Government Regulations Prove Costly for Home Builders

A new NAHB study shows that, on average, government regulations account for 24.3% of the final price of a new single-family home.  Three-fifths of the regulatory costs – 14.6% of the final house price – is due to a higher price for a finished lot resulting from regulations imposed during the lot’s development.  The other two-fifths – 9.7% of the house price – is the result of costs incurred by the builder after purchasing the finished lot.

NAHB’s previous 2011 estimates were fairly similar, showing that regulation on average accounted for a quarter of a home’s price.  However, the price of new homes has gone up quite a bit since then.  Applying percentages from NAHB’s studies to Census data on new home prices during this five-year span shows that regulatory costs for an average single-family home went from $65,224 to $84,671 – a 29.8% increase.  By comparison, disposable income per capita increased by 14.4% from 2011-2016.

In other words, the cost of regulation in the price of a new home is rising more than twice as fast as the average American’s ability to pay for it.  The full study containing details about different types of regulatory costs and their impact on development can be found here.

However, it is important to remember that NAHB is constantly fighting on behalf of the home building industry to limit costly regulations as much as possible.  Members will save a total of about $5,700 per housing start in 2016 due to NAHB’s advocacy efforts in 2015 and other select member benefits.