In response to concerns from Portsmouth, New Hampshire residents that teardown McMansions were going to be constructed, the developer said:

“By the time we renovated them, it would have been more expensive to do that than building a brand new energy-efficient home. That’s how we made the decision,” Chinburg said…

The company comes up with homes prices, he said, by “basically adding up what it costs to buy the property and build the homes,” and then adding “a fair margin.”

“Unfortunately that’s the market now … we’re not gouging people,” Chinburg said.

It would be interesting to see a breakdown of the different costs. Older homes may not be a great state of repair, they may need to be brought up to code, and they may not have the current features property owners expect. All of this requires money.

This reminds me of what can happen with big box stores. Vacant ones may not be very attractive given maintenance costs and the need to reconfigure the space for another user. Why not just build another one?

And while teardowns tend to occur in places where land is desirable, I wonder if this points to a tough future for many older homes and the aging American housing stock: will the costs of maintaining or updating the home be perceived as worth it?