Study Shows Pa. Has High New Construction Premiums

Pennsylvania has some of the highest premiums on new construction, according to a new report by Realtor.com.

The Affordability and Homebuilding: State-by-State Report Cards showed that states in the Northeast and West, which generally have stricter zoning and land use regulations, received some of the lowest grades in affordability and homebuilding.

Pennsylvania has an 89% premium on new construction, the fourth largest, just behind Kansas at 105.9%, Michigan with a 96.4% premium and Ohio with a 91.1% premium. New York followed with a 76.2% premium.

The report issued states an overall grade, calculated based on four metrics, which were a weighted average of percentile ranks:

• Realtor.com’s affordability score: 25% of the score
• Median earner’s share of income spent on median-priced listing (ranked low to high): 25% of the score
• Permit-to-population ratio: 40% of the score
• New-construction premium (ranked low to high): 10% of the score

Realtor.com Chief Economist Danielle Hale notes on Realtor.com, “Our state report card rankings reveal stark disparities in housing affordability and homebuilding efforts across the U.S. While some states are leading the way with strong homebuilding activity, others are grappling with high housing prices and sluggish construction.” 

Pennsylvania received a C based on its total 48.3 score. While the state received a 0.82 affordability score, based on the median home price of $306,740 and the median household income of $74,466, its high new construction premium lowers its overall grade.

“Pennsylvania scores quite high in both of our affordability metrics, including the median-median test, in which the median earner in PA would only have to spend about 25% of their income on a mortgage payment for the median-priced home listing (30% is the generally acceptable maximum here),” said Joel Berner, senior economist at Realtor.com. “What holds the state back and results in it getting a C is its relatively low level of new construction activity and the relatively high price point of new homes there. Without improvements to homebuilding, meaning more and lower-priced new homes being built, Pennsylvania is in danger of losing its current affordability advantage.”

Pennsylvania’s share of 2024 housing permits was just 1.6%, but the state makes up 3.8% of the population. Pennsylvania’s permit-to-population ratio is 0.42.

This compares to the highest state, Texas, with 15.3% of new homes permitted for construction in 2024, and makes up 9.2% of the U.S. population. Texas has a permit-to-population ratio of 1.67. The strongest performing state by this metric was Idaho, with a permit-to-population ratio of 2.03, and the weakest is Alaska at 0.31. Realtor.com notes, “We use this ratio to show which states are pulling their relative weight when it comes to addressing the shortage of homes across the country by building more.”

The report concludes by noting, “More permissive local zoning and a focus on delivering competitively priced new inventory are the curriculum for 2025 and beyond. All levels of government as well as private community organizers should focus on removing the barriers to homebuilding that have created the current predicament.”

The Pennsylvania Association of Realtors® recently convened a round table of industry leaders, with the chair of the Senate Urban Affairs Committee, and among the topics of conversation were construction costs.