In recent months, we’ve encountered a few situations in which a client approved a preliminary design, only to find that estimated costs to build were greater than expected. In some cases, this entailed an overhaul of the design; in others, the project was put on hold or abandoned completely. This led us to assemble a few thoughts on how to build a new home in this time of escalating costs.
Let’s look at the reasons that costs are higher than they used to be. First, building materials are commodities that are in demand globally, and this influences the local market. Standard building components such as lumber, plywood, drywall, cement, etc . have all been subject to price jumps in each of the last few years. Also, the demand for building sub-trades is very strong. Since they’re as busy as they want to be, this has sometimes created a “gold rush” mentality, with higher and higher prices being quoted. Finally, as communities adopt the new STEP Code, this is adding more complexity, more work, and higher insulation costs to the creation of a new home.
There have been instances when clients are confronted with the true cost of their dream home and have chosen to walk away from the project entirely. This can be an emotionally devastating experience. What’s to be done to avoid this?
One builder we know recommends a process that involves a frank discussion at the start of planning, in which the client has to declare their true budget. Right now, this isn’t always happening, often because the client is afraid that estimated costs will be inflated to use up the entire budget, if it is revealed. But we feel that it’s in the client’s interests to start with the builder, who can provide an honest assessment of the client’s preferred style, materials, and mechanical systems against the real budget. Then the builder can estimate an approximate affordable size of the project, and it can go forward to a designer.
That brings up another point: with a few notable exceptions, we’ve found that people planning to build a custom home are reluctant to give way on the size of the house when confronted with financial reality. Often, the builder is expected to make up the difference between the client’s wishes and the true cost of the project.
If high building costs continue to be the reality, then it may be necessary to rethink our expectations regarding the size, complexity, and level of finish on the project. Think of it this way: when car buyers face rising gas prices, they are incentivized to buy a more fuel-efficient car than the one originally planned. It’s time to apply the same perspective to custom home building and renovations. Better to realistically tailor dreams to budget — even if this means making some compromises in size and level of finish — and get a home that works on all levels, than to have to walk away with shattered expectations.