Why Does It Cost So Much to Remodel Here?

The question we get more than any other is some version of the same thing

Why does it cost so much to remodel in Santa Barbara?

The answer is complicated. But part of it starts somewhere most people probably don't expect.

From the outside, Santa Barbara looks like a contractor's dream. Wealthy clients. Spectacular homes. Generous budgets. Great building weather year round. And yes, those projects exist. The eight figure whole home renovations, the custom builds with view decks and wine caves that end up in shelter magazines.

But what most people don't realize is that the high end construction market also influences what construction costs throughout the rest of our market.  Here's the paradox: Santa Barbara's ultra high end construction market helps create a higher price floor across the broader market.  Part of this is basic supply and demand.

There are only so many exceptional tile setters, framing and finish carpenters, electricians, plumbers, painters, cabinetmakers, and other skilled tradespeople working in our area at any given time. And that supply can't expand overnight. These are skilled careers that take years, sometimes decades, to master.  When demand for those trades is high, everyone is competing for the same limited pool of talent.

And this isn't just something contractors complain about. The City of Santa Barbara's own Housing Element identifies a shortage of construction labor, particularly in specialized trades, as a contributor to higher construction costs and project delays.  Economists might call this a “capacity constrained labor market.”  And I think this label actually works quite well here.

The very large projects in Montecito, Hope Ranch, and elsewhere are one important source of that demand. A major renovation or custom home can keep some of our area's most talented crews busy for months, and even more often, years. Those crews obviously can't be in two places at once.  That doesn't mean a $15 million remodel directly determines what your bathroom costs. It does mean your bathroom remodel exists in the same labor market. That includes what a bathroom remodel costs in Santa Barbara, and how long it takes to complete one.

When a finite supply of skilled labor meets strong demand, the market has to adjust somehow. In practice, that can mean longer lead times, higher labor prices, or bringing qualified workers in from surrounding communities. At Kellow Construction, we try very hard to keep our trades local whenever possible, working with people who are accountable, invested in their reputation here, and integrated into the community we all live and work in, but not everyone here has the same approach.

Larger projects can also offer something incredibly valuable to a trade contractor: continuity. Months of predictable work without constantly estimating, scheduling, mobilizing, and demobilizing from a series of smaller jobs.  A smaller project therefore isn't necessarily cheaper on a proportional basis just because it's smaller. Most of the time it’s quite the opposite.

Santa Barbara's geography compounds all of this.  We function a little like an island economically. We're tucked between the ocean and the mountains, with a limited local labor pool and no enormous adjacent workforce to casually draw from.  Of course, tradespeople come up from Ventura, Oxnard, Santa Maria, and beyond every day. That's a normal part of building here. But distance isn't free. Drive time, fuel, vehicle costs, scheduling complexity, and the simple inefficiency of spending part of a workday getting to and from a job all eventually become part of the economics of doing the work.

Then there is housing.  The people building and maintaining Santa Barbara have to figure out how to live within commuting distance of Santa Barbara. Our housing costs make that increasingly difficult. When the cost of living in and around a labor market is exceptionally high, employers have to compete for workers in that environment too, and provide wages and benefits so they can live and thrive in the community they work.

The economics aren't perfectly linear. Your electrician's housing payment doesn't simply get added to your invoice. But over time, the cost of attracting and retaining skilled people in an expensive place influences what businesses must charge to operate here.  And labor isn't the only thing making construction expensive.

There are materials, engineering, permitting, code requirements, supervision, project management, vehicles, equipment, office staff, accounting, warranties, and all the other decidedly unsexy things required to run a legitimate construction company.  Then there's the cost no one talks about until something goes wrong: insurance.

A responsible contractor, one you actually want working on your home, carries the insurance appropriate for the work they're performing. General liability and workers' compensation are obvious examples, and many established companies carry additional coverage as well. Responsible subcontractors need appropriate coverage too.  Insurance is a huge cost for all the trades. So is licensing, supervision, project management, safety programs, accounting, warranty support, and maintaining the infrastructure required to stand behind a project after the last invoice is paid.  Those costs are ultimately distributed across the work a company performs.

This is one reason homeowners need to be careful when comparing bids based only on the number at the bottom.

If one proposal comes in dramatically lower than another, it doesn't automatically mean anything nefarious is happening. Contractors can have different overhead, different margins, different workloads, different scopes, and different ways of running their companies. Sometimes one contractor simply sees the project differently.  But homeowners should understand what is behind the difference.

Are the scopes and fixture selections actually the same? Are the same things included? Who is supervising the project? Who carries the insurance? What level of tradespeople are being used? Who is managing the schedule? What happens when something goes wrong? Who answers the phone two years later?  A lower number can absolutely be a better deal. It can also just be a different product and experience, which it usually is.  So what can a homeowner actually do about any of this?

Start talking about money early.

Before you fall completely in love with a design, have someone who understands current construction costs help you understand whether the vision and the budget live on the same planet. 

The earlier that conversation happens, the more choices you have.  A $50,000 problem discovered on paper is frustrating. A $50,000 problem discovered after demolition is something else entirely.

Also, give yourself time. In a labor market where the best tradespeople are busy, flexibility has value. A bathroom remodel in Santa Barbara typically runs four to eight weeks once you are in construction -- longer if tile is custom or if permits are required for plumbing changes. If you absolutely must have a particular person or level of craftsmanship and you absolutely must have it immediately, you may be competing with every other project that wants the same thing.  And finally, when you're comparing contractors, compare more than price.

Ask what you're actually buying.  Santa Barbara is an extraordinary place to live, and our homes reflect that. We have gorgeous old houses, complicated sites, beautiful architecture, strict building requirements, expensive real estate, demanding projects, and an unusually talented community of people who know how to work on all of it.  The same forces that make construction here expensive are, in some ways, connected to what makes the work here exceptional.  

So when someone asks me why remodeling in Santa Barbara costs so much, I don't think the answer is simply, "Because Santa Barbara is expensive."  It's more interesting than that.

We are building in a small, geographically constrained, extremely expensive labor market with strong demand and a limited supply of highly skilled people. The biggest projects don't single-handedly set the price of everything else, but they compete for that same scarce talent and help shape the market the rest of us build in.

Add the cost of housing, travel, insurance, regulation, materials, supervision, and running a responsible construction business, and suddenly the numbers start making more sense.