Laws: How Do Local Regulations Impact New Home Prices

Family looking at house

By Jeanene Dunn

 

This article is the second in a series on how the 5L’s of homebuilding can impact the price of a new home.

 

Joe Christensen, owner and founder of Cardinal Crest and Sean Flandermeyer, president of Elevate Design Build discuss how regulations can create barriers to producing a more robust housing stock.

 

Well-intended regulations and codes can create more of an obstacle than a benefit to builders and homebuyers and add several thousand dollars to the final price of a new home. A 2021 report published by the National Association of Homebuilders revealed that regulatory costs can add more than $90,000 to the cost of a new home. 

 

Examples of housing regulations

 

Environmental requirements, and other related or unrelated regulations, including those that respect and preserve history and culture, are necessary, but costs associated with implementing certain regulations can have the effect of creating less housing, instead of more that is needed. 

 

In the Kansas City area, builders are having to implement and comply with updated green standards passed by the KCMO city council. The intent of enacting the 2021 International Energy Conservation Code (IECC) was to ensure that new homes are constructed with the latest technology. 

 

Christensen and Flandermeyer say they are already producing homes that meet or exceed current standards. Flandermeyer’s company portfolio does include homes in the $200,00 and $300,000 range. “I cost out everything, and the costs associated with implementing the energy portions are unnecessarily expensive in some areas,” he says. “It doesn’t make sense for the me to pay three times the price for a light fixture when a lower priced fixture achieves the desired result in terms of energy efficiency.”

 

Christensen adds that the green standards also apply to home remodels. “A full basement remodel could add costs upwards of $25,000 or more. Homeowners may need to budget these extra funds to get that project done.” 

 

Overregulation does not create new housing

 

It causes builders to look at areas where there is demand for the product, and it’s more cost-effective for them to bring housing to market in a timely manner. 

 

In the case of Kansas City Mo., the area has seen fewer new housing permits issued this year. “It’s more than one factor, but new regulations add another layer of bureaucracy to navigate, which takes time, and in turn, costs our businesses more money, because it can create months-long delays,” Flandermeyer said. 

 

Flandermeyer adds that his new homes include the most current technology that meet green standards. “If we have to pay more for dimmer lights, additional insulation and HVAC systems, those requirements can add thousands to the final price of the home, with minimal long-term savings to the homeowner.”

 

What can homebuyers and homeowners do?

 

Educate yourself. If you are in the market for a new or existing home, or want to start that remodeling project, research the regulations and requirements in your municipality. Talk to your builder or contractor. These professionals navigate regulations, ordinances and laws every day, so rely heavily on their expertise and counsel.

 

KCHBA can help you connect with a builder for your next home or remodeling project. Visit kchba.org to learn more. 

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