What usually sets California apart from the rest of the United States, in terms of culture, is its combination of the cultures of Spain, Asia, Mexico, and the eastern United States. California is so diverse in its food, languages, and traditions, all originating from all over the world.
When it comes to building in California, there are also certain elements unique to the state. Many of which are reasons housing is scarce and very expensive in the state. This article will shed some light on the underlying factors that often aren’t very obvious to a casual observer. If you are looking to build or own a home in California, you will need a contractor such as a San Francisco Bay Area Licensed General Contractor, This Guide will let you know what would otherwise surprise you about building in California.
1. Too Long to Approve Projects
Before you drive the first nail or saw the first log of wood, you will need to get approval for that building project. Many developers describe this approval process as “painstakingly slow and complex.” It’s unlike any process you’ll ever encounter in any other state. It could take years, sometimes decades, and cost millions of dollars in fees, way above what’s normal in other states.
This adds more to the cost of building. In the end, who bears the final weight of these excessively high costs? The homebuyer. During his campaign, Democratic Gov. Gavin Newsom promised to speed up the housing development procedure. But as at the time of writing this, it hasn’t happened.
2. Labor Shortage
California is popular as the bubbling tech hub of the United States, home to Silicon Valley where many global tech giants are headquartered. As you can imagine, this attracts a flock of newcomers to the state, which translates to more people in the labor market in the Golden State. So, where’s the labor shortage from?
In a survey by the Associated General Contractors of America and Autodesk, 78% of construction companies say they are finding it difficult to hire construction workers. Positions like plumbers, sheet metal workers, bricklayers, drywall installers, pipe layers, and carpenters are the most difficult to fill. They often have to bring in workers from other states to fill these positions.
Even though California construction workers earn one of the highest wages in the country ($21.26/hour on average), it’s reported that only 3% of people aged 18-25 are interested in working in the industry. Some say the reason for this is public education not signaling construction and trades as high-paying career paths to follow.
3. Strict Building Codes
California strives to be energy efficient. Because of this, strict state’s building codes and standards require builders to use higher quality materials. From windows, insulation, cooling and heating systems, the codes are very comprehensive. This contributes to higher labor and materials costs up to 20% more than the average in the country.
4. High Developer “Impact fees”
In 2015, Terner Center reported that the average impact fees in California were $23,455 for a single-family home. For perspective, this is 3 times the national average. These fees are important, no doubt. They help local governments to pay for roads, fire services, police, schools, and parks for new communities. But in the case of California, these fees are unpredictable and can threaten the viability of your project.
5. Raw Materials are Expensive
President Donald Trump’s tariffs have affected the prices of building materials, increasing the prices of the average-sized home in the state by $20,000 to $30,000. This is because it costs more to produce household appliances, laminate, cabinets, tile, lighting, and other materials made from steel, aluminum and lumber. Along with labor, building materials account for 66% of home building costs. And these prices are constantly on the rise, especially for wood, timber, concrete, cement and steel.
6. Land is Expensive
Basic economics tells us limited supply plus high demand is equal to high price. The coastline topography of California and the ocean makes land very expensive here. The greater part of the value of a single-family home or apartment building’s value rests on the cost of the land it sits on.
7. Demand for Housing Far Outweighs the Supply
California is attractive for obvious reasons: the becoming-a-star dreams of Hollywood, the tech-billionaire ambitions of Silicon Valley startups, the romantic heat of miles of free beaches, and the exquisite vineyards of Napa Valley. It is no wonder, even though more people are moving out than are moving in, there’s almost 40 million residents in the state.
Despite this number, California ranks “49th out of 50 in the United States in per capita housing units”, wrote Gavin Newsom on Medium. Producing an average of 75,000 homes every year for the past decade hasn’t been enough to cater to the needs of the surging population.
In a nutshell
Getting ready to build or buy a home in California can pose a lot of surprises for some people, especially regarding the cost. But there are reasons for that:
- The demand exceeds the supply
- California land is very expensive
- The building codes are stricter
- There’s a shortage of labor
- Approving projects take way too long project approval times
- High tariffs have hiked the prices of building materials, and
- California has too few construction workers to meet the demand for housing.