Quote:
Originally Posted by wburg
If, as you claim, construction costs are high because of "bureaucracies," then why are the existing homes in downtown/midtown (buildings that have stood for decades) in the central city so expensive? These buildings are already built--thus there are no "bureaucracies" making their construction more expensive--but they still command a premium price. Why?
Also, if these "bureaucracies" result in higher prices, why are Sacramento's outer neighborhoods less expensively priced than downtown/midtown? They are governed by the same city government "bureaucracies," but homes are less expensive. Why is that?
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Not sure of the costs in Sacramento, but I can't imagine it's too much different. In metro San Diego, government fees range from about $40-60k per home. This includes everyone from the fire departments to the school districts. In addition, the long approval process and the inevitable design/engineering revisions probably cost an additional (I'm guessing here) $75k, probably more, but these are spread out over the number of homes and the size of the home.
Put them together and you are looking at a $50-75k per unit to build a single family home - less for multi-family just to feed the "Bureaucracy."
Why do existing homes cost as much as new homes despite not having to pay government fees? C'mon wburg... you know the answer to that.
The fees drive the costs for the entire market, not the other way around.
If government adds $60k into the value of your existing home through fees, are you not going to include that into the price of your home when you sell? No one forces you too and it's not a conscious decision, but those new-home fees are part of what the market will bear.
Secondly, in a rising real estate market, the new buyer does pay the fees indirectly through increased property taxes as a result of the higher selling price.
Does the government add to the cost of a home? Obviously the answer is an emphatic yes and it is a significant number. If you use the old rule of thumb that for every $1000 rise in the cost of a home you disqualify 1000 borrowers, then government fees and associated costs prevent at least 50,000 people from owning each specific home. That has a huge impact.
Equally as obvious: the review process is a necessary one that has resulted in many better projects and communities.
The question becomes are we getting our money's worth?