Are Rising Construction Costs Killing the American Basement?

Filed in Economics, Housing Trends by on December 26, 2019 2 Comments

The basement is losing favor among home builders and buyers. But why?

Fewer than a quarter (24.3 percent) of single-family homes built in 2018 have basements, according to NAHB analysis of data from the U.S. Census Bureau’s Survey of Construction in a recent Eye on Housing blog post. This is down sharply from the 36.8 percent of homes built in 2000 with basements, and the decline has been steady over the past two decades.

Over the same period, the share of homes built with slab foundations grew from 46 percent to 60.1 percent.

There is, of course, massive regional variation in the adoption of basements, with more than 80 percent of homes built in 2018 in the West North Central census division and nearly 70 percent of New England homes built on basements. In sharp contrast, 97 percent of homes built in the West South Central division were built on slab foundations.

Much of the single-family home production since 2000 has shifted from northern areas where basements are popular (and in some cases, necessary) to southern and western states, where they can be impractical. But even in three of the areas where basements are most popular (New England, Middle Atlantic and East North Central) there were declines in 2018.

An obvious explanation is that builders in these areas are foregoing amenities like basements in some of their homes to offer them at prices their customers can afford. Keeping new homes affordable has become a considerable challenge lately, as highlighted in a previous NAHB post.

NAHB followers on social media agreed that cost was a key factor in the disappearing basement.

The first comment on the blog post on NAHB social media channels was from a real estate agent in Tennessee: “Getting harder to justify the pricing to buyers for basements on new builds; this is the trend in Knoxville.”

The issue, according to one commenter, is that the added cost to build a basement does not add equivalent value: “Cost of building a basement is a net negative to customers on a new build, i.e. it costs more to build than the value it will add to the property – I have seen this happening across the entire country.”

Many agreed, with a few dissenting opinions (“People buying in MA expect a basement and many are looking for finished basements.”). One member in South Carolina explained the situation like this: “In SC the cost of concrete is so high and even when a basement is completely finished, appraisal values are about 50% of the main living spaces that are above ground regardless if the basement is ‘daylight or walk out.’ When I was new in real estate I asked my broker about the value of a basement and he replied, ‘advertise the house as COMES WITH FREE BASEMENT.'”

It’s been widely reported that rising materials prices are driving up construction costs. NAHB remains committed to addressing the increasing costs to build a new home. We don’t want the American basement to be another victim of soaring building costs.

Are you seeing the same issues with costs to build a single-family home with a basement? Let us know in the comments below.

Comments (2)

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  1. don says:

    Is it that buyers don’t have a use for or don’t want basements, as they might not want a frog pond? Or do they “want” basements, but refuse to value basement footage equal to above-grade footage (creating a lower profit margin for builders when compared to all the other profit-cherries)?

    Here, in the Bay Area, homes sell for $700-$1000+/sq ft. Old homes with brick basements need retrofitting, so it makes sense to add 1000 sq ft when it can be built for $300-$500/ sq ft.

    With no frost and frost line, we don’t build basements because it’s less resource to drop a house on the ground. Maybe not better, but cheaper. I’m just trying to clearly dissect the argument here.

  2. Russell says:

    The evolution of basements. Growing up in the Northeast, every home had a basement. Prior to centralized air conditioning, coal was brought in through the cellar doors with ease to the furnace. Basements were a place to store foods from gardens during winter months.
    As towns became more urbanized, basements were built with summer kitchens and family rooms since it was cooler in the basements.
    Now, with centralized air, basements have become an extra room and in most places a studio that can be rented out.
    As newer homes are being built, with the additional cost to build a basement, without the same need as there was in the past, this makes sense that less homes have basements.

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