Op-Ed: The Cost of the American Dream

By Will Ruder, EVP, Home Builders Association of Greater Kansas City

The Kansas City metro is among the finest places in the entire country to raise a family, start or grow a business, and generally pursue the American Dream. What sets Kansas City apart from other metro areas is the overall quality of life. A critical component of that quality of life as well as our societal concept of the American Dream is homeownership.

The ongoing turmoil surrounding the new tax assessments in Jackson County is unfortunate. And as our fellow Kansas Citians grapple with the financial difficulties stemming from these new tax assessments, it provides an opportunity to discuss our regional understanding of how policy decisions affect the cost of housing.

According to research conducted by the National Association of Home Builders (NAHB), 25 percent of the cost associated with the construction of a new single-family home is due to regulatory requirements. That number for a new multi-family facility is 30 percent. Additional analysis conducted by the NAHB shows that a $1,000 increase in the median cost of a new home would effectively price 127,560 American households out of the market.

These requirements come from all levels of government including federal, state, and local policymaking bodies. Regulation is a good thing when done in a measured, responsible way that accurately reflects the wants and needs of society. This is not intended to be an all-out attack on regulation. Rather, these facts simply demonstrate that changes in policy such as building codes, land use ordinances, and zoning have consequences, and that these consequences are ultimately born by all of us in the form of housing costs.

The members of the Home Builders Association of Greater Kansas City are “makers” by trade. We turn vacant parcels of ground into vibrant neighborhoods. We make payroll for the 20,000+ of our neighbors employed in the skilled trades. And we contribute more than $1.5 billion to the overall quality of life that so many of us enjoy.

However, when we look at the economic conditions our members are faced with, we are “takers” in that we “take” what the market throws at us in order to serve our neighbors. The complex equation of what it costs to build a home includes regulatory requirements, labor and material, and financing and interest rates, among many other variables. These are the elements over which we have very little control.

Kansas City area builders have some of the smallest profit margins in the industry nationwide. This is certainly evidenced by the fact that Kansas City is the only top 50 residential construction market in the country that does not have a builder ranked in the top 50 nationally. The members of the KCHBA are an important part of our communities because we are invested, involved members of those same communities. The economic activity generated by building homes stays right here at home. That is a unique quality that the entire Kansas City region should be very proud of.

The current situation in Jackson County serves as a very stark reminder of how disruptive a change in policy can be for current and prospective homeowners. Through open, honest, and productive dialogue with our policy makers, the Home Builders Association of Greater Kansas City will continue to pursue policies that provide safe, stable, and affordable housing options for all.

Homeownership will always be a hallmark of the American Dream. We need to make sure that dream is not only affordable, but attainable — and retainable — as well.