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The Birmingham Section started 2015 with a political reception at the Murray Building Co. jobsite at the old Merita Bread Bakery. More than 150 members were in attendance with city and state officials. Everyone enjoyed a tour of the site as well as barbecue from Joe McNabb and Hendrix Chevrolet.

Building construction: how tough is it to build in your area?

Issi Romem, chief economist of BuildZoom (www.BuildZoom.com), posted a blog on July 20 titled “The Toughest Places to Build”

(https://www.buildzoom.com/blog/the-toughest-places-to-build-behind-the-scenes-of-a-wall-street-journal-analysis). Click HERE for chart and table ranking the 50 largest metro areas.

His analysis covers residential construction only. I’d welcome feedback (to simonsonk@agc.org unless you want to engage your colleagues/competitors in your comments).

Do you think he has the relative difficulty right for private nonresidential building construction as well?

Is he right about residential construction, relative to other markets you may know about?

Here are some of his findings:

·         It is tougher to build in Honolulu and Los Angeles than in San Francisco and New York.

·         New York and Philadelphia are tougher-to-build than Boston and Miami, which are tougher thanWashington, which is tougher than Seattle.

·         Seattle and Riverside – whose metro area spans Los Angeles’ so-called “Inland Empire” – are roughly on par with each other.

·         Denver and Houston are roughly on par with each other as well but are both tougher to build than Dallas,Phoenix, and Austin.

·         Except for Las Vegas, the large metros in which it is easiest to build are located in the Southeast, andAtlanta stands out as the easiest among them.

 

  • The toughest places to build are not downtown. It is expected and accepted that U.S. downtowns be dense, and once density is accepted in an area it is easy to build more there.

 

  • The toughest-to-build places tend to be in the inner suburbs. Local land use rules typically codify as taboo dense construction outside of downtowns and in the vicinity of transit hubs. Because the inner suburbs have been around longer than more distant suburbs, the inner suburbs are more likely to have depleted their supply of vacant lots, leaving no room for “acceptable” new construction. The three toughest-to-build neighborhoods featured in The Wall Street Journal – Venice Beach in Southern California (90291), Prospect-Lefferts Gardens in Brooklyn (11225) and the Fishtown section of Philadelphia (19125) – all fall into this category.

 

  • The toughest-to-build places are often in gentrifying neighborhoods. While the process of gentrification is in progress, neighborhoods experience sharp housing price appreciation. However, because gentrification is often closely tied to the neighborhood’s physical charm, housing price appreciation is rarely met by equally large increases in the rate of new construction. As a result, gentrifying neighborhoods often elicit an increasing willingness to pay for housing while failing to get more housing built, i.e. they are tough-to-build. The three toughest-to-build neighborhoods featured in The Wall Street Journal fall into the gentrifying neighborhood category as well.

 

  • Another variety of tough-to-build places consists of exclusive and wealthy low-density enclaves. When such enclaves are sufficiently mature that they no longer harbor vacant land eligible for construction, they often fail to produce any new housing. In metro areas that continue to sprawl, gentrification is less common and the sharpest housing price appreciation often occurs in exclusive, wealthy enclaves such as these. The Villages in Houston (77024) and Brookhaven in Atlanta (30319) are good examples.