Shirley Mae Story Johnson

Why have home prices skyrocketed so much in Chester County?

The quick answer is low interest rates and easy money. We all know that to be true. There is another reason you may not have considered, and that is the cost of developing land and getting building lots approved for new residential construction.

Chester County is a desirable place to live and as more people move to the county, the demand for all types of housing increases. Developers who are in the process of subdividing land, paying for the rising costs of attorneys, engineers, surveyors, township resources, etc. are adding to the end user's cost of purchasing a new home. New home process increase and existing home prices follow suit. It's simple economics. Add to this the fact that as of 2001, more than 36 percent of all Chester County land was being used in active farming. On top of that statistic, each year more land goes into trusts, conservation easements, and open space thereby decreasing the supply of developable land thus increasing the price of that land and the new homes on it.

If you were to look at building lots available for purchase in Chester County, you will find several common themes. The lots may require a septic system and well water, they will likely be on a rolling hill or even a steep slope, they may have streams or wetlands, and there may be power lines overhead. All of these "features' are signs that the perfect building lot is hard to come by these days. Unfortunately, these "features" cost money ... a lot of money, especially when it comes to obtaining the approvals necessary to build on those lots.

Understanding the details of what goes into the process of subdividing land and creating a buildable lot should help crystallize why home prices are rising. As an example, we will use a fictional four-lot subdivision. The site has some trees, a small stream, sits on a hill with some steep slopes and part of it was used for farming years ago. The site has public water buy needs septic systems.

First, the developer looks at the land and must assess the viability of the soils for septic systems. We will need eight septic areas for our four homes. We need two septic areas per house since, typically, each home must have space for a primary and a backup system. We will need to bring in a soils consultant, a septic system specialist and an excavator to dig holes to test the soil. We will also need the health department to oversee all the operations. We must also check for nitrates since the land was used as farmland. Farmers of certain crops use fertilizers that contain levels of nitrates, which at high levels, can contaminate drinking water. Humans also produce nitrates in their sewage; therefore, we may need cleansing techniques to ensure the waste is not damaging our drinking water.

Next, our developer may look to see if more than 10 lots have been split off from the original tract of farmland since 1973 (don't ask, it's a complicated rule). They may also check on the existence of certain wildlife or soil conditions, or even an abundance of failed septic systems in the area. If any of these are true, we may have to submit a special sewage planning module which can take 6-12 months to complete. This one task alone can add tens of thousands of dollars to the cost of each home.

What happens to all the rain that hits the roof of your new home, driveway, or sidewalk? It must be accounted for and managed during stormwater management techniques. This task is typically taken on by your engineer and may also require additional digging to determine how the stormwater will filter through the soils.

The new homes must have a driveway or road that connects them with existing roads. Any site line issues with entering and existing a roadway must be considered, trees may have to be removed to allow a driver to see cards down the road. Banks may have to be cut back and excavated to allow room for acceleration and deceleration lanes. Special permits may be required if we are placing our driveway over a stream or wetland. Townships may require that adjoining roads be resurfaced after the new homes are built. There may also be impact frees per lot or a dollar amount contributed to the local municipality. This too adds dollars to the cost of our homes.

Our lot has a stream and wetlands, which may require us to complete a wetlands delineations study to ensure no endangered species are on site and that our proposed homes are not too close to the wetlands area. We may pay an environmental consultant to do this work along with adding additional governmental agencies to check our work and create the need for more approvals. Once again, adding dollars to the cost of our homes.

Finally, the area we are working with has some steep slopes that require engineers to design retaining walls to hold back the hills. We may need to provide an enhanced landscaping package after construction to be certain that the soils remain in place using a combination of mature trees and shrubs with strong root systems. A landscape architect would help us with this task of selecting the appropriate cover and can cost into the thousands of dollars.

Many of these rules and regulations that guide a development project are there for a reason and they serve their purpose to protect us from environmental hazards, dangerous conditions and future issues with our homes. Each year, Chester County has fewer and fewer sites that can support new homes and the sites it does have are more difficult to build upon. Why have home prices skyrocketed so much in the last five years in Chester County? Hmmm ... where do we begin?

David Marshall lives in West Chester with this wife and son while investing in real estate full-time across Chester County.

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