Administrative regulations add $132,000 to the price of each new home in the US, accounting for more than 26% of the selling price.

Administrative regulations from the federal to local levels are adding nearly $132,000 to the price of each new home, accounting for more than 26% of the sales price.

According to a report published in June by the US National Association of Home Builders (NAHB), legal burdens and administrative procedures currently account for an average of 131,734 USD per new home (average selling price is 499,500 USD), equivalent to 26.4% of value. This number has skyrocketed 40% in just 5 years, from $93,870 in 2021, twice as fast as the increase in disposable income of Americans during the same period.

Of the total costs mentioned above, the construction phase accounts for the largest proportion with nearly 85,000 USD, increasing from 13.3% to 17% of the house value after only 5 years. The main reason is increased construction permit fees and increasingly strict technical standards on exterior wall materials, insulation systems, house orientation or fence specifications.

Besides direct costs, delays in the approval process are also a major cause of cost increases. About 94% of contractors said they are often late due to licensing procedures, causing project loan interest to balloon and all of these financial costs are eventually transferred to home buyers.

Barriers also come from lack of uniformity between localities. Each state, and even each town, has its own rules, from mandating the orientation of the garage to detailing dimensions down to the centimeter. In Georgia, South Carolina and North Carolina, businesses have to spend a lot of money on traffic impact assessments.

About 88% of contractors said they must comply with specific design standards outside of the general planning, or must meet the requirement to reserve a portion of land in the project to serve public purposes.

In Texas, planning and permitting issues often spark a wave of lawsuits from local residents. The court system is supposed to be the place to resolve these disputes, but the process here is even slower.

NAHB estimates the U.S. is short 1.2 million homes, saying rising costs from regulation make it harder to increase supply.

"Policymakers need to eliminate unnecessary and costly regulations," commented NAHB President Bill Owens, a home builder and renovator from Ohio.