By Bob Barreto, President, Home Builders Association of Greenville
President, GBS Building Supply
On average, regulations imposed by all levels of government account for 24.3 percent of the sales price of a new single-family home, according to a 2016 study by the National Association of Home Builders (NAHB).
Breaking down the total regulatory costs further, the study revealed that three fifths of compliance costs, or 14.6 percent of the final house price, is due to a higher price for a finished lot resulting from regulations imposed during the lot’s development. The other two fifths, or 9.7 percent of the house price, is the result of costs incurred by the builder when building the home after purchasing the finished lot.
In the Greater Greenville area, the study indicates that a new home is $67,424 more expensive as a result of the cost of complying with regulations.
These regulations come from many sources. They include new land-use controls that reduce the potential density yield of a parcel of land, which increases the cost of the finished lot. Other regulations include significant changes to the building code that has added thousands of dollars to the price of a new home. Labor-law changes also have had an impact. As well as significant increases in building permit fees, development compliance fees, and new sewer account fees. But the greatest increase in the cost of compliance has come in the form of new and increased environmental regulations to control erosion and stormwater runoff during development and construction.
When the 2016 study is compared to a previous study prepared in 2011, NAHB found that the cost of compliance with regulations increased by 29.8 percent in the five years between the two studies. That means the cost of constructing a new home in the Greater Greenville area increased by more than $20,000, in just five years, to comply with new rules imposed by government. Meanwhile, personal disposable income in the U.S. increased by just 14.4 percent during that same time period, meaning that the average cost of regulation embodied in a new home is rising more than twice as fast as the average American’s ability to pay for it.
According to another study by the National Association of Home Builders, 521 families in the Greater Greenville are priced out of Homeownership by a $1,000 increase in the cost of purchasing a new home. If you do the math, and I have, that means the increase in the last five years in the cost of compliance with regulations has priced out of homeownership more than 10,000 families in our community.
There has been considerable discussion and debate about affordable housing in our community. Studies by the City of Greenville and Greenville County are providing evidence of the problem. Many want to blame home builders and land developers for the problem. But a reading of the studies by the National Association of Home Builders demonstrates that at least part of the problem lies with well-meaning regulations that fail to take into account the impact on a family’s ability to afford a home.
Clearly, a portion of the solution to our community’s housing affordability problem lies in a thorough review of the cost of complying with our own regulations.
The National Association of Home Builders’ Board of Directors approved six funding requests, including the Reedy River proposal from the Home Builders Association of Greenville. These proposals came from state and local HBAs requesting help with their advocacy efforts through the National Association of Home Builders State & Local Issues Fund.
The board acted on the recommendation of the State and Local Government Affairs Committee, which reviewed the requests during its meeting at the International Builders’ Show in early January.
The Reedy River, a signature part of the Greenville, S.C., community is impaired by nitrogen. The Home Builders Association of Greenville and a community coalition together have addressed the issue with stormwater regulations and modernization of sewer treatment facilities. Coalition partners have aggressively opposed the state’s efforts to place a Total Maximum Daily Load regulation on nitrogen on the Reedy River. They support an alternative called 5R, a community-based, bottom-up plan to accomplish same result as a Total Maximum Daily Load regulation but without costly litigation. The board approved $20,000 to build an economic model to show community-based collations in Greenville and other HBAs how they can solve environmental impairment problems without Total Maximum Daily Load regulations and costly litigation.
Click here to see the other five proposals.