Senior VP outlines what mortgage professionals can do to help
The National Association of Home Builders (NAHB) released a study this month that showed regulations on new build homes from federal, state and local governments add an average of $93,870 to the price of every new home. That cost, almost a quarter of the average sale price, comes from regulation during development and regulations during construction. It’s a shocking price tag and one which one NAHB lobbyist explained as a product of cumulative regulatory pressures imposed, mostly, at state and local level.
Susan Asmus, senior VP of regulatory affairs at the NAHB, noted that the cost of these regulations has accelerated in recent years as local governments use new home building as a focus of their policy initiatives. Recently, many of those policies have been focused on energy efficiency and resiliency in the face of more frequent and intense natural disasters. While Asmus accepts some of those steps are necessary, she believes that builders are shouldering too much of the cost of these initiatives, while existing housing stock often gets overlooked. When new regulations come down from local authorities, she and her local NAHB affiliates show just how much they will cost builders at a time when the housing market needs supply more than ever.
“We talk to our affiliate organizations - our state and local homebuilder associations - try to give them whatever information we can about some of the proposed regulations, and what would this mean on the ground,” Asmus said. “When they pass that information on to the state and local policymakers you get you get roughly two camps. One is, ‘I don’t care how much it cost because we’re doing the right thing.’ The other is, ‘I had no idea it cost that much. Maybe there are some tweaks that we can make to reduce those costs.’”
Asmus explained that these conversations require input from key stakeholders in the housing market. Insurers play a significant role as they’re often left holding the bag post-disaster, but mortgage professionals can provide input too, offering the perspective of housing market professionals in a market defined by tight supply. These stakeholders can usually help policymakers tweak these regulations, so the cost doesn’t fall unduly on builders.
Regulations are so focused on new builds, Asmus explained, because policymakers see a somewhat easy means of assuaging citizens’ fears about natural disasters and climate change. Builders are an easy target as they’re perceived as incredibly wealthy. Asmus noted that the average profit margin on new builds is around 4%, and that’s already being squeezed by high lumber prices. She accepts that both new and existing housing stock need to be better protected against natural disasters, but believes that adding to the huge regulatory burden already faced by builders will only serve to limit their activity and prevent new supply from coming into the housing market.
One solution Asmus advocates for is greater streamlining of existing regulations. Builders, she said, can shoulder one or two new regulations, but when a dozen regulations fall on top of one another in an industry where each individual unit needs its own set of permits the costs begin to get astronomical. If policymakers can streamline and simplify the range of regulations these builders face, that should help their bottom line while ensuring policy goals are still being met.
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While the big $94k price tag is national, Asmus noted that this regulatory problem is local in origin and local in solution. It’s there where she believes mortgage professionals can best play a role.
“The first thing to do is pay attention,” Asmus said. “Many of our members don’t hear about what’s happening at the local level until it happened. Stakeholders need to stay tuned in and participating at the community and state level because these costs matter. We’ve done studies that show how many households are priced out of the market by a $1,000 increase in the cost of a new home. Price matters and cost matters and we’re pushing for programs that help buyers defray that upfront cost. That will take the mortgage industry working with builders and insurance companies.”
