how are housing construction costs so low?? (Houston, Rockwall: real estate, lawyers)

[astrohip]

Originally Posted by josh u

I'm from Calif. Here, construction costs for a 2-story semi-luxury home runs about $200-225 per sq foot (not including land, permits, or running utilities to the house). From looking at housing prices in nice areas like Sugar Land, it seems construction costs are $90-120 per SF for an identical house in Houston et al.

I'm pretty surprised about the price difference. Material costs make up 1/2 of the construction cost and should be nearly the same between any region. So what would explain the $100+/SF difference? Labor can't be THAT much cheaper, unless they're paying carpenters $2 per hour in Houston.

Several reasons:

First, while in CA material may make up half, not true here. Our lot costs are so cheap, maybe 10-40K depending on area, that it's only 20% of raw costs. So your formula doesn't work here.

Second, our labor is MUCH cheaper here. Much less union labor, a lot of "imported" labor.

Third, this is a VERY competitive market. I regularly hear from suppliers/manuf that products that sell for $100 elsewhere might be $90 here. For no other reason than competition (IOW, same cost, lower margin by final provider). And part of that is due to Texas' low-cost business structure. Because the cost of doing business is so much lower here than almost ANYWHERE else in the country, a business can sell for less profit, and still make as much net.

Another factor: Much less governmental interference. I remember reading a few years ago, that before a single stud is nailed, a builder has already spent $40-75K on a house, just on permits & fees in CA. Here in Texas, it might be $5K.

You gotta love Texas!

[cheryjohns]

Originally Posted by Truglesmith

Cheap labor/workers (illegally in this country of course), cheap materials, cheap standards, shortcuts on quality

Depends on the builder - all are not created equal.

[ethanw]

I agree with the quality as far as the labor and parts goes, but it really depends on the builder. I just built a house last year and here where every builder is different.

• David Weekly does use more quaility stuff than the other builders but if you need to pay extra for some materials you can do so, and it really don't cost very much. I did it in few items for my house.
• And for labor quality you need to be there on top if it, everyday almost. They don't build it right, just rip it out. I did it in many instances and that's basicaly the builder job but since the builder don't take care of it, I had to do it in my own.

Originally Posted by elnina

^^^ Yeah, I would think the same. The quality might be lower. 2x4 and plywood ...

[josh u]

I doubt the labor is the main reason. A carpenter being paid $12/hr in Calif isn't going to make $2/hr in Houston (or do they?). I suspect the difference is due to the cost of doing business (no workers comp), lower taxes, more competition (there is way more construction in Houston than in SF/LA). I also notice developers take shortcuts in Houston. For instance, they build a nice luxury house but then they put in an ugly 5' cedar fence that you might find in a ghetto neighborhood here in Calif. I also notice they often don't bury utility lines over in Texas, whereas every new community in Calif since the 70s, whether expensive or inexpensive, has buried lines. This must add a lot to the cost since developers have to pay some or all of it

[Lost_In_Translation]

Originally Posted by josh u

I also notice they often don't bury utility lines over in Texas, whereas every new community in Calif since the 70s, whether expensive or inexpensive, has buried lines. This must add a lot to the cost since developers have to pay some or all of it

most neighborhoods out where I live developed since the 1960's here bury the connection lines and leave the distribution poles surrounding the neighborhood intact. My house was built in 1984 and its connection to the grid is buried.

[astrohip]

Originally Posted by josh u

I doubt the labor is the main reason. A carpenter being paid $12/hr in Calif isn't going to make $2/hr in Houston (or do they?).

Labor IS part of it. That carpenter in CA? He doesn't make $12; he makes $30. Plus benefits. Plus work comp. Plus plus plus even more. Here they make $200/day, paid as subs, no bennies, nothing.

As L_I_T points out, all new subd have buried utilities. It's part of the developers costs, and *still* our lot costs are 1/5 of what they are in CA.

[Malvie]

Originally Posted by josh u

I doubt the labor is the main reason. A carpenter being paid $12/hr in Calif isn't going to make $2/hr in Houston (or do they?). I suspect the difference is due to the cost of doing business (no workers comp), lower taxes, more competition (there is way more construction in Houston than in SF/LA). I also notice developers take shortcuts in Houston. For instance, they build a nice luxury house but then they put in an ugly 5' cedar fence that you might find in a ghetto neighborhood here in Calif. I also notice they often don't bury utility lines over in Texas, whereas every new community in Calif since the 70s, whether expensive or inexpensive, has buried lines. This must add a lot to the cost since developers have to pay some or all of it

Workers' comp is necessary in Texas just like in California, and the rates are very similar. Texas has the highest medical cost per claim for workers' comp in the nation (higher than California); Texas comp carriers cannot settle claims; they are open for life (like California). Texas is one of the highest states in the nation for workers' compensation (CA, TX, NY, FL, IL).

Texas employers can opt out of the Workers' Comp act, but they have to put in place an ERISA plan with similar benefits or face the possibility of lawsuits in tort.

(This is what I do for a living, I know this one).

[Houston321]

Originally Posted by josh u

I doubt the labor is the main reason. A carpenter being paid $12/hr in Calif isn't going to make $2/hr in Houston (or do they?). I suspect the difference is due to the cost of doing business (no workers comp), lower taxes, more competition (there is way more construction in Houston than in SF/LA). I also notice developers take shortcuts in Houston. For instance, they build a nice luxury house but then they put in an ugly 5' cedar fence that you might find in a ghetto neighborhood here in Calif. I also notice they often don't bury utility lines over in Texas, whereas every new community in Calif since the 70s, whether expensive or inexpensive, has buried lines. This must add a lot to the cost since developers have to pay some or all of it

Wow, California sounds amazing. You should probably head back, the ghetto feel of Houston with cedar fences and power poles must be frustrating for you.

[astrohip]

Originally Posted by Malvie

Workers' comp is necessary in Texas just like in California<snip>

Yes and no. All employers are required to either have w/c or as you mention, ERISA. Or be subject to lawsuits for settlements.

EXCEPT... you can hire someone as a sub-contractor. And have them sign a work-comp waiver. At which point you have basically hired someone w/o w/c! Now the sub laws are strict (subs vs employee), but if you follow them correctly, no w/c.

This is how most builders circumvent the w/c laws. Hire laborers as subs.

[crone]

I thought all construction workers in Texas who did not work for a government or major, major company were sub-contactors. One of those giant tree trimming companies had an undocumented kid fall. He was an invalid for life. No nothing from the company. When Harris county hospital could no longer help him, they sent him back to his momma in Mexico. Some guy in a lumber yard in Tomball got shot by a robber at work. The town had to have a fund raiser for him. The employer did nothing. Must have been part time.