Residential construction costs have risen far faster than inflation over the past five years. A bathroom renovation that once cost $20,000–$30,000 now commonly costs $30,000–$45,000 or more — an increase of 50% or higher. Many of our clients expected pricing to soften after the COVID-era home renovation boom, but the opposite has happened. Here are several of the biggest reasons we see construction costs continuing to rise in Chicago.
1 – Labor Costs Continue to Climb
Much of the increase is driven by labor shortages. Fewer skilled workers are entering the trades, while many experienced workers retired during or after COVID.
Although we operate an internship program to help develop skilled tradespeople, programs like this are still relatively uncommon. As the workforce ages, new workers are not being trained quickly enough to replace retiring talent.
In Chicago, a substantial portion of the residential construction workforce is foreign-born. As immigration policies tighten, the available skilled labor pool continues to shrink, which places additional upward pressure on wages and project costs. There are positives to this trend. Workers are receiving better pay and benefits than they did in the past. However, those improvements also raise the cost of construction. Healthcare costs alone have increased dramatically in recent years, significantly affecting labor expenses for companies that provide benefits.
2 – Material Prices Reset Permanently After COVID
Nearly every major construction material now costs substantially more than it did before COVID. In many categories, prices remain 30% or higher than pre-pandemic levels. Part of this is due to reduced competition in portions of the supply chain. One example is the stone countertop industry. Vendors that once priced countertops by the square foot increasingly require contractors to purchase full slabs and then separately charge fabrication and cutting fees. For some projects — especially smaller bathrooms or vanity tops — this pricing structure can increase costs by 50% or more because partial slabs are no longer readily available.
Global supply chain instability and changing trade policies also affect materials such as electrical components, plumbing fixtures, and lumber. Even uncertainty itself raises costs. Suppliers often increase prices simply because they cannot predict future replacement costs or delivery schedules.
3 – Material Quality Has Declined
Another hidden cost is declining material quality. As experienced manufacturing workers retire, quality control problems have become more common. We increasingly see defective or delayed products that require repair, replacement, or extended troubleshooting.
One recent example involved a jetted tub from a major manufacturer. During testing — before the walls were closed — the tub leaked. Attempting to repair it through the manufacturer became an extended process that ultimately failed. A replacement unit had to be shipped from Texas. The total cost of that issue approached $5,000. Although the manufacturer reimbursed the expense, costs like these eventually work their way back into consumer pricing.
Unfortunately, this is not an isolated incident. We have seen warped wood doors, leaking faucets, failed tile adhesives, and other manufacturing defects that create delays and added labor costs. We estimate that defective or delayed materials add roughly 3–5% to many projects.
4 – Clients Expect Higher-End Finishes
Homeowners today expect significantly more sophisticated finishes than they did decades ago. I once visited the Little White House where Harry Truman wintered in Key West. His bathroom in the 1950s would not have matched the quality of many middle-class bathrooms built in the 1970s — and expectations have continued to rise ever since.
Many premium finishes commonly used today — such as quartzite, porcelain slab walls, under-cabinet lighting, integrated appliances, and full-height stone backsplashes — were either unavailable or rarely used in residential projects years ago. Today, these features are often considered standard in mid- to high-end renovations. Naturally, they add cost. Ironically, some of the most effective ways to reduce project pricing involve eliminating a collection of smaller upgrades and “extras” that accumulate throughout the design process.
5 – Market Disruptions and Workforce Anxiety
The construction industry has also experienced broader disruptions that indirectly affect pricing. During and after COVID, some suburban contractors became hesitant to work in parts of Chicago because of concerns about safety, logistics, or staffing challenges. When fewer contractors compete in a market, pricing generally rises.
At the same time, immigration enforcement activity in parts of Chicagoland created anxiety among portions of the subcontractor workforce. In some cases, workers avoided jobsites or delayed projects out of fear or uncertainty, which contributed to scheduling disruptions and inefficiencies. Any interruption to an orderly construction process ultimately increases costs for both contractors and clients.
Construction Companies Are Feeling the Pressure Too
Clients sometimes assume rising construction prices mean dramatically higher contractor profits. In many cases, that is not true. Our company has intentionally kept margins relatively modest because we are hesitant to pass every increase directly onto clients. In some instances, our own costs have risen faster than we have been able to adjust pricing. We understand that today’s renovation costs can feel shocking — frankly, they are often higher than our own expectations as well.
At the same time, home values, stock markets, restaurant prices, healthcare costs, and nearly every other part of the economy have also risen dramatically over the same period. As strange as it sounds, if construction projects were priced in hamburgers instead of dollars, a bathroom renovation might cost about the same as it always did.