How Construction Costs Affect Housing Prices

The high cost of housing in the United States can be attributed in part to the high costs, regulatory and otherwise, of building new housing.

2 minute read

May 5, 2022, 11:00 AM PDT

By Diana Ionescu @aworkoffiction


Single Family Residential Construction

stock_photo_world / Shutterstock

“The main factor driving the cost of all housing is the cost of building new housing,” writes Michael Andersen, arguing that “If we want our cities’ older homes to cost less, either to buy or rent, we need it to be less expensive to create a new home.” As Andersen explains, “in the end, pricing mostly comes down to cost. The price of existing homes is held down (or driven up), more than anything else, by the cost factors of creating new housing.”

If all of us deserve a home, and I happen to agree with the 1948 United Nations General Assembly that we all do, there’s no alternative to taxing and spending. And if we also want to avoid housing shortages like today’s, there’s also no alternative to making homes cost less to build.

According to Andersen, part of the problem stems from unnecessary legal requirements. Some mandatory items, like windows, indoor plumbing, and safe electrical cables, are “well worth their costs.” But “when our governments require homes to be a certain level of ‘nice’ to be allowed to exist, they’re making assumptions that don’t apply to everyone.” Loosening some of these requirements could reduce the cost of building new homes and, thus, the cost of housing. The source article links to Andersen’s more detailed proposals in Willamette Week and his discussion of the issue on the Week’s podcast.

Monday, April 18, 2022 in Sightline

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Get top-rated, practical training

Bird's eye view of manufactured home park.

Manufactured Crisis: Losing the Nation’s Largest Source of Unsubsidized Affordable Housing

Manufactured housing communities have long been an affordable housing option for millions of people living in the U.S., but that affordability is disappearing rapidly. How did we get here?

March 25, 2025 - Shelterforce

U-Haul truck on road with blurred grassy roadside in background.

Americans May Be Stuck — But Why?

Americans are moving a lot less than they once did, and that is a problem. While Yoni Applebaum, in his highly-publicized article Stuck, gets the reasons badly wrong, it's still important to ask: why are we moving so much less than before?

March 27, 2025 - Alan Mallach

Rusty abandoned oil well and equipment with prickly pear cactus next to it in West Texas.

Using Old Oil and Gas Wells for Green Energy Storage

Penn State researchers have found that repurposing abandoned oil and gas wells for geothermal-assisted compressed-air energy storage can boost efficiency, reduce environmental risks, and support clean energy and job transitions.

March 31, 2025 - Pennsylvania State University

Downtown Los Angeles skyline viewed from a distance with freeway and trees in foreground.

Updating LA’s Tree Rules Could Bring More Shade to Underserved Neighborhoods

A new USC study finds that relaxing Los Angeles’ outdated tree planting guidelines could significantly expand urban tree canopy and reduce shade disparities in lower-income neighborhoods, though infrastructure investments are also needed.

7 hours ago - USC Dornsife

Aerial view of Claifornia aqueduct with green orchard on one side.

California's Canal Solar Projects Aim to Conserve Resources and Expand Clean Energy

California’s Project Nexus has begun generating electricity from solar panels installed over irrigation canals, with researchers and state agencies exploring statewide expansion to conserve water and boost clean energy production.

April 3 - Turlock Journal

Close-up of older woman's hands resting on white modern heating radiator mounted on wall indoors.

HHS Staff Cuts Gut Energy Assistance Program

The full staff of a federal program that distributes heating and cooling assistance for low-income families was laid off, jeopardizing the program’s operations.

April 3 - The New York Times