Part 1 of 3
With housing becoming less and less affordable in New Hampshire and the state’s housing and construction industry mired in a historic slump that is dragging down the economy, why is government at all levels continuing to add to the cost of housing through onerous legislation and regulation? That’s a question a lot of builders in the state and across the country are asking.
“At a time when wages and material costs have flatlined, the biggest driver of the widening affordability gap is clearly over-regulation. You can’t cross a stream with a culvert any more, you have to build a bridge. You can’t build a house without a structural engineer and certified energy inspectors. You can’t touch a pre-1978 house without worrying about lead paint and asbestos. Obviously we need regulation but where does it all end?” says Paul Morin, a NH builder who also serves as the Government Affairs Director for the Home Builders and Remodelers Association of New Hampshire, “Building inspectors are having difficulty understanding the new energy codes, let alone enforcing them.”
You may not have noticed that the state of New Hampshire has spent $1 billion dollars of federal stimulus funds over the past year, but if you are looking to buy a new home or renovate an existing one, you will notice for years to come. And that is just one example of how federal, state, and local laws and regulations are driving up the price of housing by the tens of thousands. The Hudson Institute estimates that, in 2007, government regulation of the housing industry increased the median price of a family home by up to $86,650 and priced 18 million people out of the home purchasing market. And when you figure in the fact that federal, state, and local regulations of the housing industry have soared over the past three years, that figure could be as much as $100,000.
Like most money that comes to the state via Washington, the stimulus funds had many strings attached. One such string was the $3.1 billion State Energy Program that requires state building codes to have a residential energy code equal to or higher than the most recently published ICC codes or plan to enact them in the next 8 years. This requirement pertains to new commercial buildings also but that is a whole other story. The practical reality in New Hampshire and other states that are being forced by the feds is that these code requirements are driving up the cost of housing construction cutting into builder profits and reducing markets at a time when many builders are going out of business due to the recession. It is important to remember this was all done in the name of “stimulating” the economy.
The federal bailout of financial institutions and tightening regulation have driven up the cost of financing and forced banks to hold onto money creating a hostile lending environment to homebuyers exacerbating the housing problem. A recent study by the National Association of Homebuilders about the extent of under-building in the single family housing market nationally highlights the fact that the crisis in today’s housing market isn’t due to oversupply but might well be generated by government regulation reducing demand for housing. The study points out that New Hampshire has a housing permit deficit of 11,500 at a time when builders across the state are being forced to leave the industry because of the lack of demand.
Overregulation of the housing market doesn’t begin and end with the federal government. The State of New Hampshire likes to regulate too. Next we will look at how one New Hampshire regulation could add $20,000 to the average price of a median family home.
Amelia Chassé contributed to this report.