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Government Regulations Account For Over 40% Of Multifamily Development Costs


Government Regulations Account For Over 40% Of Multifamily Development Costs

Multifamily developers attribute elevated prices for new projects to costly new regulations imposed by all levels of government

June 28, 2022
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Image: Stock.adobe.com

Roughly 40.6% of total multifamily development costs can be attributed to government regulation as new mandates stack up for builders in every region across the country. According to NAHB Eye on Housing, changes to building codes have imposed the greatest costs onto builders nationwide, while fees incurred when site work begins account for the second largest share of construction costs.

Fees charged when building construction is authorized made up 4.4% of all regulation costs, and affordability mandates for builders also upped construction costs for some multifamily developers. Because regulatory mandates cause development costs to surge, they also prevent builders from adding more housing units to areas with strict policies, limiting affordable housing options for residents in high-demand areas.

Regulations cover a wide-range of issues, and while they may be well-intentioned, the costs and burdens of any regulation must be carefully weighed against the benefits. Few would argue, for example, that basic safety standards for structures and workers are unnecessary. But, when regulation constitutes an average of 40.6 percent of a project’s development costs, this raises questions about how thoroughly governments are considering the consequences of their actions.

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