By Ken DeLeon
Patience is a virtue. While this has always been the case in the construction industry, patience has now gone from a virtue to a necessity. With the Silicon Valley economy thriving for many years, construction projects are now experiencing the longest wait times for city approval than at any other time during my nearly twenty years in real estate.
To better serve and advise my clients, I have decided to go through a full construction project myself in an effort to understand and become an expert on all current aspects of construction in Silicon Valley. To further this goal, I have partnered with a client to build a home in North Palo Alto. In the past, I used to tell clients to budget eight to nine months to draw up their architectural plans and obtain city approval to allow construction to begin. That is often no longer the case.
In this environment where there is a surge of remodeling and rebuilding going on throughout all of Silicon Valley, this timeline for approval now needs to be stretched out to more than a year. Unfortunately, even with full focus on the process, there is not much that can be done to get approval in less than one year. For example, the moment that my client and I went under contract on our property, we started working on blueprints with our architect. By utilizing our thirty-day escrow period we were able to submit our architectural plans just one month after closing. However, even though the project was fully compliant with all of the setbacks and city guidelines, three out of four adjacent neighbors opposed our design. After some modifications, the neighbors were satisfied and the project was able to proceed along through the rest of the city’s onerous requirements.
As of now, the home has not been fully approved and we will be fortunate if the planning and permit phase takes less than fifteen months, with over a year dedicated to working with the city for approval. Note that this is the timeline with an experienced architect and builder that have recently built many homes. If, alternatively, I had less experienced clients building their custom dream home for the first time, this process would assuredly take even longer.
On a positive note, we have found a builder who is very good at project management and has a track record of building two-story homes in under nine months. So, we have made up for the planning and permit delays by finding this builder and, as a result, the entire project will be completed in just over two years. You know there is too much bureaucracy when the approval process takes nearly fifty percent more time than what is needed for construction.
Along with rising planning times, there has also been a large spike in construction costs. Whereas I used to tell clients to build a home they should budget $300 per sq. ft., I now tell clients that they should anticipate total construction costs of approximately $500 per sq. ft. This increase is due to both higher labor and material costs. As an example, the price of lumber is up nearly 30% as there is high demand caused by the fires in California and hurricanes in Texas and North Carolina, which are driving up demand with all of the redevelopment that these natural disasters have necessitated.
While there are still a lot of reasons why one would want to build a new home, whether for anticipated profit for a developer or to create your customized dream home, both the time and costs required for this endeavor have gone up and likely will continue to do so. At DeLeon Realty, we utilize our expertise in construction and knowledge of great architects and builders to help our clients optimize what is generally a long and arduous, yet, ultimately, a rewarding process.