Regulation to blame for 32% of multifamily production expenses

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Regulation, on average, imposed by all levels of government accounts for 32% of multifamily development costs, according to the National Association of Home Builders and the National Multifamily Housing Council.

For a quarter of cases, these costs can amount to as high as 42.6%.

Regulatory expenses for multifamily production are burdensome on developers already plagued by higher costs to build and acquire property, and for homebuyers and renters, who struggle to afford increased rent and property values.

Regulatory costs for apartment and condo development include a range of fees, standards and other requirements throughout various stages of construction.

About 7% of a developer's regulatory costs are attributable to building code changes over the past 10 years, while 5.9% come from development requirements, like streets, sidewalks and landscaping. An additional 4.2% of expenses incur from nonrefundable fees imposed when building begins.

"The current regulatory framework has limited the amount of housing that can be built and increased the cost of what is produced," said NMHC President Doug Bibby in a press release.

"At a time when states and localities are struggling to address housing affordability challenges, public and private stakeholders should work together to streamline regulations and take the steps necessary to expand housing in communities across the country," he continued.

While local governments typically have authority over approving development and implementing building codes, state and federal governments are becoming more involved and adding on new layers of fees and regulations, according to NAHB.

"The homebuilding industry is one of the most highly regulated industries, and the multifamily sector is particularly subject to these obligations," said NAHB Chairman Randy Noel, who is also a Louisiana-based custom homebuilder.

"Housing affordability is a huge issue throughout the county, and this new research only further illustrates how the layers of excessive regulation translate into higher rents and reduced affordability for consumers," he added.

The research conducted by NAHB and the NMHC does not take into account price-influencing factors like the effects of recent tariffs on building materials.

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Homebuilders Multifamily Law and regulation Home prices NAHB