There’s a Solution to Rising Home Prices: Higher Density

Higher density is the way to solve rising home prices according to Richmond, Virgina.

According to the Richmond Times Dispatch, sixty percent of the total cost of a new for-sale home is construction-related, according to research by the National Association of Home Builders. Today, a humble single-family home with three bedrooms and two bathrooms will cost at least $300,000 to build, assuming basic packages for materials, fixtures and appliances.

Consider the other 40% baked into the cost of the home: the land and its development. Data from Integra Realty Resources shows the average price of land in Chesterfield County during the 12-month period that ended in June 2023 was $105,248. The low cost of a townhouse is more affordable than the low cost of a single-family home, and the increasing market share of townhouses and condos drives down the average price. Single-family lot prices in Chesterfield have reached $300,000 for a new community section averaging more than an acre in size. That price includes the raw purchase of land and the engineering, utility and road infrastructure, environmental mitigation and mandated government requirements — before home construction even begins.
The same cost factors go into the construction and development of for-rent communities. In Chesterfield, a new apartment community, factoring in land, design, lending, site development and regulations, costs an average of $230,000 per apartment. Add parking garages (enough for 1.5 parking spaces per unit), and the average cost per apartment increases to $270,000.

For-rent communities offer financial advantages to millennials with a lower barrier to entry: no down payment required and zero home maintenance. The younger generation does not necessarily want traditional home ownership with a big house and yard. Many seek less to maintain and prefer smaller living spaces, which are often more affordable.

The Home Building Association of Richmond’s mission is to protect the American dream of home ownership. Our advocacy ultimately benefits the homebuyer and renter. HBAR supports high-density development for two reasons:
High-density development reduces sprawl. Designating areas for high-density development helps keep rural areas rural. Reducing density will trigger new developments to move horizontally through the counties as housing must support a growing and expanding population.