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  • Writer's pictureJacopo Montalenti

Cost Per Square Foot to Build a House in the Bay Area

Cost is a crucial factor in the construction of buildings. The construction cost is influenced by several factors: material cost, labor costs, design parameters, complex approval process, and cost of land, among others. The Bay Area is a prime region spanning the city of San Francisco that has experienced hiking construction costs. The scarcity of building professionals as well as craftsmen is majorly attributed to the increased construction cost. The report published by UC Berkeley Terner Center for Housing Innovation (TCHI indicated that the demand for houses in San Francisco is beyond supply. Contractors have been having challenges filling worker’s positions due to the scarcity of qualified personnel. Cononan, president McCutcheon Construction Inc, attributed the shortage of laborers to the higher cost of living in the region. In order to sustain workers in the construction firms, contractors were obliged to pay them higher wages, which trickled down to the client.

In an effort to curb the shortage of workers, contractors bring workers from Seattle, Tracy, Southern California, booking a hotel for them, which is an additional expense. Other companies hire employees from Central Valley who consumes considerable time to reach the workplace only to arrive exhausted and unable to perform to the expected standards. The shortage of skilled workers prompts contractors to abandon construction sites which they are not able to man. According to Peter Downey, his construction firm had to increase the hourly rate for a supervisor from $50 to $80. Peter states that there were jobs he failed to bid for since he lacked a qualified supervisor. Downey’s company has experienced the hiking cost of construction in the Bay Area in San Francisco, where initially, the cost per square foot was $500. However, over the past year, the cost per square foot has risen to $800-$1,000.

For years people have heard a general rule of thumb that houses can be built for $200 per square foot. When a builder says they can make a house for $200 per square foot, they talk about the costs to build in a subdivision in some place like Atlanta. They are not factoring in design, engineering, or permitting costs. These costs alone are often over 20-25% of the project. They are not factoring in quality construction you’d expect in almost any coastal or metropolitan area. Costs of $500-1000 per square foot are common in many places, but spending that much makes sense as the cost of quality and finish level that owners expect. “I just want a simple house.” That’s great. But even a simple house is a complex feat of permitting, engineering, and back-breaking labor. These things take time and money. According to Roland, the survey conducted by UC Berkeley’s TCHI indicated that the building regulators in San Francisco had a complex approval system and strict environmental rules, which delayed the construction process and raised the price.

The high labor cost paid to workers is transferred to homebuyers making the houses unaffordable. The recent data from CoreLogic analytic company showed that the price for a single dwelling has increased by 14% for the last year, hitting $765,000.


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