New residential construction site with framed houses and material rolls
Government regulations are now adding an estimated $132,000 to the cost of a typical newly built home, according to a recent study by the National Association of Home Builders (NAHB). This substantial increase in regulatory costs is exacerbating the nation’s housing affordability crisis, industry leaders warn.
The NAHB report indicates that regulations imposed by federal, state, and local governments represent 26.4% of the final price of a new single-family home. Based on the average sales price of a new home in January, which was $499,500 according to Census Bureau data, this regulatory burden amounts to approximately $131,734 per house.
This finding comes at a time when housing affordability is a major concern for many Americans, compounded by elevated mortgage rates and persistently high home prices.
NAHB’s analysis reveals a sharp rise in regulatory costs over recent years. In 2021, regulations were estimated to add $93,870 to the cost of a new home; this figure has increased by roughly 40% in just five years to the current $131,734.
Among the various regulatory costs examined, changes to building codes over the past decade have emerged as the most significant burden, adding an estimated $40,288 to the cost of a typical new home.
Builders also face costs related to zoning approvals, permit and inspection fees, environmental and traffic studies, land-use requirements, labor regulations, and delays in obtaining necessary approvals. NAHB Chief Economist Robert Dietz stated, “Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply.” He added, “Easing permitting bottlenecks, density limits and inefficient zoning rules would help reduce costs and support the housing growth the nation needs.”
The study further revealed that 94.2% of surveyed developers reported that regulations typically cause project delays, and 88.2% indicated facing development standards that exceed typical building requirements.
NAHB Chairman Bill Owens emphasized the nation’s housing shortage, estimated at roughly 1.2 million homes, and argued that reducing construction barriers could help increase housing supply. “With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building,” Owens commented.
Builder confidence remains subdued, with the latest NAHB/Wells Fargo Housing Market Index showing builder sentiment falling to 35 in June, marking the 14th consecutive month below 40. In June, 35% of builders reported cutting prices, and 62% offered sales incentives to attract buyers.
The NAHB study, conducted in March, surveyed 54 land developers and 337 single-family builders. Researchers combined these responses with Census Bureau housing data and industry cost assumptions to estimate the aggregate impact of regulations on home prices. While the report acknowledges that not all regulations should be eliminated, it underscores the importance of quantifying their cost as policymakers seek solutions for housing affordability and increased homebuilding nationwide.
About the Author
