House hearing reveals enormous costs of housing regulation

Experts at a House hearing testified that 25% of the cost of buying a home and 40% of the cost of renting one is due to government regulation.

New home construction. (Image by Dwight Burdette, via Wikipedia under Creative Commons Attribution 3.0 Unported license)

WASHINGTON, March 29, 2016 — Industry regulations make up an enormous portion of the price of housing, according to two experts who testified before a House committee last week.

“NAHB (National Association of Home Builders) survey data of builders has demonstrated that, on average, regulation imposed during development accounts for 16.4 percent of the price of a home built for sale,” said Granger MacDonald, president of a home building company.

MacDonald was speaking before the House Financial Services Committee on behalf of the National Association of home Builders at a March 22, 2016 hearing entitled “The Future of Housing in America: Government Regulations and the High Cost of Housing.”

Further, he said, “regulation imposed during construction accounts for 8.6 percent of the price. Thus, in total, 25 percent of the price of an average single-family home built for sale is attributable to regulation imposed by all units of government at various points along the development/construction process.”

But the regulatory costs of owning a home were small compared to those for renting, according to Clyde Holland, Chairman and chief executive officer of the Holland Partner Group, a builder of multi-unit rental properties. Speaking on behalf of the National Multi-family Housing Council and the National Apartment Association, he noted, “One of our studies showed that 40 percent of the cost of a rental apartment has to do with regulation.”

“Government has inserted itself into the business of housing by mandating affordable housing and community reinvestment while simultaneously stifling creation of affordable housing and community reinvestment,” observed committee chairman Blaine Luetkemeyer, R-Mo.

“It’s time to promote the development and availability of housing for low- to mid-income Americans, not restrict it,” he said. “So today we ask ourselves: where do people go when they reach self-sufficiency? Is the stock of affordable market-rate housing plentiful enough to support the people seeking it? The unfortunate answer is no.”

Others testifying at the hearing included Mechele Dickerson, professor at the University of Texas at Austin School of Law, and Jayar Daily, the immediate past chairman of the Manufactured Housing Division of the Manufactured Housing Institute.

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