In Asheville, the cost of building a home is 21% higher than building a new home
ASHEVILLE – Permitting activity for new residential construction in the city of Asheville ended higher in fiscal year 2024, which ended in June, than in the same period in 2023, suggesting new projects could soon increase inventory in a housing market suffering from rising rent and housing costs, City of Asheville permitting statistics show. However, the cost of residential construction projects has significantly outpaced the growth in permitting activity across the Western North Carolina region due to high interest rates and costly labor, materials and construction costs.
During a City of Asheville Planning and Economic Development meeting on Aug. 12, Mark Matheny, director of development services, said overall activity in permitting new residential buildings increased in fiscal year 2024. Data indicated an increase of about 14% over fiscal year 2023. Overall activity in permitting residential and commercial projects decreased slightly compared to recent years.
While building permits for new residential homes, primarily one- and two-family homes, increased moderately last year, the estimated costs of the projects far exceeded the increased activity. In 2023, developers estimated total costs for 295 permits at $86 million. In 2024, developers estimated costs for 335 permits at $116 million. That represents a 35% increase in estimated costs with only a 14% increase in activity for new residential building permits.
“The construction sector is incredibly expensive right now. Whether it’s the materials, the labor or the land. Everything that has to do with the construction sector is expensive,” Matheny said during the meeting.
Asheville’s biggest housing challenge is often cited as a lack of housing — a problem not unique to the mountain town but critical to finding solutions to the housing crisis plagued by rising rents and homeownership costs, regional real estate experts say. But as developers look to build, higher interest rates have made financing more difficult — especially for larger projects — and have likely contributed to the rising cost of new construction as well.
“Banks are not willing to provide large sums of money,” Matheny said, noting that “more self-funded and partnership-funded projects” are underway in the city.
As of June, U.S. Census data indicates that the assessed value of single-family homes approved for construction in the Asheville Core Based Statistical Area was around $368,000 per building. The figure is about $144,000 below the reported median sales price for single-family homes in the city of Asheville, but represents a 40% increase from assessed values of $284,000 in 2019.
Meanwhile, the estimated per-unit cost for projects with five or more residential units, commonly referred to as “multifamily projects,” has risen from around $92,000 in 2019 to $146,470 in 2023—a 59% increase in just a few years.
City Council member Sage Turner said that while there is growth in Buncombe and surrounding counties, developers in Asheville may have trouble financing large-scale housing projects in the city due to market pressures and land shortages.
“It’s harder to build on,” Turner noted of building on Asheville land. “It has to be bigger and taller and require more financing and then: poof. (It’s) impossible.”
As for overall permit activity, Matheny called it “consistent and strong,” but noted a slight decline compared to 2023. Total permits decreased 9% from fiscal year 2023 to fiscal year 2024, from 13,108 in fiscal year 2023 to 12,226 in 2024. However, overall activity was only 1% below total permit activity in 2021, according to figures released by the city.
Commercial project permits were hit the hardest, falling nearly 12.5 percent between fiscal year 2023 and fiscal year 2024. Total residential project permits, which include new projects and modifications to ongoing projects, also declined slightly but are still higher compared to 2018, Matheny said.
“The commercial sector is declining because you just can’t finance these big projects,” he continued.
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Will Hofmann is the growth and development reporter for the Asheville Citizen Times, part of the USA Today Network. Have a tip? Email him at [email protected]. Please support this kind of journalism with a subscription to the Citizen Timesit.
