Report: Home Builders Suffering from Rising Compliance Costs

It’s not only mortgage lenders straddled with rising compliance costs, according to the National Association of Home Builders (NAHB). In the last five years, the average compliance costs for new home construction have increased by nearly 30%.

Home Prices and Regulatory Costs

Though home prices have seen steady growth since the housing market crash—and accelerated over the last two years—regulatory costs have followed suit. The costs of new stormwater discharge permits, local impact fees, and new construction codes have eaten into homebuilders profits.

The Numbers

The NAHB survey included around 400 builders from across the country. They found that:

  • In March of this year, $84,671 of the cost of an average new single-family home was made up of regulation costs imposed during the land development and construction process.
  • In 2011, that number was just $65,224.

Though the numbers may seem to communicate rising regulatory costs, they’ve risen more or less in sync with home prices.

  • New home prices have risen by 33.8% since 2011
  • Regulatory costs have risen by 29.8% since 2011
  • In 2011, regulatory costs represented 25% of a home’s final price tag
  • In 2016, regulatory costs represent a little over 24% of a home’s final price tag
  • Impact fees, which represent the cost of providing public services to a property, have increased by 45% since 2005

Regulation Threatens Affordable Housing

The home-building industry is no stranger to regulation, and the regulatory bodies are accustomed to receiving complaints from builders and developers. But the real victims of increased regulations, as well as rising home prices, are homebuyers. The many ancillary costs now inherent to building and development have steered many builders away from affordable single-family construction projects and toward the luxury market, making affordable housing even more out of reach many would-be buyers.

Title Insurance and Builder Services from Lakeside Title

Lakeside Title Company works with builders in Maryland, Washington D.C., Northern Virginia, and Southern Pennsylvania. We take care of all the title work, so you can focus on what you do best. Our goal is to simplify the construction process and increase the visibility of builders’ projects so they can sell more homes. Visit our homepage for more information.

Legal Questions?

If you have a question for an attorney, please contact Lakeside Title Company’s affiliated Law Firm, Deardorff, Rath & Pichon, LLC.

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