
As demand to live in Greater Boston soared and buildable land dwindled, many builders saw starter home properties as a development opportunity, and over the last two decades, neighborhoods once filled with cheaper housing began to transform with teardowns and so-called McMansions.
The math behind that shift is straightforward, said Paul McGovern, owner of Needham-based homebuilding firm McGovern Construction Management. Land prices in Greater Boston, particularly in the close-in suburbs, are incredibly high. When towns require a big parcel for a single house, the price of acquiring the land leads to a far higher overall development cost, which then requires a builder to construct a bigger, more expensive house to make money on the project.
In Needham, where McGovern frequently works, a buildable lot can typically be acquired for around $1.2 million, he said. Construction costs are sky-high right now, and it often costs around $1 million to build a house. It makes little sense then, McGovern said, to build a home on that lot that will sell for $2.4 million. That’s why some builders opt for projects that will sell for between $3 million and $4 million, with significantly better margins but far more expensive than the typical Massachusetts resident can afford.
Three quick thoughts in response:
- This math is a little different than some I’ve seen discussed before. When land could be acquired for less and when construction did not cost as much, the resulting teardown home would then be in the $1.5-3 million range with plenty of margin for the builder. But if costs are significantly higher, how many buyers could afford the $3-4 million range? What does that mortgage look like?
- This discussion of teardowns is in an article about large minimum lot sizes in some Massachusetts communities. This drives up costs for development and redevelopment. What would the teardown math look like if a buy was able to take that larger lot, subdivide it, and build multiple residential units on the same original land?
- The policy change in question – changing lot size requirements for housing – would add some residential units. Here are estimates of how many: “The ballot question campaign has estimated Question 7 would add between 2,200 and 5,700 net new homes in the state annually. But the Tufts University Center for State Policy Analysis pegged the number far lower, somewhere between 350 and 1,200 new homes per year.” This is small change that might slowly add up. What other housing solutions are on the table to go along with this one?








