Dive Brief:
- The time it takes to meet the necessary regulatory requirements that come with building single-family homes is adding costs to the process and restricting development in some areas of the country, Builder reported.
- Extended approval processes mean more regulatory fees, but also result in more overhead costs incurred over a longer timeline.
- In some markets, development time is as high as 48 months, in some cases drastically reducing the rate of return, forcing builders to choose areas of the country with shorter and more predictable development timelines.
Dive Insight:
Industry organizations have long railed against the increasing number of regulations lobbed at them by local, state and federal government agencies.
A recent National Association of Home Builders report found fees and regulatory costs added almost 25% to the cost of a home, and industry organizations are constantly at war with agencies like the Department of Labor over the expansion of silica and overtime pay rules to name a few. Construction industry groups maintain that ever-growing requirements will cost contractors millions, even billions, in compliance costs. As Builder reported, these costs are becoming so prohibitive that they are constraining supply of starter homes, as well as other categories of single-family units, making it more difficult for first-time buyers to enter the housing market.
As far as cost of development, however, the NAHB reported that 15% of regulatory costs are accrued prior to actual construction. By the time delays, zoning approval costs, the value of dedicated land, changes in development standards and other preconstruction costs are figured in, they can add up to more than 54% of a builder's land costs.