Brandi Jewett, Forum Communications, Published November 25 2012
Construction costs drive GF home prices higher than Fargo
High construction costs are increasing the price of new homes and limiting the number land developers are willing to build.
“We can’t get to those price points where the buyers need (us) to be,” said homebuilder Jon Miskavige during the Sept. 19 meeting of the city’s Blue Ribbon Commission on Housing.
A report from the commission says housing is in short supply, noting specifically a high demand in the $150,000 to $200,000 price range.
According to area homebuilders and land developers who sit on the commission, constructing homes in this price range is no longer an easy task.
“You know, right now we just put a development in and infrastructure costs run $700 a foot,” developer Tim Crary said at that same meeting. “They’re just high, and that doesn’t include your land yet, that doesn’t include your engineering fees, your financing – there’s a lot of costs there.”
The median home price in Fargo is lower than Grand Forks, $145,000 and $170,000 respectively.
Fargo City Planner Jim Gilmour says narrower lots in Fargo may help alleviate some costs associated with building a home.
“Quite a few of our homes are on 40-foot lots,” he said, noting that per square foot the costs may be similar but a wider lot frontage in Grand Forks would drive up costs.
Building smaller homes on smaller lots in hopes of reaching the $150,000 to $200,000 price range in Grand Forks doesn’t seem to be a solution for everyone, though.
Collette Iseminger, housing commission member, said she is currently building a home on a small Walnut Street lot she purchased from the city.
“We’re not getting out for less than $200,000,” she said. Homes on other similar city lots are reaching more than $400,000 in construction costs, including land purchases, she said.
As discussed by the commission, bringing down construction costs and building homes for less than $250,000 may not be possible without providing financial incentives to developers or some sort of subsidy for homebuyers.
“I believe that,” Iseminger said of the subsidy. “Especially looking at what we’ve been through.”
Subsidies have been used in past home construction projects such as the Promenade Court project completed by the Grand Forks Housing Authority.
From 2004 to 2011, all but one of the 51 homes in that subdivision sold for less than $150,000, according to Terry Hanson, director of the Grand Forks Housing Authority. The remaining home sold for about $152,000.
The Promenade Court homes, located about four blocks south of Gateway Drive just east of North 55th Street, were funded in part by Community Development Block Grant money. In total, the housing authority received $775,000 to build the homes – a subsidy of about $15,200 per home.
‘Our soil eats iron’
The commission’s report says infrastructure costs aren’t enough to have an adverse effect on the housing market, but they likely aren’t helping the situation.
Still, comparing Grand Forks home construction prices to other North Dakota cities isn’t as easy as looking at a price tag.
Several environmental factors in Grand Forks affect how homes are built and ultimately part of their cost, area engineers say.
Starting from the ground up, the Grand Forks area soil has a significant impact on homes and the infrastructure surrounding them.
“Our soil eats iron,” said City Engineer Al Grasser, noting he didn’t remember dealing with corrosive soil conditions when he worked in Fargo.
“It was a shock to how different things are when it comes to building up here,” he said. “But it doesn’t take you long to figure out why.”
More expensive materials such as stainless steel are substituted in construction to combat soil conditions.
Home foundations in Grand Forks also must be built at least 5 feet deep to reach the frost line. If they don’t reach the frost line, the home is susceptible to frost heave – movement in the ground caused by the water in soil freezing.
Frost heave has the potential to cause major damage to homes, but other cities similar to Grand Forks do not have to worry about it.
Sandy soil in Bismarck doesn’t heave when winter comes, according to Grasser, allowing the city’s minimum home foundation depth to be only 4 feet.
Streets and infrastructure surrounding homes also are affected by the area’s soil and climate. Asphalt is affected more by frost heave, so a majority of Grand Forks’ streets are constructed with concrete. Concrete is about 13 percent more expensive than asphalt initially, but has a longer life expectancy, according to Grasser.
That’s important when factoring in the special assessments buyers will pay on a newly constructed home. Special assessments are fees homeowners pay for the creation or maintenance of amenities such as streets or sewers.
“We build for longevity,” Grasser said. “You wouldn’t want another special assessment popping up when you’re still paying off another one.”
Construction costs covered by these assessments tend to be higher in Grand Forks because of the city’s location.
Grasser says the city is farther away from areas that produce construction materials such as aggregate and pipes. A 36-inch reinforced concrete storm sewer pipe costs $87 per foot in Grand Forks compared to $70 per foot in Fargo.
Development projects in Grand Forks also tend to be smaller in scale than Fargo. While smaller projects may seem less expensive, that’s not the case. The cost of mobilizing construction equipment to build homes remains the same whether the project includes five homes or 20.
“You’re paying the same if the semi is full or half empty,” said Grasser.
Brand Jewett writes for the Grand Forks Herald