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crisis ever .’ The reason is that the economy cannot increase wages enough for consumers to overcome record-high housing prices and mortgage rates hovering at seven percent .
How did we get into this mess ? Much of it is self-inflicted by our state and local governments , which have increased costs and punished the home building industry with impact fees , delays , and energy mandates that have , depending on the entity , added nearly 24 percent to the cost of a new home , according to a study by the National Association of Home Builders .
Regulations during project development added 10.5 percent to the final house price , and the other 13.3 percent was due to regulation during home construction .
In dollar terms , the impact of these fees pushes the price of a new home from $ 371,260 to $ 487,200 — the average new price in July 2024 , according to the US Census Bureau .
A 2022 study by the Austin Board of Realtors and the Home Builders Association of Greater Austin identified separate charges to builders for comprehensive plan fees , zoning change fees , parkland dedication fees , site plan application fees , building permits , tap fees , and stormwater fees . That ’ s in addition to general development impact fees , which are often among the highest assessed and are required to fund public infrastructure like roads , sidewalks , and drainage systems .
States and municipalities could greatly help themselves if they were more interested in the long-term benefits that would accrue to themselves and their citizens by easing the financial burden imposed on developers and builders . Dramatically reducing or eliminating these fees would significantly decrease the cost of new homes , especially entry-level homes .
The wrong view
Today , there is a double standard : Developers spend a lot of money installing streets , utilities , and recreational facilities . In addition , some cities require developers to donate land for schools , parks and open spaces .
Moreover , builders create high-valued assets for cities that provide ongoing new revenue to the city every year through taxes .
Although municipalities get a windfall of revenue , they continue to charge home builders access fees to tie into the utilities that the cities or counties spent little or nothing to acquire .
Municipalities should not treat land development and home building as an income opportunity . Instead , they should view home builders as providers of future tax revenue .
Adding to the cost of housing
Municipalities charge home builders for permits and other fees that add to the price of the home . Many cities also take weeks or months to issue housing permits , forcing builders to pay carrying costs on unproductive building sites . Again , this adds to the price of every home .
To add insult to injury , many municipalities treat builders poorly , sometimes with outright hostility . Such behaviors can indirectly increase building costs as adversarial relationships give builders little incentive to find ways to help these municipalities .
Builders would love to build affordable entry-level homes but cannot , due to costs inflated by fees , delays , and other obstacles imposed by local governments . As a result , builders must build mid-level to luxury-level homes to remain financially viable .
Three ways to increase affordable housing
What can municipalities do to increase the affordability of entry-level housing as well as housing costs in general ?
Here are three innovative solutions – action steps – that can be taken to solve the problem :
1 : MUNICIPALITIES
■ Create a development fund , financed by issuing development bonds secured by future property tax revenue
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