Eli5: why do people say its cheaper to build up than out?

Question

I’ve heard contractors say this over and over again. It’s cheaper to build up when adding sqft to a home than to build an addition out? Is this true and if so why?

In: 1

Answer 1

If you build one multi-family unit for four spaces on land that could fit two single family units, then that’s four units sharing the fixed costs that otherwise two would share. That’s cheaper.