You would think that, by now, government officials would understand this simple equation: More regulation equals higher housing prices and lower affordability. Yet year after year—and despite numerous government and independent studies documenting how much regulation adds to the cost of new housing and prices families out of homeownership and decent rental housing—government at every level continues to impose regulations that unnecessarily drive up costs.
In eastern Massachusetts, according to a recent study of 187 cities and towns, local regulations can add as much as 30 percent to the cost of a new home. For each instance that communities increase minimum lot sizes by one-quarter of an acre, the study found, about 10 percent fewer homes are permitted. Fourteen municipalities zone more than 90 percent of their land area for two-acre lots. And half of the municipalities zone more than 50 percent of their land area for one-acre lots.
Two Massachusetts research groups, the Pioneer Institute for Public Policy Research and Harvard's Rappaport Institute for Greater Boston, jointly conducted the research, which is summarized in a new report, “Regulation and the Rise of Housing Prices in Greater Boston.”
HOME ECONOMICS Sadly, the correlation between regulation and increased housing costs is nothing new. “Not in My Backyard: Removing Barriers to Affordable Housing,” a 1991 HUD study, concluded that “exclusionary, discriminatory, and unnecessary regulations constitute formidable barriers to affordable housing.” And it cited previous studies and conferences dating back to the late 1960s that reached similar conclusions.
The relationship between regulations and rising prices is also not unique to specific markets such as eastern Massachusetts. In fact, it's quite common. Across the nation, the evidence is clear that restrictive development regulations—including growth boundaries, large-lot zoning, excessive setback requirements, prohibitions on multifamily housing, and high impact fees—are driving the cost of housing beyond the means of many low- and moderate-income families.
While affordability woes now affect even lower-cost, rural areas, the problem is most acute in high-growth, high-cost areas. In California, perhaps the most heavily regulated state, the median price of a home is more than $470,000. A study by Northwestern University found that about a fifth of that cost is due to government-imposed regulatory costs and impact fees.
Ultimately, when the cost of housing gets too high, families suffer. Many may be forced to move to places where housing is not so expensive, and it is common to find that people who are essential to our communities—for example, police officers, firefighters, and nurses—must commute long distances to work. Others spend more than 30 percent of their income on housing, and some are forced to live in housing that is inadequate to meet their needs or that is substandard.
From coast to coast, rising housing prices are forcing more and more households into crisis and taking a toll on families, businesses, and communities. And the irony, of course, is that we—and our public officials—know exactly what is causing the problem.
SPEAKING OUT I want to emphasize that the need to prevent, eliminate, or moderate the regulations that unnecessarily push up the cost of housing is a driving force behind much that we do at the NAHB and at member associations. It is one of the basic principles in virtually all of our advocacy efforts related to land use, codes, housing finance, the environment, construction safety, and more. And, frankly, without our hard work and ongoing efforts, I believe that studies such as the recent ones in Massachusetts and California would show that regulation adds even more to the cost of new homes.
Fighting for affordability and against regulatory excess is one of the most important things that the NAHB does for its members. You expect us to be continually vigilant, and we will continue to fully meet that expectation.
President, NAHB Washington, D.C.
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