Why Does It Cost So Much to Build in NYC?

Building in New York City costs more than almost anywhere in the world, and the reasons are less about greed than about a large accumulation of rules, most of them written for safety. According to research from the Citizens Budget Commission, Vital City and building code experts like the Center for Building, 5 major drivers account for much of the gap.

Watch on YouTube • Browse every Daily Tesla News episode

What makes construction so expensive in New York City?

According to the Citizens Budget Commission, Vital City and the Center for Building, the major drivers are the 2 staircase rule, elevator requirements, the Scaffold Law, complex plumbing and electrical codes plus slow permitting, and labor costs that run above the national average. Most of these rules were written for safety, and together they add up to some of the highest construction costs in the world.

How does the 2 staircase rule raise building costs?

New York generally requires apartment buildings above 3 stories to have 2 separate exit stairways. That consumes significant floor area and forces larger, costlier buildings for the same number of units. Much of the world, including Europe, Asia and South America, permits single stair buildings up to 6 to 8 stories, and at least one study found no difference in fire safety between 1 and 2 egress stairs. Supporters of the current rule point to the added margin of safety in an emergency.

Why do elevators and the Scaffold Law add to the price?

NYC mandates larger, more expensive elevators than many peer countries, and experts note a mid-rise elevator here can cost several times what a comparable one costs in Europe. The Scaffold Law makes New York the only state that imposes near-absolute liability on contractors and owners for gravity-related injuries such as falls, regardless of fault. Contractors reportedly spend 7 to 10 percent of revenue on insurance, versus 3 to 5 percent in many other states.

How do codes, permitting and labor affect costs?

New York has more restrictive plumbing and electrical codes, including limits on cheaper materials, and a slow and complex approval process where delays add carrying costs. Construction labor also runs above the national average. Each of these adds to the final price of a building or a renovation.

Are these rules worth the cost, and is anything changing?

Nearly all of these requirements were created for legitimate reasons, usually safety, so the open question is whether the added cost delivers added safety or simply makes housing more expensive. A code reform task force is reviewing elevator and plumbing rules, single stair reform is gaining momentum, and the city is promoting modular construction to lower costs. None of these changes has removed the existing rules yet.

What does this mean for Staten Island and Brooklyn homeowners and buyers?

High construction costs show up in the price of new apartments and in what a renovation costs a homeowner in either borough. The reforms under review, such as single stair buildings and elevator rules, apply mainly to apartment buildings, so they matter most for Brooklyn multifamily development. Homeowners planning a renovation can ask contractors how code requirements and permitting timelines affect their quote before work begins.

Questions about how this affects your home in Staten Island or Brooklyn? Work with Joseph Ranola, or text or call (917) 905-2541. New episodes of Daily Tesla News break down the NYC real estate stories that move the market.