NAHB: Regulatory costs account for 24.3% of new home price

Dive Brief:

  • A National Association of Home Builders study found that an average of 24.3% of a home’s final selling price is made up of local, state and federal regulatory costs.
  • Development expenses for the homes represent 14.6% of the total cost of regulation, with builder outlays accounting for the remainder.
  • The NAHB said although the percentage of housing regulatory burdens are still fairly in line with its 2011 estimates of 25%, home prices have skyrocketed, resulting in a near 30% rise in the dollar value of those costs — from $65,000 in 2011 to $85,000 in 2016.

Dive Insight:

In stark contrast to the 30% rise in the dollar amounts of U.S. regulatory costs, average income has increased only 14.4%, not even half the jump in regulatory costs for homes.

During development of building lots, the NAHB study said costs like impact fees, utility hookups and stormwater regulations come into play, as well as the cost of regulatory delays  such as additional interest payments on loans and extra overhead. Building regulatory costs include building permits, the expense of implementing new worker safety regulations  like OSHA's new silica rule  tariffs on materials, and additional requirements in the home, such as fire sprinklers and carbon monoxide alert systems.

In March, NAHB officials appeared before the House Financial Services Subcommittee on Housing and Insurance to testify about the regulatory burden facing the building community. The NAHB told Congress that the "regulatory burden" has contributed to the ever-tightening inventory of rental and for-sale residential units.

Another area of contention for the NAHB is the U.S. Department of Housing and Urban Development Federal Flood Risk Management Standard, which opponents say will result in invalid flood maps, thus leaving construction companies uncertain as to where they should build. The NAHB is also targeting the Davis-Bacon Act, which mandates prevailing wages on federal projects. The association told Congress that this added cost prevents small construction companies from taking part in many projects and said it raises the costs on what is supposed to be affordable housing.

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Filed Under: Residential Building Legal/Regulation