The Small Lot Limit

Nobody Asked Me But… Smaller Lots To Offset Rising New Home Costs Has Its Limits

By Dennis Sweeney, Executive Vice President
HBA of the Greater Rockford Area

Every developer/builder understands that the cost of the land/lot determines the cost of the house. Therefore, if you can reduce the cost of the lots then you can reduce the cost of the house. Smaller lots mean more lots and thus more affordable lots as a starting point for building a new house.

However, there is a limit to how small you can go in every market.

Local zoning laws will have density limitations and set back requirements plus the utility easements that limit the buildable area of a lot. Consumer market forces require that new homes in each market have certain design features like number of bedrooms and bathrooms, laundry room, garage parking, ranch style design, etc. to make them sellable. There are interior amenities that are required as well, like solid surface countertops, hardwood/plank/tile flooring, A/C, dishwasher, upgraded lighting fixtures, upgraded plumbing fixtures, outdoor living area, etc.

A few years ago, some local builders looked at the possibility of building new homes on infill city lots. It was difficult to put a ranch style three bedroom house with an attached two car garage, the most popular local housing design, on an older infill city lot. When that lot size is reached then that is when the lot downsizing for new homes will end.