The Real Cost of Building a Home in Houston

Every first-time builder in Houston I have ever met underestimated their build by somewhere between 12 and 25 percent. Not because they were careless. Because they budgeted for the obvious line items and forgot the ones that always show up. Here is what it actually costs to build a home in Houston in 2022 and where the money goes.

The Big Picture for 2022 Houston

For a 1,800 square foot single-family new build in an inner-loop Houston neighborhood, hard construction cost in 2022 was running $145 to $185 per square foot for a builder-grade finish, and $200 to $260 per square foot for a step up. High-end custom builds were already pushing past $300 per square foot. Land was on top of that, and so were the soft costs nobody includes in their first spreadsheet.

The Line Items Beginners Miss

• Permitting and impact fees. City of Houston permit fees, drainage review, and any required impact or tap fees can add several thousand dollars per unit and weeks to your timeline.
• Utility tap and meter fees. Water, sewer, and electric service installation are not free. A new water tap alone in some Houston neighborhoods runs four figures.
• Survey, soils, and engineering. A new survey, geotechnical report, and structural and MEP engineering for a custom plan are all required. Stock plans help, but you still pay for site-specific engineering.
• Construction loan interest. If you are using a construction loan, interest accrues on every draw for the entire build period. On a 9 to 12 month build, this is real money.
• Insurance. Builder's risk insurance for the full term of the build is a soft cost most beginners forget.
• Closing costs on the back end. If you are selling, plan for commissions, title, and seller-paid closing assistance.

How to Budget a 1,800 SF New Build

Here is the structure I use as a starting point for an 1,800 square foot Houston spec build. Your numbers will move based on lot, finishes, and current material pricing, but the structure holds.

• Land: 15 to 25 percent of total project cost
• Hard construction: 60 to 70 percent
• Soft costs (permits, engineering, insurance, utilities): 5 to 8 percent
• Financing costs (interest, points, fees): 4 to 7 percent
• Contingency: 10 percent of hard costs, minimum

If your spreadsheet does not have a contingency line, your spreadsheet is wrong.

Common Cost Overruns

Three categories blow budgets on Houston new construction more than any others. Foundation, change orders, and finishes.

Foundation surprises come from soils. Houston clay moves. If your geotech report recommends a deeper or thicker slab, that is not a place to cut corners. Change orders happen when the homeowner or developer keeps adjusting scope after the budget is set. Each change carries a markup and a schedule hit. Finish creep is the slow process of upgrading the cabinet package, the tile, the fixtures, and the appliances during the build. Each individual upgrade looks small. Together they eat the contingency.

What to Do With This

If you are about to budget a Houston new construction project, write your line items first and your dollars second. Use the structure above. Then go back and ask, for each line, what could go wrong and how much it would cost. That is your contingency conversation. Have it before you put a foot on the lot.

At Coffee & Construction Houston, we walk through real budgets from real BEDDIEO projects. The room is The Construction Lounge. The firm behind the budgets is BEDDIEO Construction & Design. You can also read more about my work as a Houston developer.