The National Association of Home Builders (NAHB) released a study this month showing that federal, state, and local government regulations for new buildings add an average of $ 93,870 to the price of each new home. This cost, almost a quarter of the average selling price, comes from regulations during development and regulations during construction. It is a shocking price that one NAHB lobbyist declared as the product of cumulative regulatory pressures exerted primarily at the state and local levels.
Susan Asmus, senior vice president of regulatory affairs at NAHB, noted that the cost of these regulations has increased in recent years as local governments use new home construction as a focus of their policy initiatives. More recently, many of these measures have focused on energy efficiency and resilience in the face of more frequent and intense natural disasters. While Asmus accepts that some of these steps are necessary, it believes that the builders are paying too much of the cost of these initiatives, while the existing housing stock is often overlooked. When new regulations are enacted by local authorities, they and their local NAHB subsidiaries show how much they will cost builders at a time when the housing market needs supplies more than ever.
“We’re talking to our affiliates – our state and local builders’ associations – and trying to give them all the information about some of the proposed regulations and what that would mean locally,” Asmus said. “If you give this information to the state and local policymakers, you get about two camps. One is, “I don’t care how much it costs because we’re doing the right thing.” The other is, “I had no idea it cost that much. Maybe we can make some improvements to reduce these costs. ‘“
Asmus stated that these conversations require input from key stakeholders in the housing market. Insurers play an important role as they often hold the bag in hand after the disaster, but Mortgage professionals can also provide input and offer the perspective of real estate professionals in a market characterized by a shortage of supply. These stakeholders can usually help policymakers optimize these regulations so that the costs do not fall unduly on builders.
The regulations are so focused on new construction, Asmus said, because policy makers see a somewhat simple means of allaying citizens’ fears of natural disasters and climate change. Home builders are an easy target as they are perceived to be incredibly wealthy. Asmus found that the average profit margin on new builds is around 4%, which is already being negatively affected by the high lumber prices. It accepts that both new and existing housing stocks need better protection from natural disasters, but believes that increasing the huge regulatory burden that builders are already facing will only serve to limit and restrict their activities prevent new offers from entering the housing market.
One solution Asmus advocates is to tighten existing regulations. Builders, she said, can adopt a new regulation or two, but when a dozen regulations fall on top of each other in an industry where every single unit needs its own permits, the costs start to get astronomical. If policy makers can streamline and simplify the rulebook for these builders, it should help their bottom line while ensuring that policy goals continue to be met.
While the $ 94,000 grand prize is national, Asmus noted that this regulatory problem is of local origin and local solution. That’s where she believes mortgage professionals can best play a role.
“The first thing to do is pay attention,” said Asmus. “Many of our members don’t hear what is happening at the local level until it has happened. Stakeholders need to stay informed and participate at the community and state levels as these costs are a concern. We have conducted studies showing how many households will be displaced by a $ 1,000 increase in the cost of a new home. Price and cost issues and we are pushing for programs to help buyers meet those upfront costs. To do this, the mortgage industry has to work with builders and insurance companies. “