Regulatory
Costs Inflate New-Home Prices, Builders Say, Fees for park space, storm-water
devices, endangered-species surveys; ‘I don’t build affordable houses anymore’ By
Chris Kirkham 7/22/16 chris.kirkham@wsj.com
As
the cost of construction permitting has risen over the past decade, Atlanta
home builder Dennis McConnell has taken a new approach with customers.
He
now itemizes the regulatory costs so buyers can see firsthand why the price
tags for his houses are so high. Among recent charges he has outlined: $8,000
for a new type of storm-water capture device required for each house, $3,500
for customized architectural plans required on every lot and about $15,000 to
remove a tree from the property.
With
every new regulation, “the more expensive it becomes,” said Mr. McConnell,
president of Healthy House of Georgia. “I don’t build affordable houses
anymore.”
As
home builders pick up the pace after a punishing downturn, they face a bevy of
new regulations and higher fees governing everything from environmental quality
and park access to regulations on the amount of brick on a home exterior.
Builders say many of the new requirements are well-meaning, but added up they
translate to higher costs that are passed on to prospective purchasers.
For
the past five years, the median new home price has been 32% to 38% higher than
the median price of a resale home, according to data from the U.S. Census and
the National Association of Realtors, the largest such gap since the figures
started being tracked in the 1960s. Compliance costs are one of many factors
affecting prices of new homes, economists said. Builders have also focused more
on the move-up and premium markets throughout the economic recovery, meaning a
tendency toward larger, pricier homes.
Several
recent studies have documented how increased regulatory and permitting costs
affect prices. A report by John Burns Real Estate Consulting in Irvine, Calif.,
concluded that new homes have become “permanently more expensive to build”
because of increased regulations.
The
study surveyed more than 100 building-industry executives, asking for examples
of costs that didn’t exist a decade earlier. New regulations included a survey
required in some areas of the Midwest to determine whether endangered bats are
on a property, which builders said can cost $10,000 or more for each new
development.
A
report in May from the National Association of Home Builders found that the
average cost for builders to comply with regulations has risen nearly 30% over
the past five years. A study from housing-research firm Zelman & Associates
calculated that local “impact fees” charged to builders and developers to pay
for services such as roads, sewers and parks have climbed 45% since 2005 to an
average of $21,000 per home across 37 major markets.
City
officials argue that regulations and fees have increased at a reasonable rate
and account for a much smaller portion of final home prices than costs such as
land and labor.
“Impact
fees don’t set the price of a home. The market sets the price of a home,” said
Ed Hunzeker, administrator of Manatee County, Fla., which recently voted to
raise impact fees for new developments by 80% or more over the next three years
after cutting them during the economic downturn. “Somebody has to pay for new
growth—the new roads, the new sewer lines, the new infrastructure required.”
In
places such as Florida and California, where a 1978 ballot initiative restricts
increases in property tax assessments, impact fees on builders and developers
have long been a way to fund essential services.
The
increases have prompted more pushback from developers in Texas, where fees have
historically been lower.
Dallas
has been one of the nation’s fastest-growing regional economies, where suburban
development north of the city has turned onetime ranch communities operating on
septic systems into sought-after, full-service destinations for families.
In
the town of Prosper, north of Dallas, the city requires a dedication of one
acre of park space for every 35 units (single- or multifamily) and a park fee
of $1,500 to $2,000 for each unit.
Last
year, the city finalized a 10-year master plan for parks that proposes a new
system of trails, ballparks and other recreational sites to accommodate a
population expected to increase from 15,000 to 70,000.
Nearly
half of all residents surveyed for the parks plan said the best way to pay for
the services would be through increased fees on developers, while less than 4%
said increased property taxes would be the preferred method.
“There’s
an expectation in the community that as the town grows, they don’t have to go
to an adjoining municipality for a soccer game or for baseball fields,” said
John Webb, the town’s director of development services.
Matt
Robinson, general manager with Walton Development and Management in Dallas,
said developers should pay their share for new services. But too often he feels
that developers are an easy target when cities plan for future growth.
“When
you do a parks master plan, it’s like asking somebody ‘Do you want a Ferrari or
do you want a Geo Metro?’” Mr. Robinson said. “Everybody’s going to want the
Ferrari.”
In
other cases, builders argue that regulations from different authorities are in
conflict. In Atlanta, for example, builders are now required to install
underground storm-water devices as wide as 50 feet on every lot to better
filter runoff.
The
city also has a strict tree-preservation ordinance with penalties of up to
$60,000 an acre for illegally clearing trees on lots. Mr. McConnell recently
spent an extra three months redesigning a home to both build the storm-water
system and avoid a $15,000 charge for taking down two large oak trees on a
property.
“It
requires these complex site plans not for life safety issues, but so they can
control whether or not the house is too tall, whether it has the right look, or
if the tree can be saved,” he said.
Regulatory
costs on new home construction have increased by $20,000 per home since
2011. Of the 33.8% increase in the cost
of new homes, 29.8% is due to new or increased regulatory costs. (data as of
March 2016)
Comments
The
regulations driving this cost increase came from UN Agenda 21’s requirement
that single family homes become unaffordable along with cars. Of course borders
would not be allowed, so we blew up the Middle East. The construction
ordinances were prepared by UN non-profits and passed on to the American
Planning Association. Within the past 8
years, our State Legislatures were handed the UN Agenda 21 mandate, although
they swore the never heard of it and thought it must be a conspiracy theory. To
ensure that they kept their mouths shut, Obama gave Georgia a federal money
match of $22 billion to go along with the $22 billion they get in State taxes. Our
rural counties are marked for depopulation and movement to the “megacities”.
These
ordinances were “one size fits all” in a can and our city council and county
commission reps implemented them all the same.
They include Master Plans with bike lanes, multi-use paths, green-space,
“in-your-yard water treatment”, sidewalks, big intersections, engineering
design costs for roads, over the highway shuttle bridges, mandatory parks
everywhere and transit-oriented, high density apartment development. These are being accessorized with Muslim
Refugee Terrorists arriving daily. It
makes me wonder why our vigilantes haven’t rounded up our elected officials for
a quick trial and a hanging.
Norb
Leahy, Dunwoody GA Tea Party Leader
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