Multifamily development and the toll of regulations
Government regulations at all levels are hiking the price of multifamily development costs, according to report by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC).
On an average, 32.1% of the costs are driven by regulations while in 25% of developments the cost reached as high as 42.6%.
Changes in building codes during the past 10 years have contributed about 7% of regulatory costs while 5.9% is attributable to development requirements, including streets, sidewalks, parking, landscaping and architectural designs, the NAHB and NMHC reported. Another 4.2% is derived from non-refundable fees charged when site work begins.
Apartment and condo development is typically subject to a significant array of regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process. But this is the first time the NAHB and NMHC have researched and broken down just how much of an impact that regulations have on final costs.
“The home building industry is one of the most highly regulated industries, and the multifamily sector is particularly subject to these obligations,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Housing affordability is a huge issue throughout the county, and this new research only further illustrates how the layers of excessive regulation translate into higher rents and reduced affordability for consumers.”
Local governments generally have authority for approving development and adopting building codes. But state and federal governments have become increasingly involved in recent years while levying additional fees and regulations.
“The current regulatory framework has limited the amount of housing that can be built and increased the cost of what is produced,” said NMHC President Doug Bibby. “At a time when states and localities are struggling to address housing affordability challenges, public and private stakeholders should work together to streamline regulations and take the steps necessary to expand housing in communities across the country.”
Developers can almost certainly expect average costs to be higher now or in the near future due to the effect of recent regulations that went in place at the end of 2017, such as the new Silica Rule.
With building materials and lumber prices rising even higher – due in part to tariffs – builders can expect the price of multifamily development to rise in the upcoming year.
The report’s data was created by surveying NAHB and NMHC members to quantify how much regulation exists and how much it is adding to the cost of developing new multifamily properties.
On an average, 32.1% of the costs are driven by regulations while in 25% of developments the cost reached as high as 42.6%.
Changes in building codes during the past 10 years have contributed about 7% of regulatory costs while 5.9% is attributable to development requirements, including streets, sidewalks, parking, landscaping and architectural designs, the NAHB and NMHC reported. Another 4.2% is derived from non-refundable fees charged when site work begins.
Apartment and condo development is typically subject to a significant array of regulatory costs, including a broad range of fees, standards and other requirements imposed at different stages of the development and construction process. But this is the first time the NAHB and NMHC have researched and broken down just how much of an impact that regulations have on final costs.
“The home building industry is one of the most highly regulated industries, and the multifamily sector is particularly subject to these obligations,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Housing affordability is a huge issue throughout the county, and this new research only further illustrates how the layers of excessive regulation translate into higher rents and reduced affordability for consumers.”
Local governments generally have authority for approving development and adopting building codes. But state and federal governments have become increasingly involved in recent years while levying additional fees and regulations.
“The current regulatory framework has limited the amount of housing that can be built and increased the cost of what is produced,” said NMHC President Doug Bibby. “At a time when states and localities are struggling to address housing affordability challenges, public and private stakeholders should work together to streamline regulations and take the steps necessary to expand housing in communities across the country.”
Developers can almost certainly expect average costs to be higher now or in the near future due to the effect of recent regulations that went in place at the end of 2017, such as the new Silica Rule.
With building materials and lumber prices rising even higher – due in part to tariffs – builders can expect the price of multifamily development to rise in the upcoming year.
The report’s data was created by surveying NAHB and NMHC members to quantify how much regulation exists and how much it is adding to the cost of developing new multifamily properties.