If you’re shopping for a newly built home within the city limits or nearby suburbs of places like Los Angeles, Chicago, Washington, D.C. or Nashville, your options can be limited.
“There are no newly built communities in Los Angeles,” says Tommy Beadel, CEO of Thomas James Homes, a Los Angeles builder of new homes on individual lots. “If you want new tract housing, you have to go 40 to 60 miles outside the city, which means an hour-and-a-half to two-hour drive in traffic.”
The solution for many urban and inner suburban buyers is to build a semi-custom or custom home on an infill lot, which typically refers to a single lot in an established neighborhood. Often, infill lots include a house that is obsolete.
“In L.A., the housing stock is 70 to 80 years old or older, typically a 1,000-square-foot house with three bedrooms, one bathroom and a driveway that takes up 20 percent of the lot,” Beadel says.
In most areas, building on an infill lot is more costly than buying in a new community, primarily because land costs are typically higher in neighborhoods prized for their location near city amenities or in good school districts. If you already own a lot, the costs are comparable to building a custom home, but you may find that zoning regulations restrict what you can build.
“Buyers come to us because they can’t find what they want in the neighborhood they want,” says Jonathan Lerner, CEO of Meridian Homes, a custom home builder in the Washington, D.C., area. (No relation to the writer.) “It can take more than a year to find a lot that meets their criteria and usually that means buying a lot with a house on it that we’ll demolish to build a new one.”
While location is the prime driver of the desire to seek out an infill lot, sometimes buyers also want features that don’t exist in their preferred neighborhood. “Buyers may be looking for a first-floor master suite or enough bedrooms to accommodate a multigenerational household,” says Lisa Pickell, president of Orren Pickell Building Group, a custom home builder in Chicago. “They need to build a custom home to do that.”
Land Before Home Design
Besides location, buyers need to understand the functionality of the land. Thomas James Homes buys lots throughout the Los Angeles area and helps buyers find a lot if one in the company’s inventory doesn’t match their needs.
“People come to us and want to talk about what their house will look like, but we need to talk about the land first,” says Sassy Hackett, head of sales and marketing for Capitol Homes, a custom home builder in Nashville. “The land determines everything.”
Most infill builders buy single lots to build on, sometimes with a house to demolish. In addition, many of their customers come to them with a piece of land they own with or without a house. Sometimes homeowners realize that they’re better off knocking down the house they live in rather than remodel it.
Getting rid of a house costs less than you might suspect. Generally, says Pickell, acquiring the permits to remove a house and demolish it costs about $10,000 to $15,000.
That can be less costly than getting the permits and infrastructure in place on a lot that has never held a residence.
A benefit of owning or buying a lot with a house already on it is that the builder won’t be required to pay for a water or sewer connection or for impact fees, which some jurisdictions charge on new construction to pay for schools and road improvements, says Lerner.
“In Montgomery County, Maryland, impact fees cost $40,000 to $50,000 per new house,” he adds. “Paying $15,000 to knock down a house is much less expensive.”
In the Nashville area, impact and permit fees vary widely, says Hackett, from no impact fees at all in some places to under $2,000 in others. She says permitting fees run as high as $25,000 in some counties near Nashville.
In some cases, it may make sense to keep or restore part of the existing home.
“If you’re buying in an area with historical preservation guidelines, you may need to keep some elements of the existing home such as the façade and the original windows,” Pickell says.
Zoning rules may affect your decision about the existing home, too.
“Everything depends on the jurisdiction and where you want to place your new home on the lot,” Lerner says. “The rules have changed now, but it used to be that in Montgomery County you might want to keep a wall in the basement to get a more favorable placement on the lot, usually closer to the street than current zoning would allow.”
In some locations, you must keep part of the existing home to be grandfathered into earlier zoning guidelines, says Pickell.
Generally, though, it’s best to demolish a house. “It’s not safe and doesn’t make sense to keep an old foundation or some other part of the house,” Hackett says. “We also can’t warranty any part of the house that we didn’t build.”
To Blend or Not to Blend
One of the more challenging aspects of building a new home on an infill lot is blending into the surrounding neighborhood.
Existing neighborhoods with a homeowners’ association usually have restrictions on the exterior architecture of new homes, says Hackett. Even if there aren’t restrictions, architects typically try to mimic some elements of nearby homes so that the new home doesn’t stand out too much, she says.
“Zoning, setback and height restrictions can impact what we’re able to build, which is why we’ve preplanned a library of floor plans that buyers can choose between that we know will fit within the restrictions in the L.A. area,” Beadel says. “Scale and style can be hard because we’re often replacing a single-story home with a two-story structure. A lot of people in L.A. want a modern home, too, so we try to accommodate that, but we also build Cape Cod and farmhouse-style homes.”
Building Your Custom Home
Prices for homes built on infill lots vary widely by the housing market, the size of the home and the construction materials. For example, in Nashville, Capitol Homes typically builds homes with 2,600 to 3,100 square feet that are priced from the $330,000s to the $450,000s. In Chicago, Pickell says they typically build homes with 3,500 to 4,000 square feet for $1 million and larger homes are priced up to $4 million or more, not including the land.
Typically, whether you own your land or not, you’ll finance your home with a construction-to-permanent loan, says Beadel.
If you envision your dream home in the thick of an existing neighborhood, work with an experienced real estate agent or a builder that specializes in infill homes to find the right lot in the right location to accommodate your dream.
Visit NewHomeSource to find a custom home builder and learn more about buying and building on your own lot.
Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades.