Local Regs Hammer Affordable Housing, Study Finds
Local government regulations can add as much as 30% to the cost of a new home, according to a recent study of development regulations in 187 cities and towns in eastern Massachusetts.
The study found that for each instance that communities increase minimum lot sizes by one-quarter of an acre, about 10% fewer homes are permitted. Fourteen municipalities in eastern Massachusetts zone more than 90% of their land area for two-acre lot sizes. Half of the municipalities zone at least one-acre lot sizes on more than half of their land area.
Two Massachusetts research organizations, the Pioneer Institute for Public Policy Research and Harvard’s Rappaport Institute for Greater Boston, jointly conducted the study and the results of the research are reported in “Regulation and the Rise of Housing Prices in Greater Boston.”
James Stergios, executive director of the Pioneer Institute, explained the research findings during a Jan. 12 press conference at the International Builders’ Show in Orlando, Fla. He was joined by Jeff Rhuda, business development manager for Symes Associates, Inc., a Massachusetts development company, and Layne Marceau, president of the Northern California Division of Shea Homes and chairman of the California Building Industry Association.
Marceau offered the perspective of builders and developers in California, one of the most heavily regulated states in the country.
“It has gotten to the point that more than 20% of the cost of new housing is regulatory costs,” Marceau said. “Some of these are hidden regulatory costs and some are very direct costs.”
Marceau pointed to an example of NIMBY-ism and ill-conceived land-use regulation in Livermore, Calif., where impact fees and regulatory costs now add $120,000 to the cost of every new home built. A proposed, moderate-density residential community in an area of Livermore that had been slated for development was put to a vote and rejected by the city’s citizens, 72% to 28%.
Instead, the developer must now subdivide the property into 20-acre lots, Marceau said, and, incredibly, still meet Livermore’s inclusionary housing requirement to make 30% of the housing affordable. That is difficult to do, Marceau pointed out, when the cost of each 20-acre lot is over $1 million.
Rhuda, speaking about the Massachusetts experience, said the high cost of housing is making it difficult for Massachusetts companies to attract and retain top employees.
“Massachusetts is one of the few states that have lost population the last two years in a row,” Rhuda said. “Businesses are saying that housing and healthcare costs are their two biggest concerns.”
Among the findings from the Pioneer/Rappaport report:
- Housing prices in the Boston metropolitan area would be 23%-36% lower than they are now if the region’s housing stock had increased by the same rate in the 1990s that occurred from 1960 to 1975. The region’s housing stock increased by 27% during the earlier period, compared to only 9% in the 1990s.
- One additional acre in a locality’s minimum lot size is associated with an 11.5%-13.8% increase in housing prices in that locality.
- As minimum lot sizes increase by one acre, the share of homes that qualify as affordable drops by 8%-20%.
“There had been a lot of anecdotal evidence that regulations were a large and growing part of the cost of housing,” Stergios said. “We wanted to move past the anecdotes and compile the hard data that would show us the real cost of local regulations.”
This research model could be used to assess the impact of local regulations across the country, Stergios said.
In addition to this analysis, researchers at the Pioneer Institute and Rappaport Institute assembled and coded a database on zoning codes, subdivision requirements and environmental regulations that as of 2004 governed land use in the 187 communities within 50 miles of Boston. The database is an online catalogue that enables its users to view and compare regulations throughout the sample communities and is available to the public online.
For more information, e-mail Blake Smith at NAHB, or call him at 800-368-5242 x8583.