The Effect of Government Regulations on Construction Costs

A recent study conducted by the Washington Policy Center found that as much as 24 percent of housing price increases may be attributed to the government policy. Indeed, the study found that state and local laws, permitting, building restrictions and regulations add on average $144,000 to the cost to construct a new, median priced home.

Reminds me of the old saying “No society in the history of the world taxed and/or regulated itself into prosperity.”

A link to the piece is found here

The Perfect Storm

Rising construction & operating costs – along with rising interest rates – were partially offset by significant rent increases for market rate properties in 2022. Many of these deals were salvaged by increased market rents last year.

Not so for affordable multifamily.

Costs and interest rates rose for affordable multifamily, too. But rents – which are tied to household income – increased only modestly in 2022. Because of this, many of these restricted rent deals don’t pencil out.

From the piece:

“The 2023 housing market’s ‘headwinds’ are the same for all homebuilders — high construction costs compounded with high interest rates that have lowered borrowing amounts. But those challenges are especially sharp for affordable housing developers.”

A link to the news piece is found here.

Thoughtful design can create high-quality affordable multifamily housing

“Developers who build affordable housing face a lot of hurdles: complex subsidy programs, expensive labor and materials, onerous local land use regulations, and, of course, community opposition. Neighboring residents often worry that low-cost housing will be ugly and comprised of hulking, boxy structures with cheap-looking facades. But while affordable housing developers do have tight budget constraints, there are strategies that allow them to build apartments that are visually appealing and offer comfort and convenience to their residents while meeting all the essential requirements of safe, healthy housing.

In this article, we examine strategies to save costs on three building components: the exterior shell, interiors, and services.”

https://www.brookings.edu/research/affordable-housing-doesnt-have-to-look-cheap-inside-or-out/

Parking requirements and foundations are driving up the cost of multifamily housing

“In this article, we explore strategies to improve the efficiency of constructing apartment buildings through cost savings in site preparation, substructure work, and parking. This is the third piece in a series on how innovations in design and construction can reduce the costs of multifamily housing. Prior articles discussed cost categories for different building typologies and proposed strategies to save money on land and soft costs.”

https://www.brookings.edu/research/parking-requirements-and-foundations-are-driving-up-the-cost-of-multifamily-housing/

Flexible zoning and streamlined procedures can make housing more affordable

“This article is the second in a series examining how innovations in design and construction can bring down the cost of building apartments. The first article discussed how costs vary across different multifamily typologies. In this piece, we address potential cost savings in two categories: land costs and soft costs.”

https://www.brookings.edu/research/flexible-zoning-and-streamlined-procedures-can-make-housing-more-affordable/

Making apartments more affordable starts with understanding the costs of building them

“This piece is the first in a series that explores how improved design and construction decisions could reduce the cost of building multifamily housing. Our goal is to lay out what developers, architects, and contractors can do to improve affordability, independent of larger changes in land use policy or housing finance. We also note areas where design and construction interact with the policy and finance environment, and which would benefit from broader changes.”

https://www.brookings.edu/research/making-apartments-more-affordable-starts-with-understanding-the-costs-of-building-them/