New Construction in California Just Got More Expensive

Construction workers work on the roof of a house being built in Alhambra, Calif., on Sept. 23, 2024. Frederic J. Brown/AFP via Getty Images

Commentary

As an architect in California, one of the most frequent questions I hear is, “What will this project cost?” It’s a sensitive topic, especially here, where construction costs seem to only go up.

Despite designing with economy in mind, unpredictability is a constant challenge. Unlike other states I’ve worked in, California’s costs are especially volatile. Over my eight years here, I’ve never seen construction costs decrease year over year.

When Gov. Gavin Newsom signed the recent gas bill into law, it immediately caught my attention. As a private consumer, I understand the intent behind the legislation. It aims to lower gas prices by requiring oil companies to keep more fuel in reserve. On paper, it sounds reasonable. But as a professional in the construction industry, I see the unintended consequences already unfolding, particularly for an industry that ranks among the top 10 in California and employs about 5 percent of the state’s workforce.

The construction industry is built on two pillars: materials and labor. Both are vulnerable to the ripple effects of higher fuel costs. Many construction workers commute long distances to project sites, and increased gas prices will directly drive-up labor costs. On the materials side, most building supplies are sourced from 50 to 200 miles away, making transportation costs a significant factor.

California’s increasing cost of living and doing business is already pushing companies to rethink their positions. Tesla, Oracle, Hewlett Packard, Palantir, Vizio, Nvidia, Zoom, 3M, and even Disney have expanded heavily or relocated to other states because of higher taxes, labor costs, and regulatory hurdles.

California’s construction industry, and by extension the economy, can only benefit from policies that reduce these rising costs, rather than adding new ones.

If Newsom truly wants to support consumers, the solution lies in reducing the cost of doing business. Instead of imposing more regulations, such as the new gas bill, California could focus on lowering operational costs by addressing the true drivers—like high taxes, excessive regulation, and complex permitting processes. This would make the state more attractive for companies and help alleviate the rising costs of construction that ultimately affect consumers.

The intent behind the law may have been good, but it risks making California a less affordable place to live and work. With businesses already leaving the state in search of better economic conditions, it’s crucial that we adopt policies that keep companies, jobs, and investment in California—rather than pushing them elsewhere.