Why Do Houses Cost So Much?

Housing affordability is one of the biggest problems facing California, and much of the world. How did houses get so expensive? The short answer is that no one really knows. There’s a shocking lack of research and data on why houses have become so unaffordable, considering that housing affordability affects us all.

About 50 years ago, in 1970 in Sonoma County, the average house cost $ 23,000. But what about inflation? Correcting for inflation, that’s $ 180,000 in today’s dollars. The average priced home in June 2023 was $ 810,000. House prices have risen 450%, after correcting for inflation! No wonder this is such a crisis, influencing all of our lives, directly and indirectly.

Some Causes

There are a variety of causes which are commonly identified when we talk about the shocking rise in home prices. Here are the most common:

• Decreased land availability (less buildable land left)

• More difficult to build (the land available is harder to build on)

• Tougher building codes (improved energy efficiency and higher strength requirements)

• Delays in project review and time to obtain building permits has increased cost (delays and uncertainty increase risk and cost)

• Worker shortages

• Labor costs

• Material costs

There’s no doubt that all these factors have increased construction costs. Many builders would like you to believe that the cost of materials and regulations are the largest factors driving home prices.

But the two biggest factors are labor cost and labor productivity. Construction is the only major industry where productivity has dropped over time.

What’s really happened is that the world has changed significantly during the last 50 years, but the way that homes are built, and the way that labor is organized has not. For example, air tightness was a negative 50 years ago (homes need to breathe) and now air tightness is key to an energy efficient home. This increased air tightness has increased construction complexity, and had the unintended consequence of increasing mold and rot because moisture can’t escape.

The Failure of SCIP Panels (so far)

What would you call a building system developed more than 50 years ago, that currently accounts for under one tenth of one percent of new homes? A failure.

For those of us who believe in the inherent benefits and potential of SCIP’s, the path forward begins with an acknowledgement of just how bad things are. If you ask people involved with SCIP construction why it has failed to catch on, here are most common explanations:

• Closed mindedness and risk aversion from contractors

• Lack of training, education, and awareness of SCIP benefits

• Resistance from subcontractors for plumbing, electrical, etc.

• High cost and lack of experienced shotcrete workers willing to do residential

• Panel manufacturers focused on profits over supporting builders

• Dishonesty and greed from everyone involved, including contractors

There’s no doubt that all of these explanations have contributed to the failure of adoption of SCIP construction. But the key reason comes down to this— it costs too much.

A common story emerges: A homeowner or architect is interested in disaster resistant construction. They do some research and are intrigued by SCIP panels. They ask their general contractor. The contractor tells them that it’s expensive, complicated, and unnecessary. The truth is there’s no upside for the general contractor. For them, it’s more to learn, more to go wrong, and harder to find subcontractors. Next, the contractor asks for quotes from a stucco subcontractor to apply the two inches of structural concrete on the inside and outside of the panels. A stucco person is used to applying non-structural concrete. Now they need to apply concrete two inches thick, that is the key structural element. If something goes wrong and the concrete cracks, the stucco subcontractor could be on the hook for huge structural expenses instead of a cosmetic repair. The stucco contractor gives a price that is 3X what it should cost. Next, the contractor gets bids for plumbing, electrical, and HVAC. The same story applies here, more for the subcontractor to learn, more to go wrong, and no upside. The current construction system is working just fine for them, and there’s no reason to change.

The contractor brings a bid back to the homeowner, and it’s shockingly high. The homeowner is disappointed, but satisfied that they considered disaster resistant construction, even if they couldn’t afford it. The higher price makes sense to them—shouldn’t it cost more to build a house resistant to wildfires and hurricanes and three times stronger for earthquakes? Another house gets built with stick framing, and it will be at risk of being destroyed by the next natural disaster.

There are three key points to this story:

• Concrete is an unforgiving material, difficult or impossible to repair if not done right at first

• Risk aversion and lack of experience drives the higher cost (not material costs)

• Getting concrete on the panel correctly and repeatably is the key to reducing costs

This is why Reimagined Homes has focused on developing an easy, repeatable cast-in-place system to get the concrete on the panels. This system requires lower skill and fewer labor hours. Part of this system is a special concrete mix, and the restriction that forms be filled slower than typically done.

Building a House to Last 500 Years

500 year old homes are not an impossibility in many parts of the world. But in the United States, we don’t think of homes as something that can last centuries, so don’t try. Our comparatively young country and tradition of building with wood have partially blinded us to the possibility of building something to last for ages.

It’s easier than ever to build a house with a reasonable chance of lasting hundreds or maybe 1,000 years. Roman concrete in the Coliseum has lasted over 3,000 years. But we’ve taken the wrong lesson from this story— there’s nothing magic about Roman concrete, The Romans were both lucky and smart. Lucky enough to have a special type of volcanic ash available nearby, and smart enough to develop concrete that self heals when water begins to penetrate.

The point is that modern concrete can be much better, is constantly improving, and affordable enough to be used by everyone. What’s missing is the desire to build homes that could last hundreds of years after we’re gone. Building a home intended to last centuries is a gift to future generations and a wise use of resources.

Coming Full Circle

When I began working on the concepts included in this website, I imagined that the result would be a modern home that maintained a strong connection with nature. Cutting edge materials, such as SCIP panels, would be softened by finishes, natural materials, and plants to create a home that people would want to live in. From a disaster resistance, cost, and simplicity standpoint, it’s hard to beat a concrete box. But who wants to live in a concrete box? A whole layer of additions would be necessary to transform a concrete box into a home.

But I discovered that my goals in Reimagined Homes mostly returned full circle to Mediterranean architecture from thousands of years ago. As a prime example, look at this artist’s rendering of the Palace of Knossos, as it existed 3,500 years ago:

The Palace of Knossos

Yes, it’s a palace instead of a home, but look at the details— indoor outdoor spaces, surrounding gardens, flat roofs, large windows to let in light (OK, there aren’t windows because clear glass wasn’t invented for another 2,500 years). Why does this look like a modern performing arts center or hotel, instead of a European castle? Climate is part of the reason. The mild Mediterranean climate meant that indoor/outdoor spaces and courtyards were beneficial almost year-round. The palace isn’t a fortress because the palace is on the island of Crete, Greece so the Minoans didn’t need to worry about invading armies.