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Regulatory Costs Help Make 'Affordable Housing' Unaffordable

Last Thursday, we growled about the effect that government subsidies have in the healthcare and higher education fields, specifically raising the cost to consumers.

Yesterday, the Wall Street Journal's Chris Kirkham reported that "home builders say they are squeezed by rising compliance costs." Here's a portion of Kirkham's reporting (emphasis added below):

"The average cost for home builders to comply with regulations for new home construction has increased by nearly 30% over the last five years, according to new research from the National Association of Home Builders.

"Regulatory costs such as local impact fees, storm-water discharge permits and new construction codes, which have risen at roughly the same rate as the average price for new homes, make it increasingly difficult for builders to pursue affordable single-family construction projects, the group argues.

“It really makes it hard to satisfy the lower end of the market, which is a lot of first-time buyers,” said Paul Emrath, vice president for survey and housing policy research at the NAHB, who conducted the survey of about 400 builders across the country.

"The cost of regulation imposed during the land development and construction process on average represented $84,671 of the cost of the average new single-family home in March. That is up from $65,224 in 2011, the last time the home-building industry group conducted a similar survey on regulatory costs.

"The 2011 and 2016 surveys used a different panel of home-building executives, who were asked to calculate the costs of environmental mitigation, impact fees and other approvals as a percentage of construction or lot development costs. Both surveys showed that regulatory costs represented about the same percentage of the final price tag of a new home—24.3% this year versus 25% in 2011.

"Other recent surveys have also suggested that builders are contending with steeper costs than they have in the past. A study this week from housing research firm Zelman & Associates found that local infrastructure “impact fees” have increased by 45% on average since 2005 in 37 key home building markets across the country, to about $21,000 per home."

The Wall Street Journal included the following graphic in the report:


In September 2015, the Arlington County Board adopted -- with considerable fanfare -- a so-called Affordable Housing Master Plan (AHMP). The county even released a three-page press release. The County Manager also issued a "supplemental report" with a clarifying statement that the AHMP "does not commit the County to any immediate or future expenditures." Our September 21, 2015 Growls includes links to all the gory details. A search of the AHMP found two instances of "regulatory" (pages 18 20) and three of "compliance" (pages 2, 8 and 8). Unfortunately, there was no accompanying discussion that indicated the County Board, the County Manager, or county staff were even cognizant of the regulatory costs, or compliance costs. that are "built into" each new home. Nor does the table of contents suggest any effort would be made to reduce the cost of so-called affordable housing by reducing the regulatory costs.

In the September 21, 2015 Growls, we included the following paragraph from a news report by the Arlington Sun Gazette's Scott McCaffrey:

"The package had the support of most housing advocates, but some in the community voiced concern about the cost – Arlington already spends far more of its municipal budget on housing than neighboring jurisdictions – and over unforeseen and unanticipated side effects."

Growls readers who haven't expressed their concerns about affordable housing -- and now the regulatory costs imposed by our local government -- are urged to tell members of the Arlington County Board. Just click-on the link below:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.


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