How Much Does it Cost to Build a House in Cambridge?

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Cambridge sits directly above the state capital city of Boston, across the Charles River. In its earlier years, the city was one of the influential centers of the Puritan doctrine, which was adopted by the town’s founders. Today, Cambridge is well-known for the county’s outstanding universities: Harvard University, Massachusetts Institute of Technology (MIT), Ledley University, Hult International Business School, as well as the Radcliffe College before it merged with Harvard. Not only that, the city’s economy is consistently thriving with its Kendall Square being dubbed as “the most innovative square mile on the planet.” This is because of the area’s high concentration of successful startups that were established within the vicinity of the square since 2010.

The Cost of Building a Home in Cambridge

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While buying a house was quite popular, after the COVID-19 pandemic, housing inventory has decreased to an all-time low. Aspiring homeowners are now having a difficult time buying a home, especially first-time buyers. Bidding wars have become a common occurrence, and home values are rapidly growing, approaching the cost of construction. As a result, many people are opting to build new homes and customize them according to their preferences.

A new 2,600-square-foot home in the county will cost $400,000 to build, according to Home Builder Digest. This figure falls within the range of multiple bids on the online contractor marketplace BuildZoom (BZ). BZ reports that building a new custom home costs roughly $140 to $320 per square foot, or $345,000 to $800,000 for a 2,500-square-foot home.

In terms of home construction costs in Cambridge, the median price of $210 per square foot is generally within the range. Value-conscious homes are projected to cost between $180 and $210 per square foot, while mid-range homes will cost between $210 and $330 per square foot. High-end homes, on the other hand, are more expensive because project owners prefer more customization and modifications. The price per square foot for these houses ranges from $330 per square foot and beyond. Aspiring homeowners will need to have an average budget of $450,000 to $825,000 to construct a 2,500-square-foot home in Cambridge.

These are merely estimates and not exact figures for how much it costs to build a house in Cambridge. The location, size, home style, architectural fees, permits, and many other elements all have a role that affects the overall construction cost. These factors are divided into two types: hard costs and soft costs.

Hard Costs

Hard costs pertain to the factors involved in the physical building of the home. This includes the construction costs, materials, labor, and landscaping. Extra amenities or home additions are also included in this category, alongside heating, ventilation, and air conditioning (HVAC), electrical, and plumbing systems.

A custom home in Cambridge costs about $160 per square foot on average. This estimate only covers the costs of basic construction, such as labor, foundation, standard building materials, basic finishing, and cleanup. Considering a lower-cost structure might bring this figure down to around $130 per square foot. Upgrades such as premium materials, kitchen and bath customisation, and the installation of extra facilities, on the other hand, might push the price up to $290 per square foot. A 2,500-square-foot home in the city will cost between $325,000 and $725,000 to construct, excluding site work, land, and other fees.

Listed below is the estimated price breakdown of each home construction service:

The overall building cost is heavily influenced by material costs and labor fees. Materials typically account for around 50% of the construction budget and are determined by the materials’ quality, type, and quantity. Labor costs, on the other hand, range from 30 to 60% depending on the location, size, style, and layout of the home.

Listed below are the average fees for each services, as per ZipRecruiter:

Framing Contractor: $33 per hour
Construction Manager: $42 per hour
Roofing Contractor: $25 per hour
Carpenter: $24 per hour
HVAC Installer: $25 per hour
Electrician: $27 per hour
Plumber: $24 per hour

Figure 1. Typical cost breakdown of a single-family home constructed using the conventional method, according to Home Builder Digest.

Soft Costs

Soft costs refer to the fees that go beyond the actual building of the physical home. Usually, these expenses are planned and settled before the construction begins. This category includes fees associated with land acquisition and development, authorizations from the local government, and the overall appearance and layout of the home.

Figure 2. Soft cost percentage and average price range of additional fees, determined from the overall cost of custom home building in Cambridge.

Cost of the Land

According to the city’s Zoning Regulations, the minimum lot required for each dwelling unit is determined based on the chosen neighborhood’s density. For residences that are in the A-1 district, or the lowest density, structures should have a minimum lot of 6,000 square feet. This area is also limited to detached single family dwellings. On the other hand, residences in the A-2 district, or areas with a slightly higher density compared to A-1, require a minimum lot of 4,500 square feet. This area generally has the same use limitations as the A-1 district except for new two-family houses and apartments which are prohibited. An exemption to this rule is the conversion of a single family home into a two-family one.

As for the land prices, Orchard listed Massachusetts as the 4th most expensive place to buy an acre of land. One acre in the state cost roughly $103,000 or $2 per square foot. With Cambridge specifically, there are currently no available lands. However, the city being in close proximity to Boston and being considered as its major suburb, their land prices do not widely differ and are generally in the same range. To give context, land listings in Boston have an average price of $200 per square foot, as per Redfin.

Permits and Other Fees

Before beginning any work, local governments require project owners to obtain a permit. Members of the board will examine the blueprints submitted and must evaluate whether the project is feasible. If granted, the project owners will be issued a permit that will act as a go signal for the project. If it is rejected, changes must be made, and the plan must adhere to the regulations. This is an important stage because it guarantees that the structure and property are safe for both homeowners and the neighborhood.

All new constructions, repairs, and alterations in the city require a minimum fee of $50, according to the Cambridge Inspectional Service Department. As for the expenses to be settled, building permit fees are calculated based on the construction costs. Every $1,000, or fraction thereof, costs $20. Suppose building a 2,500-square-foot home in Cambridge costs $400,000. The total building permit fee to be settled for this project costs $8,000.

For the plumbing, mechanical, and electrical permits, costs are determined based on the fixtures and accessories to be installed.

Keep in mind that starting the construction process prior to obtaining the permits necessary will lead to a violation; all permit fees required will be tripled in value. Settlement of this will not exempt anyone from fully complying with the regulations set by the local government.

Architecture and Design Fees

The cost of an architect and a designer differs widely. Because of their experience, expertise, and reputation, some architects charge more than others, and others are paid as part of a package deal with design-build firms. In the end, hiring them can help ensure that the project designs are strictly followed and that the structure complies with city requirements.

Architects in Cambridge normally charge between 13 and 14% of the building cost for new home projects, depending on the complexity and scope of work. There may be instances that this rate will either increase or decrease depending on the workload, complexity, intricateness of details, and the home’s size. Suppose a basic building charge for a 2,500-square-foot home in Cambridge is a $400,000. The total architecture fees will then cost between $52,000 and $56,000. This estimate is based on a mutually agreed-upon scope of work between the client and the architect. Any additional tasks will be invoiced separately, typically on an hourly basis, and added to the overall design fees.

How do Cambridge’s custom home building costs compare to nearby cities?

The state of Massachusetts is categorized as part of the country’s Northeastern region. Its median home building contract price is estimated to be around $155 per square foot. This makes the area the second most expensive region to build a house in, running behind the West. In Massachusetts specifically, its median home building contract price is around $150 per square foot, making it generally mid-tier as it ranks 5th as the most expensive state to build in.

The average cost of building a home among major cities in Massachusetts is relatively the same, ranging from $162 to $163 per square foot with the exception of one city. Listed below are the median basic home building price of each major city, as compared to Cambridge’s average cost of $160:

Boston: $163 per square foot
Framingham: $163 per square foot
Lowell: $163 per square foot
Springfield: $162 per square foot
Worcester: $137 per square foot

The Future of Cambridge’s Residential Construction Industry

When the pandemic suddenly broke out and the entire world went into lockdown, people were ordered to stay indoors for their own safety. This led to many families wanting to change aspects of their space. Some families have renovated their homes to improve them, while others have simply outgrown them and require a new one. Thus, many families are looking for a new house that meets their needs and matches their lifestyle. This was initially good news for the real estate market and building industry, but it quickly turned into an unmanageable demand and created an enormous strain on both the real estate market and housing industry.

Back in 2016, the Financial Times had already described that purchasing a property in Cambridge is more challenging than getting into the prestigious Harvard University. Today, it became even more difficult as the home inventory in the real estate market has reached historically low levels, causing prices to rise. Due to scarcity, bidding wars have become the norm. In fact, the value of single family homes in the city has increased by 13.5% over the previous year, and is now priced at a whopping $2,100,000. Fortunately, prices are starting to level and are now slightly lower than the peak. Housing inventories are also increasing and slowly catching up to the demand. Still, Cambridge remains the most expensive city in the metro area.

To combat the city’s surging housing prices, the local government is working hard to secure and develop affordable homes. Acquisition of existing residential structures, new construction, adaptive re-use of non-residential buildings, condominium acquisition, existing building restoration, and preservation of existing affordable housing are a few of the strategies they employ. Cambridge’s housing division collaborates with non-profit housing providers and the city’s housing authority to organize and finance these projects.

Cambridge currently has a number of on-going projects to further solve the high demand in housing. An example of this is the conversion of the former Edward J. Sullivan courthouse and jail into a mixed-use office, residential, and retail building. Another is the construction of a new residential building located at the heart of Kendall Square. The NoMa Site 1 will produce about 300 residential units, including 52 affordable and 10 middle-income units. It will also house more than 8,000 square feet of retail stores. This project is expected to be completed by the end of Summer 2022.