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News » US » Home builders put price on government regulation » published 15 Jun 2018

Home builders put price on government regulation

A new study has found that more than 30% of the cost of developing a typical multi-family housing project is attributable to regulation.

Regulation imposed by all levels of government accounts for an average of 32.1% of multi-family development costs, according to the new research released by the National Association of Home Builders (NAHB) and the National Multi-family Housing Council (NMHC). In a quarter of cases, that number can reach as high as 42.6%, the research found.

Apartment and condo development can be subject to a significant array of regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process. The researchers say that, until now, there had been no previous research done to analyze the extent of this regulation.

The joint research effort surveyed NAHB and NMHC members to quantify how much regulation exists and how much it is adding to the cost of developing new multi-family properties.

Breaking down the government regulation costs showed that an average of 7% of regulatory costs come from building code changes over the past 10 years, 5.9% is attributable to development requirements (such as streets, sidewalks, parking, landscaping and architectural design) that go beyond what the developer would ordinarily provide, and 4.2% of the costs come from non-refundable fees charged when site work begins.

“The home building industry is one of the most highly regulated industries, and the multi-family sector is particularly subject to these obligations,” said NAHB chairman Randy Noel. “Housing affordability is a huge issue throughout the county, and this new research only further illustrates how the layers of excessive regulation translate into higher rents and reduced affordability for consumers.”

NMHC president Doug Bibby said: “The current regulatory framework has limited the amount of housing that can be built and increased the cost of what is produced. At a time when states and localities are struggling to address housing affordability challenges, public and private stakeholders should work together to streamline regulations and take the steps necessary to expand housing in communities across the country.”

NAHB said that developers can almost certainly expect average costs to be higher now or in the near future due to the effect of recent regulations that went in place at the end of 2017, such as the new Silica Rule. Further, the survey does not account for other price-influencing factors such as the effects of recent tariffs on building materials, or the extent to which local jurisdictions empower citizens to oppose multi-family development in their communities.

 

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This article was published on 15 Jun 2018 (last updated on 15 Jun 2018).

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