Why Do Houses Cost So Much?
No other article which the average family needs is so large or lasts so long as a house. If bought, it is ordinarily the most expensive thing ever acquired. If rented, the monthly bill is larger than for any other expense, except possibly food.
Why do houses cost so much?
To get at the bottom of this problem, we have to take a look at the industry. To build a house, you need a lot, graded, drained, and landscaped, and the improvements that go with it-streets, walks, sewers, gas and electric lines, and so on. The site alone, which is the lot and its improvements, takes a fairly large portion of the total cost of a house. For instance, for all new single-family houses in the $2,000 to $4,000 class financed by the Federal Housing Administration, the average improved lot costs $370. Of this, $240 was the cost of improvements and $130 the cost of the land.
Houses are large, bulky, and built of many different parts. Furthermore, a great variety of materials and equipment go into a house. House building touches practically the whole field of raw-material production, while almost 70 different industries process the materials, such as lumber, cement, brick, plaster, etc., that are used. In normal times, the builder has a wide choice of materials. He can get window frames made of wood, steel, bronze, or aluminum; flooring of wood, clay, stone, rubber, cork products, or wood fiber; roof tiles or shingles of asbestos, cement, bituminous materials, wood, clay, or stone. Sometimes one part is made of many materials. Thus, asphalt roof shingles may contain felt, asphalt, and bits of stone; windows may have wooden sashes, glass panes, steel glass clips, putty, nails and screws, aluminum weather stripping, bronze hardware, iron sash weights, cotton sash cords, glue, and lead and oil paint.
Because of the great variety and number of parts, the building of a house is a long and difficult job, and the builder must hire many kinds of workers, both skilled and unskilled. Nineteen separate trade groups are affiliated with the Building and Construction Trades Department of the American Federation of Labor.
Nor is this all. A house needs water pipes, ducts, electric wires, furnace, radiators, plumbing, kitchen cabinets, sink, tub, shower, toilet, electric fixtures, and other apparatus. Buying and installing all these add greatly to the total cost.
Houses are expensive chiefly because they are large, bulky articles that require many parts which have to be assembled in one place by many workmen. But this is not the only reason for their expensiveness. Another reason is that house building has not yet been put on a “mass production” basis.
House building is a small-scale industry. There are thousands of builders in the United States, but few large building organizations. There are none to be compared with such corporations as Ford, General Motors, or Chrysler in the automobile industry, General Electric or Westinghouse in electric machinery, Du Pont in chemicals, and the like.
The Bureau of Labor Statistics found in 1938 that the average builder of single-family dwellings in 72 cities built only three and a half houses a year. In fact, even in the largest cities, more than half the builders took out permits to build only one house each inside the city limits. Many of them worked part time as builders and the rest of the time as carpenters, painters, or contractors for other builders. The small-scale size of the industry is also true for apartment builders.
Because the average builder is a small operator he cannot get the benefits from large-scale buying of materials or land. In other industries, such as automobiles, the price of the product has dropped through the years because large corporations produce millions of units of the same article each year. In doing so they use millions of the same parts, mostly made by machines and put together on an assembly line, thus cutting unit costs sharply. In house building, every unit is put together on the site under the direction of a builder or contractor, and most of the work is done by hand.
The average price of automobiles fell from $2,112 in 1908 to $653 in 1940 (f.o.b. factory) while annual sales rose from less than one hundred thousand to nearly four million. The average price of electric washers between 1926 and 1940 dropped from $147 to $71, and of household refrigerators from $524 in 1921 to $152 in 1940. In house building, however, there is little conclusive evidence of cost reduction for the industry as a whole as a result of major changes in materials or production methods.