a client to the last will result in the best outcome. We’ve determined that it’s time to update our numbers, so we’re unveiling the 2024 Residential Construction Budget Cheat Sheet.
You may find a PDF download here.
It’s worth breaking things down to better understand why we’re still seeing construction costs accelerate far beyond typical inflation. Here in the Pacific Northwest, several factors have intensified over the last five years, and new ones have emerged, which have fueled the construction cost escalation.
LASTING EFFECTS OF THE COVID-19 PANDEMIC AND THE GREAT RESIGNATION
While the mandatory Covid-induced lockdowns seem far behind us, the scarcity of resources and skilled labor continue to impact the construction industry. The unprecedented price increase of lumber during the pandemic has stabilized, but construction costs were irreversibly elevated during that period. Basic building supplies like concrete, framing, and steel reached pricing highs that make a project difficult to pencil out, while specialties like lighting and plumbing fixtures now come at an unprecedented premium and take longer to arrive. More, many smaller scale builders and trades leveraged this period as an opportunity to retire, close shop, or make lateral professional moves. A noticeable population of the workforce also resigned, exacerbating an already tight labor market.
BUILDING DEPARTMENT REGULATIONS
Permitting requirements continue to be added to all facets of a project, with little to no removal of pre-existing ones; ultimately, this layering of demands has a compounded effect on a project’s complexity and budget. Some will argue that these regulations are well-intended and well-meaning; but we maintain that without a mechanism in place for code authorities to be required to add new provisions and revamp or scrap older provisions, our dire need to create more access to housing will become ever more critical.
Beyond the land use and building code impacts, the secondary codes for mechanical, electrical and plumbing (MEP) continue to add gratuitous provisions that make our heads (and wallets) hurt. We’ve discussed this previously, but new electrical requirements (for example) — such as adding ground fault protection throughout a home rather than to critical circuits — adds 5% to an electrical budget. Once you tack on a series of marginally beneficial code changes like this, your MEP costs can easily be 25% more than just a few years ago.
Perhaps the most damaging of all building department positions, though, is it appears that transparency and clear communication have been replaced by cycle after endless cycle of permit corrections. Instead of a building department simply spelling out how they interpret a particular code or picking up the phone or sending an email outlining how they prefer to see a specific calculation completed, permit corrections are now carelessly issued one after the other in an unpredictable number of cycles. Four, five, or even six cycles of permit corrections are now typical in jurisdictions around the Pacific Northwest, with some later cycles introducing brand new issues that should have been communicated in the first cycle. Each cycle takes a jurisdiction months to address, coordinate and review, and this constant moving of the goal posts costs the client and design team precious time and budget.
More so than in years past, we’re currently noticing higher expectations on behalf of clients. It’s becoming more difficult (and expensive) to attain a level of acceptable completeness. Some of this is just math; as costs increase, it seems like more should be gained. We don’t blame clients for having higher expectations; we certainly would given the current cost of construction.
VENDORS & SUPPLIERS
A decade’s worth of industry demands has placed most vendors and suppliers in a constant state of being overwhelmed and overcommitted. Subsequently, their prices continue to increase. And this has a chain reaction. Our vendors’ vendors have supply and bandwidth issues that impact the entire chain. As noted earlier, an across-the-board shortage of skilled labor adds a whole other level of pressure to many vendors’ abilities to meet project needs.
OTHER & UNFORESEEABLE
There are other factors beyond our control or influence that we are continuing to uncover, or simply get smacked across the head with. For example, due to the amount of infrastructure work in Seattle, every single thing related to concrete (mixing, trucking, reinforcing, pumping) continues to increase in cost at an unimaginable rate. In an effort to rein in costs, we keep peeling the onion on issues like this, but the more we peel, the larger the onion gets. We may use 200 yards of concrete on a project, while 60,000 yards go toward municipal work, so we are left feeling fortunate we can get concrete at all.
In the end, as a resourceful, resource-conscious architecture practice, we are dedicated to design outcomes that are functional and elegant; we are continuing to look for ways to contain costs; and we are committed to using every dollar wisely. Along with these guiding principles, we have a wealth of ideas for additional ways savvy clients may navigate the knotty, challenging, and rewarding project development processes.
• Bring an architect on board early
• Reuse the foundation of an existing home
• Be reasonable with what is sustainable
• Being “green” doesn’t always make sense
• Start thinking of sustainability more as built-in utility rather than as a fashionable trend
• Limit the amount of reviewers/variables on a project
• Find a good team and trust them
• Be reasonable with what is achievable in the finished product and set clear expectations with the builder
(Obvious defects get fixed, but ease up on total perfection or get your checkbook out.)
We continue to look for methods to best serve our clients and communities. In keeping with our transparent practice of planning, design and construction, we are compelled to refresh and share this cost summary. As with any endeavor, distinguishing the current challenges provides the first insights into finding the best solutions.
Cheers from Team BUILD