Housing Affordability and Regulation
With home appreciation on the rise, and the cost of new homes increasing, out come the predictable cries for affordable housing.
But fear not, local groups have come to the rescue with “solutions” to the affordable housing crisis. In a recent Atlanta Business Chronicle article, along with an op-ed piece in Georgia Trend magazine, solutions to the problem have been identified.
One suggestion is to offer more down-payment assistance for first-time affordable buyers. That sounds similar to what happened prior to the housing collapse and the Great Recession.
Another is to issue a $250 million bond for housing, with some of that money providing short-term and emergency solutions for people facing evictions. It that a long-term solution?
The Atlanta Business Chronicle article said that a housing task force visited Seattle for a peer exchange. In Seattle, they approved a special levy of property taxes to go towards housing affordability. Will that “rob from the rich and give to the poor” scheme be proposed for Atlanta?
Throughout all of these talks and grandiose solutions, has anyone bothered to talk with actual developers and homebuilders? Have any of these think tanks invited the Greater Atlanta Homebuilders Association to the table? That association is filled with some of the best building minds in the Southeast. Have their opinions been asked?
Have the people that actually build the houses been consulted on the subject of housing affordability?
If they had been consulted, Metro Atlanta homebuilders would have easily identified one big factor that contributes to the overall cost of the house: government regulation.
According to an NAHB/Wells Fargo Housing Market Index report, government regulation of some form or another accounted for six out of the top nine significant problems builders faced in 2017.
In a recent study by NAHB/NMHC, regulation imposed at all levels of government (local, state and federal) accounts for 32.1 percent of the cost of an average multifamily development. One-fourth of the time the cost can reach as high as 42.6 percent.
For single-family homes, government regulations account for, on average, 24.3% of the final price of a new single-family home.
When you apply the percentages from NAHB’s studies to Census data on new home prices between 2011 and 2016, it 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% in that same five-year span. So, the cost of regulation in the price of a new home rose more than twice as fast as the average American’s ability to pay for it. That is certainly a big factor in housing affordability.
I was recently told by a local developer that it can take three years to convert raw land into vacant developed lots in Metro Atlanta, primarily due to regulation and red tape.
Everybody wants affordable housing, just not in their backyard. Residents and local jurisdictions say they want affordability. Then, they put strict guidelines on lot size and density. This forces the builder/developer to build larger houses on that property.
If we really want to address housing affordability, let’s ensure that those that actually build the homes have a voice in the process. Only then will real progress be realized.
To Your Success,
