![]() Both new and existing government regulations can add up to 40.6% of the costs of the average development, says a new report issued by the National Association of Home Builders. Breaking down the costs, the survey, done in conjunction with the National Multifamily Housing Council, says that just over 11% of those costs are coming from building codes that have been upgraded or changed in the last decade. The second highest cost, at 8.5%, stems from costs imposed when site work begins. Government-imposed inclusionary zoning, defined as requiring developers to build a certain segment of their apartments below the market rate, makes up 2.7% of costs. Ironically, according to the survey’s findings, some regulatory mandates have had the effect of discouraging developers from building in the very communities where new housing is the most needed. Just under 48% of the survey’s respondents said they avoid building in areas with certain regulatory mandates, even if the community needs more housing. An overwhelming 87.5% said they avoid building in areas where rent control policies are in place. The survey report, Regulation: 40.6 Percent of the Cost of Multifamily Development, notes that the “first significant interaction between a multifamily developer and the government typically occurs when the developer applies for zoning approval to allow multifamily housing to be built on a particular parcel of land.” Those costs, at that stage, include everything from “fees owed to the local jurisdiction for proceeding through the approval process to market or environmental impact studies that must be commissioned from private consultants.” While there are instances where developers can acquire land for housing development without having to go through a rezoning process, just under 94% of the survey’s respondents said they regularly “dedicate resources to rezone the land to allow multifamily construction. When they exist, these costs average 3.4% of the total development cost.” Respondents also pointed to costs associated with overall impact fees as well as utility impact fees. Nearly 92% of the respondents said they have been required by local authorities to include energy efficient and façade design fees, while also being required to “leave a portion of the development site dedicated for government use or left unbuilt.” The survey report additionally notes that while developers regularly respond to a host of federal, state, and local building mandates, a large nearly 96% of respondents said complying with such regulations, “caused some sort of delay for their typical project.” In a press release accompanying the survey and issued by the NAHB, it was noted that “few would argue, for example, that basic safety standards for structures and workers are necessary. But when regulation constitutes an average of 40.6% of a project’s development costs, this raises questions about how thoroughly governments are considering the consequences of their actions.” By Garry Boulard
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