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05/10/2021

Gov regulations add more pressure to home prices

NAHB study shows that regulations imposed by all levels of government account for 23.8% of current average new home sales price.
a building with a metal fence

While mounting lumber prices have added as much as $36,000 to the cost of a new single-family home, regulations are also taking their toll.

A report from the National Association of Home Builders (NAHB) indicates that regulations imposed by all levels of government account for $93,870, or 23.8%, of the current average sales price ($397,300) of a new single-family home.

According to the NABH, of the $93,870 figure, $41,330 is attributable to regulation during development, and $52,540 is due to regulation during construction.

“This study illustrates how overregulation is exacerbating the nation’s housing affordability crisis and that policymakers need to take bold steps to reduce or eliminate unnecessary regulations that will help builders increase the production of quality, affordable housing to meet growing market demand,” said NAHB Chairman Chuck Fowke.

This study on the cost of regulations does not take into effect how rising lumber and other material prices over the past 12 months have raised housing costs, however.

NAHB completed another report last month that shows rising lumber prices, which have soared more than 250% since April 2020, have added $35,872 to the price of a new single-family home. This figure is on top of the $93,870 cost due solely to regulation.

While NAHB’s previous regulatory estimates in a 2016 study were fairly similar, the price of new homes increased substantially in the interim. 

When applying these percentages to Census data on new home prices, the data show an estimate that regulatory costs in an average home built for sale went from $84,671 to $93,879 — a 10.9% increase during the five-year span between NAHB’s 2016 and 2021 estimates.

The full NAHB study on government regulations is available here.