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Builders Grapple With Sky-High Regulatory Costs
 With concerns about affordability growing in many of the nation’s major housing markets, NAHB Vice President and Treasurer Brian Catalde and California Building Industry Association (CBIA) President Steve Doyle, attending PCBC last week in San Francisco, called on local governments to reduce the impact fees, zoning constraints, construction code requirements and other regulatory burdens on builders and developers that are driving up the cost of housing.
Catalde and Doyle said local governments should approve more medium- and high-density housing, plan better for growth, streamline the zoning and approval processes and spread the costs of government services more equitably among all their citizens rather than singling out new-home buyers.
“We are seeing millions and millions of middle-income families being priced out of the market for homeownership all across the country,” said Catalde, a builder based in Playa del Rey in Southern California.
Catalde noted that four factors ― the cost of doing business; cost shifting such as impact fees and inclusionary zoning; production constraints such as large-lot zoning, setback requirements, urban growth boundaries and habitat areas and open space requirements; and the cost of regulation have escalated the cost of housing.
“You’ve got hundreds of regulatory costs and impact fees. There are so many layers of regulations that it’s all pretty fuzzy until you’ve found your way through the maze,” Catalde said. “Ultimately, it’s the home buyer who gets stuck paying the check.”
Catalde mapped out four meaningful steps that local governments can tackle immediately in order to make housing more affordable. These include:
- Passing more notice-and-opportunity to repair (NOR) legislation. Catalde said aggressive litigation tactics are currently driving up home prices and discouraging construction of much-needed multifamily housing. NOR legislation would help control aggressive litigation.
- Spreading the costs of local government services fairly among all who use them, rather than having new-home owners footing most of the bill.
- Changing zoning and development regulations so that land-use policies have less impact on housing prices.
- Applying cost-benefit analysis to all new regulations. “Government at all levels needs to be more disciplined. If the cost to society is greater than the benefit, then the government needs to change or reconsider that regulation,” Catalde said.
In California, where demand is so strong that the housing supply is barely keeping up and affordability has plummeted, Doyle, a San Diego County builder, said CBIA is working with the governor’s office and the League of California Cities to create legislation that would require local governments to zone enough land for housing to accommodate population growth for the next 20 years.
“Most local officials realize what the high cost of housing is doing to their communities today and the impact it will inevitably have down the line in terms of the economy and their ability to find and retain employees,” Doyle said. “We’re hopeful a bill will result by next year."
Another bill making its way through the California legislative process would streamline the environmental review process for infill developments, Doyle said, while adding that the bill would be a “good first step in reforming the state’s environmental laws.”
Doyle said the homeownership rate in California was the second-lowest in the county. He noted that much of the high cost of housing could be attributed to NIMBYs; environmental activists; local officials who want to appease their NIMBYs and want new housing to pay for an ever-growing range of government services; and state lawmakers “who keep coming up with ever-more creative ways of making it harder to build houses.”
About 5% of California is developed, and the amount of land zoned for housing construction that has been permitted and is ready to be developed is a lot less than that, Doyle said. In addition, “it takes seven to 10 years to get a subdivision approved, so it’s not like the spigot is going to open up anytime soon,” he said.
Doyle also noted that jurisdictions are adding exorbitant impact fees for local services. For instance, the city of Livermore is charging $130,000 per home in its subdivisions, the highest in the state.
“The school district, the park district, the city, the county, the arts council ― everybody wants their cut. There’s hardly a community left where the fee burden is under $20,000 per home, and in most communities, fees total $30,000 to $50,000 per home,” Doyle said.
“Too many of our legislators seem to think that whenever there is a problem, the solution is to make the new-home buyer take care of it,” Doyle pointed out.
For example, rather than building new power plants or making older homes more energy-efficient in order to help solve the state’s energy problems, he said that the state is tightening its energy standards for new homes — already 30% higher than the rest of the county ― even more.
“Instead of focusing on 150,000 new single-family homes a year, if we really want to make a dent in energy consumption, we’d work on the 9 million homes built before the first energy standards were enacted. Just insulating these older homes would make a huge difference,” Doyle said.
To read Brian Catalde’s entire comments at PCBC, visit Housing Forum in this issue.
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