Four Ways to Cut Construction Costs and Increase Buying Power in Home Building

According to a Reuters poll of experts, home prices in Canada are expected to increase slightly this year and continue to rise in 2025. This is due to high demand for housing, limited new supply and the possibility of interest rate cuts later in 2024. 

With the cost of building a home predicted to increase, many home builders are looking for ways to lower construction costs without compromising on quality or overall profitability. Here are four effective strategies to achieve these goals and increase buying power in your home building business.

1. National Accounts Program: Hedge Against Material Cost Increase

As a home builder, you likely have great relationships with your suppliers and receive competitive pricing that’s in line with the volume you build each year. What would happen if you could multiply your buying power ten-fold or more? Think of the leverage you could gain with those who supply your plumbing and electrical fixtures, drywall and lumber.

There are many benefits of joining a large network of builders — you gain access to cost discounts and rebates through a national accounts program that provides pricing advantages you may not be able to obtain on your own. This is the power of strength in numbers, as you gain the ability to benefit from national builder pricing within your smaller home building business.

Even if you only reduce your cost per square foot by $1, you instantly save thousands of dollars per home, not to mention the substantial savings that can be realized when building entire communities. This can add up quickly when you’re saving on every window, door and faucet placed in your homes. Those dollars go directly to your bottom line.

2. Think Long-Term for Land Development

Along with construction materials, it’s important to note the cost implications of land development and labor. The land acquisition process takes time and money. It can be challenging for builders to find raw land that needs to be entitled and developed before home building can begin.

Available land in desirable locations is scarce and expensive. The right piece of land might cost more in the short term, but the wrong piece of land has long-term cost implications. Not only will it result in poor sales and slow velocity, but it will extend the time spent on a construction site and increase the costs associated with it. As Phil Fankhauser, co-founder of Epcon Communities, likes to say, “You can never get a good enough deal on a bad site.”

3. Planned Building Attracts Trade Partners

Labor is another cost concern for many builders. The availability and consistency of trade partners can be hard to come by, but there are benefits to production building that help regulate the flow of labor and reduce time on site.

By building in one location over several years, trades have consistent work and are more likely to prioritize that project over others. Furthermore, building a limited lineup of floor plans allows them to avoid a learning curve on every job, which makes the process much more efficient over time. Planned even-flow building, rather than ebbs and flows in volume, allows you to manage an accurate schedule and move trades efficiently from one house to the next.

Taking labor and land into consideration is not immaterial when planning for the construction costs of a home, so make sure you know your criteria for an ideal location and, once you go vertical, strategize ways to make your job sites as attractive as possible to your trade partners.

4. Take the Complexity Out of Home Building

Home building can be complex, but it doesn’t have to be. If you are a custom or semi-custom home builder, how much time are your people spending on pricing customizations, managing construction issues arising from one-off designs or reworking features that appeared to work on the drawings but posed problems in the field?

What additional costs are your suppliers baking into your bids, knowing that they will spend extra time troubleshooting complex custom blueprints or making special trips to scattered job sites? How much could you lower your costs through standardized materials, giving yourself the opportunity to build your plans more than once? If any of these questions strike a nerve with you, your business could benefit by committing to a simplified business model.

Tap Into the Active Adult, Seniors and Related Housing Market in Canada

Epcon Franchising has exclusive opportunities for home builders or developers in Alberta, Ontario, British Columbia and other provinces. If working with a large home builder would lower your construction costs, increase your buying power and give you greater ability to meet housing demand, then reach out to Epcon Franchising to see what real estate franchise opportunities exist in your market.