California homeowners have always faced challenges when it comes to protecting their properties, but over the past few years, something dramatic has changed: the cost to rebuild or replace a home has skyrocketed.
In a recent episode of Insurance Hour, host Karl Susman sat down with architect Tony Lewis, principal of Lewis Shepplein Architects, to explore what's really driving these cost increases — and why many homeowners are underestimating how much it would take to rebuild after a loss.
What followed was an eye-opening conversation that revealed just how complicated and expensive home reconstruction has become, and why it's critical that insurance coverage keeps pace with these realities.
Lewis began with data that confirmed what many in the construction and insurance industries already suspect: building costs are up across the board.
California's official Construction Cost Index, which tracks labor and materials in Los Angeles and San Francisco, tells the story in numbers:
Between 2011 and 2015, annual increases averaged just 1.75%.
From 2016 to 2020, the average climbed modestly to 3.12%.
Then came 2021, when costs surged a staggering 13.4% in a single year.
In 2022, they rose another 9.3% — compounding on top of the previous year's spike.
To put that in perspective, the cumulative increase since 2020 has pushed California construction costs to nearly 9% above the national average, second only to Hawaii.
What caused this jump? Lewis points to a perfect storm of inflationary pressures:
COVID-19 supply chain disruptions, which made basic materials like lumber and steel scarce and expensive.
Labor shortages, as many skilled tradespeople left the workforce or shifted industries during the pandemic.
Surging demand for home renovation and new construction as Californians spent more time at home and sought upgrades ...
