Following are several reasons that explain why rebuilding costs could be 30-40% higher than new construction.
- Demolition and debris removal. While new home construction normally begins on open site with perhaps some brush removal and grading, rebuilding begins with a partially or totally destroyed structure occupying the building site with trees, plantings, driveways, sidewalks and other structures that have to worked around. The site may have to be cleaned after a fire left it contaminated.
- Top-down versus Bottom-up. New construction begins at the foundation and builds upwards. Repairing a house that is not destroyed often means removing the roof and rebuilding from the top down, a far more time-consuming and labor-intensive process.
- Costs Vary by Location. The demand for construction labor and associated fees in your community may vary greatly with those in another community. As an example, average rebuild prices for a mid-century ranch in suburban Ohio may be $75 to $90 a square foot, while the cost to rebuild a condo in Manhattan may be $300 a square foot.
- Access to the Worksite. When new homes are under construction, there is usually open area, allowing for easy access to the site. Materials can be driven directly up to any side of the structure as needed. When a house is being rebuilt among existing homes though, there is often landscaping, fences, and similar obstructions limiting access. Materials often have to be off-loaded further away and delivered by wheelbarrows or hand-carried to where they are needed. The impact on labor costs can be significant.
- Construction costs rise after natural disasters. Following a natural disaster affecting a wide area, the costs of building materials and contractor fees nearly always rise sharply in response to the sudden increase in demand. In Florida we saw this after Hurricane Andrew. Even without deliberate profiteering, this would normally be true because when local supplies are quickly exhausted, materials have to be brought in on an emergency basis, often from mills or factories at great distance. This may require higher transportation costs. Whenever many homes have to be repaired or rebuilt at the same time, the cost for each will be higher than normal.
- Special Features and Unusual Materials. Older homes and homes that have been extensively remodeled often have customized features or include materials not commonly found in homes being built today. These features and materials can be expensive, if not impossible to duplicate. It’s often difficult to even find craftsmen that still do this type of work.
- Rebuilding to code. Most older homes were built during times when building codes were less strict than they are today. If you are rebuilding or restoring your home, you may need to meet the newer and more demanding building codes. Even undamaged parts of the structure may have to be rewired or plumbed to meet current codes. Building code changes can add thousands of dollars to the cost of restoring a damaged home.
- Economy of scale. When contractors have many homes under construction at once, materials can be purchased in at a discount due to large quantities and work can be scheduled for the most efficient use of carpenters, plumbers, electricians, and other tradesmen.
We recommend checking with your agent every two to three years to request a new rebuilding cost estimate. If you don’t have replacement cost coverage on your homeowners policy, you should speak with your insurance agent about getting it. Not having replacement cost coverage could mean you end up with huge out of pocket expenses.