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A new study that credits Henrico with below-average building permit costs misses the mark when it comes to measuring the true cost of building a new home, local industry and housing officials say .

A 2022 study by Construction Coverage concluded that IIn counties with populations between 200,000 and 349,999, Henrico’s construction costs are significantly lower than those of all but one country.

Permitted units in Henrico County have an average permit value of $115,119, compared to $218,791 per unit nationally, according to data used in the County Building Permit Survey analysis. US Census Bureau (2021).

The report aims to identify where it costs most or least to build new homes and give an idea of ​​how costs vary in the housing market, said Michael Welker, who participated in the study.

Home Building Association of Richmond CEO Danna Markland didn’t necessarily disagree with the findings, but took issue with the use of permit values ​​to draw conclusions about construction costs.

Factors such as the cost of development to acquire land, rezoning and home site preparation all include the cost of building a home, she said.

Permit value, however, is most often submitted before a project’s full estimates, and the method of reporting will vary by builder, she said. Therefore, the initial permit price does not include options and upgrades during construction.

“It’s actually kind of an industry secret that nobody, anywhere puts a realistic or accurate estimated total cost on permits,” said Michael Roach, owner of Apex Construction.

Markland said it’s also difficult to credibly measure construction costs in different localities, which makes permit value an inaccurate measure.

“It’s hard to make comparisons across regions because nothing is consistent,” she said.

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The Construction Coverage study, which is a website that publishes guides, research and reviews relating to the construction industry, notes that the value of the building permit does not reflect the ultimate market value of the unit, but assumes that the permit represents the total value of all construction work for which it is issued.

However, Welker also acknowledged that permit values ​​are not the only metric to use to assess the value of new construction.

“I think they’re a good indicator, but certainly I agree it’s not the only indicator,” he said.

With the effects of inflation, labor shortages in the construction industry, material costs and supply chain challenges, the costs of a project when allowed can not ultimately be what it costs the builder to build, he said. Overall, the study simply used data available from the Census Bureau to see differences in the market, he said.

The true cost of construction must factor in not only construction overhead, but also superintendents, labor and fluctuating commodity prices, Markland said.

“The permitting process is one thing,” said Jovan Burton, executive director of Partnership for Housing Affordability. But construction costs may continue to rise due to inflation and supply chain challenges, he said.

However, that doesn’t mean the value of the permit has nothing to do with the construction process itself, Roach said.

For example, Roach said he’s more likely to make deals in Henrico than in other counties because the permitting process can speed things up and estimates can come out faster.

Richmond Association of Realtors CEO Laura Lafayette also said she would take the report with a grain of salt because of its methodology, but agreed her dealings with the county had been very effective.

The average time to obtain permits is 10 to 14 days, Roach said.

“If I hit three or four weeks, I start to worry. It just doesn’t really happen.

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Roach said he would assume construction costs are lower in Henrico compared to other counties and said the county’s process is easier compared to neighboring Richmond.

The lower prices at Henrico likely speak to the predictability and reliability of working with the county and the ease of the permitting process, Burton said.

“This process saves developers a lot of time, which in turn saves them a lot of money,” he said.

However, lower construction values ​​don’t necessarily translate to lower-than-average home prices in times of inflation and tight labor markets, among other factors, Lafayette said.

For example, while the average permit price in Henrico may have remained low compared to other counties, the median sale price of a single-family home increased 11.2% from August 2021 to August 2022. , according to the Central Virginia Regional Multiple Listing Service local market. update.

Developers will build what the market demands and price accordingly, and there are plenty of people who pay even more than the list price to get their contract accepted, Lafayette said.

While it generally benefits affordability when it’s easier to build new construction at a more profitable pace, a rough path still exists for first-time home buyers, Burton said.

The median home price in Henrico is $350,000, the lowest among the major locations in the area (Richmond, Henrico, Chesterfield and Hanover).

But while the median home price may be lower in Henrico, that doesn’t lessen the challenges that exist in accessing new homes.

The majority of people looking for more affordable options won’t be able to access new construction as much as resale, Burton said.

“[Construction] costs will continue to be high across the board for everyone, no matter where you are or where you work,” he said. “But you can save a bit if the authorization process is efficient enough.”

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