Virginia Capitol Connections, 2025 Annual Magazine 26 There is little doubt that housing affordability is a critical issue in the United States generally and Virginia specifically. The causes of this crisis are largely seen as mismatches. Migration from colder climates to warmer ones, economically stagnant to vibrant metropolitan areas, leaves some areas with abundant (if more timeworn) housing stock, while realty open houses attract hundreds of lookers and dozens of offers in fast-growing communities. Other forces also create issues for meeting permanent housing demand. Empty nesters may be holding on to larger homes because paid-off mortgages and connections to the familiar and the familial produce less turnover than anticipated. Some “starter homes” and luxury pads are converted to short-term rentals, while national corporations acquire others to rent at high market rates to profit from the housing crunch. Homebuilding in much of America has been transformed from typical custom-built and locally developed subdivisions to products of a handful of mega-builders who construct the equivalent of folk singer Joni Mitchell’s “little boxes on the hillside, little boxes all the same.” These developers are not rooted in the community and will even decide not to build too many homes, which may cut into profit margins. Complaints abound about the high interest rate on a home mortgage, but the 6 or 7 percent rate today seems attainable in contrast to the 10–12 percent rates of the 1970s and 1980s. Of course, today’s borrower doesn’t benefit as their parents did from interest and state and local tax deductions. So what is the problem that keeps us from addressing the housing affordability crisis? A common theme among builders, developers, and an increasing number of state and federal lawmakers asserts the answer is clear: government overregulation, and in particular, local government regulation. In debates in Washington and elsewhere, proposals to cut funding— especially for popular programs—claim that the cuts will come from identifying and rooting out “waste, fraud, and abuse.” No one would argue that any complex program will function without some of this unholy trinity, but in the absence of scandal or incompetence, rarely would the misappropriation of funds represent a major portion of program expenditures. Given the regular scrutiny by auditors, government watchdogs, journalists, and voters, elimination of waste, fraud, and abuse usually represents that part of a budget that would require greater expenditures to produce smaller results. In the effort to address housing affordability, the cry is to sweep away government regulation, often with a call to preempt local government authority by eliminating requirements or “fast-tracking” regulatory approvals at the local level. But what are the opportunities to address the regulatory environment to create a better balance between supply and demand? Earlier this year, the National Association of Home Builders and the National Multifamily Housing Council jointly issued a report entitled Regulation: 40.6 Percent of the Cost of Multifamily Development. That title should grab attention. If 2 out of every 5 dollars spent on building multifamily housing is due to regulation, surely there are easy ways to cut the red tape at city hall, county offices, or town planning departments. Affordable Housing and the “Waste, Fraud, and Abuse” Solution By JOHN MCGLENNON Cost of applying for zoning approval 93.9% 3.4% 3.2% Costs when site work begins (fees, required studies, etc.) 98.0% 8.7% 8.5% Dev. requirements (layout, mats, etc.) beyond the ordinary 91.8% 5.8% 5.4% Cost of land dedicated to the government or left unbuilt 51.0% 4.7% 2.4% Fees charged when building construction is authorized 95.9% 4.6% 4.4% Costs of affordability mandates (e.g. inclusionary zoning) 38.8% 6.9% 2.7% Changes to building codes over the past 10 years 100.0% 11.1% 11.1% Complying with OSHA/other labor regulations 93.9% 2.7% 2.6% Pure cost of delay (if regulation imposed no other cost) 95.9% 0.5% 0.5% TOTAL COST OF REGULATION 100.0% 40.6% 40.6% *The base is different for every percentage in this column, so the line items are not additive. Source: NAHB and MNHC Regulation as a Percent of Total Development Cost Average Across All Properties Average When Present* Share With the Regulatory Cost Table 1. Average Regulatory Costs as a Share of Total Multifamily Development
RkJQdWJsaXNoZXIy NjQ0MA==