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Home Builders Detained by Rising Compliance Costs

money-houseHome builders have hit a roadblock. The ramped up regulatory environment has made it difficult for builders to produce affordable homes.

Regulations put in place to protect the environment and to shore up local city finances are holding back affordable home building, according to a report by Jody Kahn, SVP of John Burns Real Estate Consulting [1].

“Now, more than ever, the demand for affordable entry-level housing will need to be met by the resale market, since new homes have become permanently more expensive to build,” Kahn stated.

In a survey of more than 100 home building executives across the U.S., John Burns determined what new home construction costs have come into play that did not exist 10 years ago and which markets have been affected most by regulation. Builders identified local issues with compliance in the Florida, Southeast, Northeast, Midwest, Texas, Southwest, California, and Northwest markets.

John Burns' National Issues Mentioned Over and Over by Home Builders:

"While virtually all of these costs appear to come with positive consequences for the environment, neighborhoods, or city finances, they also make it quite difficult for builders to build entry-level homes and, consequently, for the home construction market to recover to normal volume levels,"Kahn stated. "Rising construction costs push new home prices higher and out of the reach of many prospective buyers. Increasingly, home builders have been forced to serve only the more affluent home buyers."