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Regulations Add Cost to Housing

August 19, 2014

The National Association of Home Builders estimates that for every $1,000 increase in the price of a home, more than 200,000 Americans can no longer afford that home. It’s a sobering statistic that brings the concept of “affordable housing” into fine focus at a time when municipalities across the country are increasing the number of optional regulations required during the land development and building processes.

While attending the University of Pittsburgh as an undergraduate, I worked for the Allegheny County Housing Authority in Pittsburgh. Our mission was affordable housing. The Authority constructed, rehabilitated and managed thousands of housing units around the county. This program was provided courtesy of the Federal government (a/k/a the American taxpayer).  After getting my Bachelor's degree, I entered the private sector and began my lessons in the practicalities of how such programs become retitled as “exactions”, “incentives”, “impact fees”, “water quality preservation” and so forth. While I understand that various governments believe, and rightly so in many cases, their regulations, laws and ordinances serve a variety of purposes that are in the public interest (neighborhood and historical preservation, safeguarding public safety and the environment, “saving” resources, and so forth), the cost of those protections can be expensive to the homebuyer and therefore a tax on the economy.

The demand for central city or close-in home sites will expand as travel times to the suburbs and the cost of operating personal vehicles continues to increase.  Restrictive development regulations that claim to be promoting environmental and neighborhood protections may actually be doing the opposite.  Densifying the central cities reduces the need for fossil fuels burned by commuters and delivering of goods and services.  Along with an affordability analysis, an analysis of “greenprint” impact should be considered by municipalities when considering any new ordinance that restricts or limits development. I examined the costs of such ordinances in great detail and that white paper can be downloaded here.

I am not advocating a complete abandonment of regulation; many regulations especially with respect to health and safety are absolutely necessary.  In fact, the irresponsible actions of some builders and developers have often precipitated many of the regulations that burden the more responsible businesses.

However, the passage of new rules without a thorough vetting of the reason for the rule (e.g., was the precipitating action a unique case?), and an unbiased “affordability assessment” prior to the passage of the ordinances is counterproductive to a stated goal of affordable housing. Often the jurisdictions consider these regulations without either consulting or giving legitimate credibility to the input from the homebuilding and development community whose real stakeholders are the homebuyers.

Further, jurisdictions may use the excuse, “It only adds $150.00 to the house price.” That may the case for a single rule but piling ordinance upon ordinance amounts to death by a thousand cuts.  One hundred and fifty dollars or even fifty dollars quickly adds up to thousands of dollars and has a serious impact on affordability, robbing many Americans of the ability to own their own home.

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