$131,734 and Counting

I was sent an article a while back that I recently found the time to read.

It had a number that made me stop and think.

Actually, it sent me down a pretty deep rabbit hole.

Turns out there's probably enough down there for another four issues.

The Good News: This week I learned a lot about government regulation.

The Bad News: I'm a little more confused now than when I started reading about regulation.

According to a recent study from the National Association of Home Builders, government regulations now account for an average of $131,734 of the price of a new home.

That's 26.4% of the average new home price they used for the study.

Which is a pretty significant number considering nobody has even picked out the countertops yet.

Well, how did they come up with that number?

The answer is a little more complicated than the headline.

NAHB surveyed 54 land developers and 337 home builders and broke regulatory costs into two categories.

About $47,000 happens during development and another $85,000 during construction. That includes everything from zoning and permits to delays, design requirements and building codes.

The biggest single category?

Building code changes.

NAHB estimates those changes over the last ten years account for $40,288 of the final price.

Now, before we start protesting pages out of the code book, there's an important part of the study that I think gets lost in the headline.

NAHB isn't saying all regulation is bad.

They're not even saying $131,734 of it is unnecessary.

They're estimating what complying with all of it ultimately costs.

And there is obviously a difference.

I want to be clear when I say I understand we need regulations and codes.

They are in place to provide a standard and to protect the public and consumer.

Not only that, but it's understandable to state that times change and practices evolve.

On that note, I drive by houses built 50 years ago that are still standing to this day.

A 2x10 spruce-pine-fir floor joist didn't all of a sudden lose its maximum span.

I'm being tongue-in-cheek, but if you're in the industry, you know what I am trying to say.

I manage the construction of houses. I've dealt with zoning and utilities. I've seen from a distance what goes into developing a subdivision, and heard my fair share of summarized county meetings.

I'm not saying I know all of these avenues intimately.

But I do get to see what happens once some of these decisions make their way downstream.

Take erosion control for example.

Obviously we need it.

Nobody wants half an acre of freshly graded dirt washing into the neighbor's yard every time it rains.

Nor do we want to put unnecessary stress on wildlife and the ecosystem.

But then you get into how you define a lot as stabilized.

Around here, establishing sufficient grass coverage can become part of getting a house across the finish line.

My county requires disturbed areas to have permanent vegetation established before an erosion-control permit can be closed out.

That's not simple when building on anything over .25 acres.

It's even harder when you aren't landscaping houses at the perfect time of year for planting.

Which, unfortunately, the closing schedule could care less about.

Let's say you finish a house in the winter.

You can throw out winter rye and hope Mother Nature cooperates. Maybe you get enough coverage to satisfy everybody.

Then July rolls around.

The rye dies from the "friendly" NC summer heat.

If the homeowner hasn't established a warm-season grass, you're staring at dirt again.

So what exactly did we accomplish? And who's fault is it?

Is the builder required to come back and reseed warm season grass in the spring and pray the homeowner waters it?

That's the slipperiest of slippery slopes if you ask me.

You ever see a farmer plant tomatoes in the middle of January?

Maybe in a greenhouse.

Sometimes the requirement makes perfect sense on paper.

In the field, it doesn't work that cleanly.

One solution I've heard suggested is sod.

That certainly solves the grass problem.

It also creates another problem.

Start laying sod across a half-acre or acre lot and somebody has to pay for it. Then somebody has to keep all of that sod alive.

Maybe we should install irrigation too.

Great.

Who pays for that?

Eventually the answer to most of these questions is the same person.

The buyer.

And that's what I find interesting about the $131,734 number.

It's easy to look at one requirement at a time and say it makes sense.

Erosion control makes sense.

Building codes make sense.

Inspections make sense.

Energy efficiency makes sense.

Infrastructure has to be paid for somehow.

But houses aren't built one requirement at a time.

They all get stacked on top of each other.

A few thousand here. Another requirement there. Another fee. Another inspection. Another week carrying the house.

None of them necessarily break the deal by themselves.

Eventually, though, they can create a real burden on developers, builders, and ultimately the consumer.

None of this is to say we don't need building codes, inspections, environmental protections or regulations.

We obviously do.

But I also don't think every regulation deserves a free pass just because the intention behind it is good.

At some point, you have to ask whether the cost of a requirement actually reflects the value it's providing.

Especially when we're also talking about how difficult it has become to build affordable housing.

Because every added fee, delay and requirement eventually finds its way somewhere.

And more often than not, that somewhere is the price of the house.

$131,734 is a heck of a number.

Maybe we should be asking a few more questions about how we got there.

See you next Friday.

— David