Wondering Why the Price of a New Home is so High

Remember this as you vote in your local, sate and Federal elections.  All those regulations come with a steep cost.

Regulations Add a Whopping $84,671 to New Home Prices

Filed in Codes and Regulations, Economics on May 9, 2016 • 0 Comments

Financial Impact of Regulations on Home Building

29.8%

The increase in regulatory costs to build an average single-family home in 2016 compared to 2011. 

Costs During Development

Costs During Construction

Based on data from the U.S. Census Bureau and the NAHB/Wells Fargo HMI surveys. 

A new NAHB study shows that, on average, government regulations account for 24.3% of the final price of a new single-family home.

Three-fifths of the regulatory costs – 14.6% 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 – 9.7% of the house price – is the result of costs incurred by the builder after purchasing the finished lot.

NAHB’s previous 2011 estimates were fairly similar, showing that regulation on average accounted for a quarter of a home’s price. However, the price of new homes has gone up quite a bit since then.

Applying percentages from NAHB’s studies to Census data on new home prices during this five-year span shows that regulatory costs for an average single-family home went from $65,224 to $84,671 – a 29.8% increase.

By comparison, disposable income per capita increased by 14.4% from 2011-2016. In other words, the cost of regulation in the price of a new home is rising more than twice as fast as the average American’s ability to pay for it.

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