PropTech Challenge and Yacht Party, Nov. 29th | NYC REAL ESTATE TECH WEEK →

Report Shows Construction Materials Costs Lower Than Last Year, but Still High

Laws that give tenants the first option to purchase their multifamily property when it goes up for sale are gaining steam around the country, spurred by efforts to tackle the affordable housing crisis. The laws, typically known as TOPA (The Tenant Opportunity to Purchase Act) or COPA, (Community Opportunity to Purchase Act), have been around for decades in some cities, but given the state of today’s housing market, they are getting a lot more attention. While well-intended, the laws have led to clashes with real estate investors and a debate over whether they help or hurt the surrounding communities, as Propmodo’s Barbra Murray explains in her latest piece. But first, some welcome news about the state of construction materials prices. 

Overall construction materials prices are down about 1 percent since March of last year, a positive sign for the real estate and construction industries, though prices remain significantly elevated since just before the pandemic. Multifamily construction is up 0.4 percent year-over-year, while non-residential construction is down 0.6 percent over the same period, according to the construction trade group Associated Builders and Construction. Prices for a range of materials used in construction, including lumber, iron, and steel, dropped significantly over the last 12 months. However, within the last month, those numbers have crept back up, leading to an overall 0.2 percent increase in materials costs. Overall, construction materials costs are still 39 percent higher than where they were in February 2020, just before the pandemic hit. 

The high costs of materials over the last three years has led to higher overall construction costs for projects and a lot of delays. These costs have been extra painful since the industry has also been struggling with supply chain issues and a labor shortage. Many developers looking to get around high construction costs have explored the growing market for alternative materials, the most popular of which has been mass timber, which is popping up in projects across the country. More developers are looking at modular or prefab construction methods as well and there is even a growing movement toward using recycled plastics as building materials. The use of these kinds of alternative materials are expected to continue to grow, and until inflation rates come back down to a more reasonable level, we can expect to see traditional construction materials prices stay elevated.

Image - Design