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Regulatory Costs Account for 23.8% of New-Home Prices

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Regulatory Costs Account for 23.8% of New-Home Prices


May 11, 2021
Builder reviewing house plans
Photo: rh2010 | stock.adobe.com

Housing regulations during development and construction account for $93,870 or 23.8% of the total median sales price of a new home, according to a survey by the National Association of Home Builders. Such costs include applying for zoning approval, hard costs of compliance, such as fees and required studies, and fees paid by the builder after purchasing the lot. And when complying with regulations, many developers and builders report an average six months of delays, resulting in additional costs. NAHB Chairman Chuck Fowke calls on policymakers to reduce or eliminate unnecessary regulations so builders can increase production.

Of note, the study on the cost of regulation does not take into effect how rising lumber and other material prices over the past 12 months have raised housing costs. NAHB completed another report last month that shows rising lumber prices, which have soared more than 250% since April 2020, have added $35,872 to the price of a typical new home. This figure is on top of the $93,870 cost due solely to regulation.

While NAHB’s previous regulatory estimates in a 2016 study were fairly similar, the price of new homes increased substantially in the interim. When applying these percentages to Census data on new home prices, the data show an estimate that regulatory costs in an average home built for sale went from $84,671 to $93,879 — a 10.9% increase during the five-year span between NAHB’s 2016 and 2021 estimates.

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