Builders: 25 Percent of New Home Costs Stem from Regulations

The regulatory burden includes costs associated with permitting, land development, construction codes and other financial hindrances.

WASHINGTON – March 29, 2016 – Citing an acute shortage of affordable rental housing and severe regulatory burdens that drive up the cost of single- and multifamily housing for homebuilders and consumers alike, the National Association of Home Builders (NAHB) called on Congress to pursue regulatory reforms that would improve affordability and promote new development.

Testifying before the House Financial Services Subcommittee on Housing and Insurance, Granger MacDonald, a homebuilder from Kerrville, Texas, and first vice chairman of NAHB, told lawmakers that home building is one of the U.S.'s most heavily regulated industries.

"Government regulations account for 25 percent of the cost of a new single-family home," said MacDonald. "The regulatory burden includes costs associated with permitting, land development, construction codes and other financial hindrances imposed on the construction process. Oftentimes, these regulations end up pushing the price of housing beyond the means of middle-class working American families."

NAHB actively opposes new regulations from the Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency, the Federal Emergency Management Agency and other agencies that could drive up the cost of housing. Specifically, regulations on energy codes, waters of the U.S., OSHA's crystalline silica permissible exposure limit and the U.S. Department of Labor's persuader rule and new joint employer standard are a few of the regulatory issues that homebuilders say they face on a daily basis.

MacDonald also raised concerns that the U.S. Department of Housing and Urban Development's forthcoming regulation to implement the new Federal Flood Risk Management Standard will have a negative impact on the cost and availability of multifamily projects. Without maps of the regulatory floodplain, builders and developers using HUD products and programs will face unnecessary uncertainty as they plan multifamily projects.

Another factor driving up the cost of affordable housing construction, NAHB said, is Davis-Bacon Act mandates on federal construction projects that hinder the government programs' goals by creating additional layers of bureaucracy and costs.

"NAHB strongly opposes the mandatory use of Davis-Bacon prevailing wage rates and requirements," said MacDonald. "As this law is currently enforced, it is artificially driving up construction costs on apartment communities that include HUD financing, and the compliance burdens are creating barriers to entry for small mom-and-pop subcontractors to work on these projects."

While NAHB urged Congress to pursue regulatory reform, MacDonald commended the committee for its work on the Housing Opportunity Through Modernization Act of 2016 (H.R. 3700). The bill, which passed the full House earlier this year, would reduce inefficient and duplicative requirements that have made many of the HUD and rural housing programs burdensome.

MacDonald also called on lawmakers to continue their support of successful housing programs, such as the Low Income Housing Tax Credit, and urged them to support full funding for rental housing programs such as the Housing Choice Voucher Program, Project-Based Section 8 Rental Assistance and the HOME Investment Partnership Program.

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