How Regulations Impact Home Prices

May 16, 2019
construction workers
Photo: Unsplash/Guilherme Cunha

HousingWire reports that government regulations play a major role in the current housing affordability concerns.

In 2016, the National Association of Home Builders (NAHB) found that one quarter of the final price of a single-family home came from a combination of government regulations.This is affecting homebuying power, alongside other factors such as rising material and labor costs. 

In early 2012 a typical family could afford 77.5% of all new and existing homes that were sold. Today, that share stands near a 10-year low at 61.4%. The percentage would be even lower if not for a recent uptick in income growth.

The results were revealing in terms of where these costs arise. Three-fifths of the total impact was due to higher costs associated with finished lots. For example, delays related to land development raise housing costs (recall that most land developed for housing is purchased using debt, which means higher interest expense with time).

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