For The Record

Think tank study blames government rules for soaring house prices as speculation drives market

By: - May 11, 2022 8:54 pm

A report from Georgia’s Public Policy Foundation and home builders association says that while workforce shortages and the cost of building materials receive a lot of discussion about the rising price of homes, their study demonstrates the significance of government regulations, In this 2019 file photo, new homes are under construction in McDonough. Stanley Dunlap/Georgia Recorder

A Georgia policy think tank’s report argues that too many government regulations drive up the cost to build new homes while pricing out first time home buyers.

The Georgia Public Policy Foundation on Wednesday held a second leg of a statewide tour detailing its housing regulation study that found government regulations, ranging from design and environmental standards to building codes, account for more than one-quarter of the price of a new single-family home in Georgia — more than the national average.

The statewide survey estimates that those regulations account for 27% of the cost for a single-family home in Georgia, compared to the national average of 23%. ‌In other words, a‌ ‌new‌ ‌$300,000‌ ‌home‌ ‌in‌ ‌Georgia‌ ‌would‌ ‌be‌ ‌about‌ ‌$12,000‌ ‌less ‌expensive‌ ‌nationally without the regulation cost estimates tallied in the analysis.

The conservatve-leaning nonprofit’s survey is based on responses from 86 builders and lot owners who are among the 988 members of the Home Builders Association of Georgia.

The report from the foundation and National Association of Home Builders contends that Georgia’s inadequate housing supply is too often overlooked by policymakers focusing on demand.

And the survey suggests that local government ordinances affect new housing prices in a way that disproportionately hurts first-time home buyers.

“We’re not arguing that all (regulations) are bad or should be eliminated,” said Chris Denson, the foundation’s director of policy and research. “ We just want policymakers to be aware that when they impose these things, that there’s a real world cost that is then transferred on to prospective homebuyers.”

Georgians continue to be priced out of homes as the cost to buy homes soar and rent becomes more of a drain on pocketbooks while the population continues to grow. And that comes as fewer homes have been built. In Georgia, more new home building permits were issued in the final five years of the 1990s than from 2010-2019.

The‌ ‌debate‌ ‌over‌ ‌how‌ ‌much‌ ‌control‌ ‌zoning‌ ‌board‌s and‌ ‌other‌ ‌local‌ ‌government officials should have over residential construction standards played out several years ago among state lawmakers when a legislative committee studied how those requirements affected workforce housing. 

Denson said the survey advances the notion that Georgia is “ground zero” for imposing local architectural design standards after 72% of the 86 members responding reported having to follow them compared to 58% of builders nationwide.

Todd Edwards, the deputy legislative director for the Association of County Commissioners of Georgia, said that government regulations serve a wide range of purposes, such as protecting people in areas more susceptible to flooding through stronger codes dealing with building or electrical standards.

“I think most Americans want to live in neighborhoods and communities that are regulated to some extent,” he said Wednesday.

Edwards‌ ‌said‌ ‌it is appropriate for local elected officials to determine the minimum size of lots on which houses can be built, just like they are responsible for determining‌ ‌design‌ ‌standards.

“Some local governments have adopted those because to them it’s very important to maintain their communities and also protect others property values,” he said.

One‌ long-standing complaint among Georgia homebuilders is the  impact fees charged by local governments to developers to pay for infrastructure like roads and sidewalks, and services like sewage and water.

“One thing that we constantly hear is that because of these regulatory impact fees that builders are incentivized to build larger homes, because there’s a fixed cost that they’re going to incur anyway,” Denson said.

Edwards, however, said those costs for services would either be passed along to the home builders on the front end or have to be shared among residents.

According to Edwards, the role of private investors is playing a much larger role in heating up the housing market by buying up existing housing stock, and thus pricing more families out.

The foundation plans to hold its next public briefing on its housing report on May 25 at the Fayetteville County Chamber of Commerce.

 The plan is to eventually broaden it with a more regional analysis and also expand it to cover multi-family housing, Denson said.

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Stanley Dunlap
Stanley Dunlap

Stanley Dunlap has covered government and politics for news outlets in Georgia and Tennessee for the past decade. The Georgia Associated Press Managing Editors named Stanley a finalist for best deadline reporting. The Tennessee Press Association honored him for his reporting on the disappearance of Holly Bobo.