"Excess" government regulation may boost the price of a new home by as much as 20 per cent, researchers at Rutgers University have concluded in a new study.
Drawn up by Rutger's Center for Urban Policy Research, the report also maintains that reform of the regulatory process involved in housing would increase the number of families who could afford homes by 8 per cent.
The research project, "Government Regulations and Housing Costs," surveyed more than 2,000 builders and concluded that a three-bedroom, $50,000 home built on a half-acre lot would include $9,844 in expenses due to "excess" government requirements. Over a 30-year period, according to the study, these standards would raise the monthly cost of maintaining a home by $80.
The report defines over-regulation as "those forms or variations of governmentally-imposed controls which exceed minimum health, safety, and welfare considerations." The study acknowledges that its cost findings may be "overstated" for two reasons; first, because "the definition used for excessive costs is a servere one that admits only minimal standards for health and safety," and second, that individual developments may not face all the costs used in the model calculations.
The four largest "unncessary" expenses identified by the survey included:
Minimum building size: The consumer preference for larger homes has gradually ben incorporated in building codes, the researchers said. Local guidelines that exceed standards of the Department of Housing and Urban Development may force buyers to obtain houses that are larger than they require, the report conlcuded. The survey calculated the cost of these regulations at $2,880 for the model home.
Outdoor burning: Where bulldozing and hauling were required to clear property because outdoor burning was prohibited, the additional cost was $1,105. The researchers maintain that air quality is affected "more by ambient air of more populated or industrialized locations than by pollution caused by local vegetation burning."
Minimum lot size: Many communities control housing density by requiring building lots to have a minimum size, the report said. While acknowiedging "considerable argument" over the possible costs of this practice, the survey contended that minimum lot sizes above one-fourth of an acre tended to increase housing costs excessively. For a half-acre site where the land is valued at $16,000 per acre the increased expense would be $800, according to the survey.
Settlement fees: The survey reported that costs associated with settlement could be dropped by one-sixth, or $600. This could be done through "marketable title laws, lower attorney fees, lower title insurance enabled by extensive analysis or risk, an better regulation of title research companies."
The Ruters survey parallels a recent report by an ad hoc Fairfax County group, the Committee to Reduce the Cost of Housing. The committee, made up of four persons with backgrounds in real estate and development and three county officials, estimated that it takes 2.5 years to complete the average home in Fairfax. Through regulatory reform this period could be cut by 200 days, according to the group, saving as much as $2,800 per home.
The Rutgers study, which was directed by Dr. George Sternlieb, noted that the cost of housing has risen substantially fastere than income. As a result, while half of all families were able to afford a new, detached house in 1970, fewer than one-third could do so in 1975.
The elimination of "unnecessary" regulations, the researchers concluded, would drop the cost of the study model by nearly $10,000. In turn, less family income would be needed to qualify for a mortgage and, the study suggested, 8 per cent more families would then be able to afford new housing.
One regulatory aspect cited by the study was the sheer number of permits now required. While no dollar value was placed on this cost, the survey did cite an unanmed Maryland builder as exemplifying this problem.
"In the case of a suburban Maryland subdivision," the report said, "a total of 18 permit fees and four bonds were required at various stages of the development process. The majority of these requirements - 13 of the fees and all four bonds - were related to land development. The remaining five permits involved aspects of the residential structure itself."