Archive for March, 2012

Regulations in the Home Building Industry

Friday, March 23rd, 2012

In looking at the cost of a new home we have to consider the cost of the homesite, the actual construction cost and the cost of government in the process.  Typically, the cost of the homesite runs anywhere from 25-33 percent of the total price of the new home.  Sometimes you can find a site for less or have one given to you by a relative but it usually falls in the 25-33 %  range.  The cost of the actual construction not counting the regulatory items is estimated to be in the 40 percent range to give a total of about 67 percent.  That includes the cost of the labor, material and equipment for the construction of the new home.  Now as we look at the remaining costs we find we have about 33 percent or about one-third of the cost of the new home is for government regulations.  This number was actually confirmed by a study done by the Department of Housing and Urban Development done in the early 1970′s and we find those  numbers to still be in the same range.  It is interesting to note that as government tries to mandant affordable housing they have a large percentage of the cost to be attributable to them.  Now I am not trying to say that all regulation is bad but we are looking at a  $ 200,000 homes having an additional cost of $ 67,000 for regulations.  If government really wanted to make housing more addorable for Americans they should first look at what they have  done to make it more costly.  Do I actually think that will happen ?  I answer that by asking the question as to how many laws has government actually taken off the books versus how many new laws have been added to the statue.  It’s something to think about as we look at the cost of housing in this country.  Keep looking up.