There’s more to building a home in Nevada County than construction costs
July 31, 2016
A home builder will typically spend about $100,000 before construction even starts on a new house in Nevada County.
About half of that money is for design, financing and a host of government and utility fees. The other half is for improving the lot, which includes constructing sidewalks, streets and connecting utilities.
Add to that another $20,000 to $50,000 to purchase the land for the new home.
Put another $150,000 to $250,000 on the tab — the cost of actually constructing the home — and the price of building a new house rises to over $300,000. And that's before the home construction company makes any profit.
"That's why houses cost what they cost," said Keoni Allen, president of Sierra Foothills Construction Company.
Tweak a few aspects of any home and the price changes. A new home in Penn Valley that isn't connected to the Nevada Irrigation District will pay about $25,000 less because it's on a well and not connected to existing sewer.
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Conversely, someone building a new home in Lake of the Pines who is connected to NID would pay that $25,000.
A home builder that's in certain fire and school districts will pay more, or less, to the respective districts.
Regardless of where someone builds, they will pay money to the government. Those fees are for processing permits, building inspections and development impact fees.
"For us, it's not so much the cost of the house that sets the stage for the fees," said Craig Griesbach, Nevada County's building director. "It's more pushed by size and the type of building."
Griesbach's office is what's called an enterprise fund. It receives no money from the county's general fund, which means its operating costs are paid by various fees.
It received about $1.3 million in fiscal year 2015-2016 from plan reviews and inspection fees.
"It's very business based," Griesbach said. "It's like the doughnut shop down the street. They collect for the business they provide."
That means the fees are tied to how many hours it takes for Griesbach's employees to process the inspections and review the plans. An hour of work costs $144.56, which includes the costs of the employee's salary, county vehicles and paying the office's utilities.
In short, Griesbach's office charges home builders the cost of doing business.
Griesbach used a 2,118-square-foot home with an attached 575-square-foot garage as an example when breaking down his office's fees.
The fire sprinkler inspection fee for that home is $144.56 because it takes an hour to complete. The building inspection fee is $1,539.27.
Add in the local and regional development impact fees — a total of $5,761 — along with several other government fees and the grand total owed to Griesbach's office is $8,784.25.
That doesn't include the fees owed to any fire and school districts, as well as sewer and NID connection fees.
The same home in the Higgins Area Fire Protection District would require a $592.46 payment, if the house was near a fire hydrant. A lack of a hydrant would increase the cost.
The homeowner would pay another $9,048.48 if the home was within the Nevada Joint Union High School District.
Both fire and school district fees are based on the square footage of the home.
Additional fees could be minor if the builder isn't connecting to NID or sewer. If he or she does, another $25,984 is tacked onto the bill.
All those fees — county, fire, school, NID and sewer — makes the grand total $44,409.19 for the Nevada County home.
That's compared to $37,000 for a similar home in Placer County, which includes fees from the county, fire and school districts and sewer connection.
Placer County has 375,391 residents, as opposed to Nevada County's 98,877.
The county and septic system fees for a similar home in Sierra County, which has 2,967 residents, would cost $5,381. That cost would climb to $7,898.50 if it's within a fire district.
Taking care of business
Allen, who also serves as chairman of the Nevada County Contractors' Association's political action committee, said $44,409.19 is similar to his cost estimates for the various Nevada County fees.
Allen, however, notes that costs can vary. The 2,118-square-foot example is what's called a production home. Those homes are built by a developer who buys the land, subdivides it and then constructs homes on the lots that are later sold.
That's opposed to a custom home, which typically cost twice as much.
Both types of homes are affected by ever-changing state laws that Allen said cause building costs to rise.
For example, all new homes must have sprinkler systems installed. That pushed costs up.
"Typically every three years we get a new set of rules that always gets more stringent, not less stringent," Allen said.
Fewer people in the labor market also plays a role. Allen said older workers are retiring and not being replaced by a younger generation.
Barbara Bashall, executive director of the Nevada County Contractors' Association, also pointed to a labor shortage as a reason for cost increases, as well as the strict building codes.
According to Bashall, building contractors laid off many employees when the economic slump occurred. Many of those employees moved into other industries and haven't returned.
"It's tough finding qualified workers," Bashall added.
Home building is on the rise in Nevada County despite the costs, said Gregory Bulanti, president of the Nevada County Association of Realtors.
That wasn't the case during the Great Recession, when buying an existing home was cheaper than today. Land sales languished on the market, Bulanti said.
That's changed in the past year. The housing market is tight, and land sales have increased as more people opt to build what they can't buy.
"It shows a healthy real estate market," Bulanti said. "It shows there's money in the market."
To contact Staff Writer Alan Riquelmy, email firstname.lastname@example.org or call 530-477-4239.