Renovation Costs During COVID

We’ve all heard about the cost of lumber going up, but that’s not the only price increase we’re seeing. Estimating projects appropriately has been quite a challenge for us over the past two years, and we're definitely getting the hang of it. I’d love to share why it was so difficult for so long and what we are doing to help our clients navigate through the unknowns.

Creating the home of your dreams is a process, we’re here to help you realize that dream.

Photo by Milivoj Kuhar on Unsplash.

Increased Cost of Labor

The demand for skilled labor is going up, so high in fact that contractors have to increase wages and benefits to retain employees. Add to that the massive increase of sick time out, the time required for staff to mourn, and this is absolutely a time of mourning, isolation requirements, and perks offered to entice employees to vaccinate. It is an extremely expensive time to have a labor crew if you treat them with respect and dignity (which we pride ourselves on doing). However, the result of this attention to employee well-being is increased labor rates for your home improvement projects.

Increased Cost of Products

As I previously mentioned, we have all heard about lumber cost increases—what we haven’t heard is that these cost increases are across the board. Fasteners, tools, rentals, drywall, adhesives, you name it—everything costs more than we are accustomed to.

I mentioned product shortages in our article, “Design & Build During a Pandemic—Over a Year Later”. We know what happens when there’s not enough of a product, the price is raised to allow businesses to survive when selling less. This means that the toilet being purchased in 2022 will cost more than the one purchased in 2020.

Increased Sub-Contractor Costs

The cost of sub-contractors is directly correlated to both the cost of labor and the cost of products. Our sub-contractors are the best of the best, and because of this, they are in high demand.

What does this mean for you and your renovation project?

It means that the estimate your contractor has provided was probably based on their previous experience, and while they may have added padding to cover for the known cost increases, it is likely not enough (lesson learned the hard way). You see, typically we round up each expense to play it safe, adding plenty of cushion for items missed (because while we try to tick off every consideration, we are still human after all).

We usually recommend setting aside 20% for contingency (the “just-in-case” money). This is a standard recommendation, as referenced in this fantastic article by House Method, “How Much Should You Really Be Budgeting for a Home Renovation?”.

In today’s world, all those safeties that contractors have learned to depend on are being tossed out the window. The 20% contingency, it turns out, is nowhere near enough padding.

-Rachel Waldron

Bank Rate shared that “Some projects saw prices increase by more than 50 percent compared to 2019 levels…” in this article.

Your wonderfully diligent and careful contractor who has a reputation of coming in under budget, but is coming in significantly over budget was not irresponsible. They did not try to take advantage of you. They were not lazy in their estimating. They are not making excuses. There simply is no way at this time to provide an accurate and dependable estimate for renovation.

I know, that sounds awful, and I wish it were untrue. Renovations are already unpredictable. We all know that there may be surprises (old pipes, black mold, pests, etc.) that create complexity. Add to that complexity the unknowns of a 50% price increase that we diligently round up on and add at least 20% in safety… we’re still 30% UNDER what we should have planned for! Oh, Bank Rate, if only we’d found your article sooner!

We’re walking into this maze of the unknown with you, we will do our best to be your guide in navigating it.

Photo by Kamil Feczko on Unsplash

“What should I take from this?”

• It is an estimate. Take that ballpark estimate and know that the contractor has done their very best with it. Take it with a grain of salt and know that it is based on past experience and they will do their best to hit that mark.

• Be prepared for unexpected costs. No contractor can predict all the nuances of a project before starting. Every job is different.

• Pad your costs. Take into consideration that if project costs have increased by 50% in the last year and prices are constantly changing, it might be a good idea to know that a $40k ballpark with plenty of padding might really be $60k and it’s not due to a lack of care or experience. Be prepared for your project to cost more and do not start a renovation project without plenty of contingency set aside for unexpected costs.

• Be patient. Know that we are in a world of unknowns at this time. We are all mourning. We are all facing difficult times, we are working through it.

• Be sure of our intent. I know a LOT of contractors, and every one of us takes pride in happy clients, NOT the profit we made from a job. The truest profit is a happy client spreading the word that we did right by them.

What Waldron Designs is doing to address these fluctuations

• Waiting until all products have arrived prior to starting a project. This prevents any product price surprises (to an extent). Additionally, this saves on the time labor has to invest when not having to start and stop while we wait for additional materials.

• Smart estimations. We are estimating using retail costs, then selling at our wholesale cost + markup (this comes in lower than the retail cost). We’ve found that this comes in closer to the final total, taking into account fluctuations.

• Fees that are honest. We have recently doubled our materials fee minimum, being true to what the market is demanding.

• Labor rates that work. We estimate all labor at the rate of our highest-paid employees so that when lower-paid employees step in, it is a saving to you. Keep in mind, however, that lower-paid employees also typically need more handholding and supervision.

• Communication. We are communicating very firmly that estimates are just that, and that renovations are unpredictable as are the costs of products and labor today. An estimate is provided assuming ideal conditions and while we take what we can see into consideration, this is truly the best we can do.

None of this is intended to discourage anyone from taking on their renovation project. Our goal instead, is to encourage realistic planning and preparation for the unexpected. Feel free to contact us directly with any questions about these cost changes! We are happy to review them with you to the best of our knowledge and walk through preparation techniques for a remodel this year or beyond.

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