4 ms·

I personally feel regulation slows down new construction, but doesn't necessarily increase costs. Dilapidated houses still go for large sums, so I suspect land

I personally feel regulation slows down new construction, but doesn't necessarily increase costs. Dilapidated houses still go for large sums, so I suspect land costs to be a major reason as well. Additionally, lack of contractors is becoming an issue(demand increases, costs increases) with many of them working indefinitely over in fire-ravaged areas like Paradise or Santa Rosa.

Erik816 7y ago
If you slow down construction, you are inherently making it more expensive.
- adamredwoods 7y ago
  ...if there is significant demand. Additionally faster construction can also imply higher costs (more workers needed for single projects to meet deadline, etc).
wahern 7y ago
Yeah, the question isn't whether stricter building regulations increase costs but by how much. And in the context of the housing crisis, how much does it increase the price of pre-existing housing. The costs are attenuated down market. And the benefits are shifted across time--the expensive single-family home sprinkler system today that seems like overkill is intended to prevent deaths when it becomes a multi-generational, multi-family home 20 years from now. Just like anti-lock breaks and crumple zones increased the price of cars but substantially increased the safety of used cars years later, and much if not most of the premium in costs was borne by the first buyer. As you say, labor seems like a much more significant factor. And restrictive zoning and NIMBYism even more so. But restrictive zoning is a sensitive topic for conservatives. Conservatives seem to be against regulation except when it's used to preserve the "character" of existing neighborhoods--not to be confused with historic preservation, which is bad restrictive zoning. Direct regulation is a more convenient target, ideologically. Likewise, I often hear conservatives lament the cost of labor but they're walking on glass by suggesting that working-class voters should be paid less. To be fair, progressives make the same mistake of assuming new housing should be built for the poor and working class. And NIMBYism knows no bounds. Indeed, it was progressive efforts to "empower" communities that opened the doors for NIMBY obstructionism. It's difficult to devise a political mechanism that won't ultimately benefit the rich and powerful more than the poor.
liber8 7y ago
If construction takes longer, costs increase. This is indisputable. Imagine you buy a piece of land for $100,000 with the intention of developing it. Until the property is developed and sold, you have numerous carrying costs (taxes, insurance, debt payments, etc.). In California, your annual carrying costs may easily be $8,000-$10,000 per $100,000. If it takes you one year to develop the property, you need to sell the property for $108,000 just to cover the carrying costs (i.e. this doesn't account for the actual construction costs or selling costs). If it takes you two years to develop the property, you need to sell the property for $116,000 just to cover the carrying costs. Keep in mind, the time to develop isn't idle time where the developer incurs only carrying costs. It's endless drafts, consultations, and meetings. It requires actual money to be paid not only to the city, county, and state, but to architects and planners and contractors to comply with increasingly byzantine and mercurial requirements. The longer this goes on, the more money a developer has to spend. The longer a developer is forced to carry the property, the more they need to charge to recoup their investment. Since no one is going to develop property without anticipated profit, this means prices necessarily rise.
- adamredwoods 7y ago
  Regulations are known upfront. Good contractors and architects know each city's processes and how to navigate through them.
  - jdminhbg 7y ago
    > Regulations are known upfront. Ideally, yes. In practice, no. Capricious zoning and development regulators are on the HN front page at least weekly.
  - analog31 7y ago
    That's probably true, but it also limits the number of available contractors to the ones who know a particular city's processes. It would be harder for a smaller contractor to operate across multiple jurisdictions. So it limits competition, which drives up prices.
  - scarface74 7y ago
esmi 7y ago
Regulation most certainly increases construction costs. Safety features will definitely increase cost. So does environmental compliance. I don't necessarily think those are bad things, but they definitely increase costs. From the article: "These energy rules reflect an important priority for Californians, but they contribute to staggering construction costs and, in turn, higher house prices. Affordable housing builders spend $400,000 per unit, on average, for new housing in Los Angeles, more than any other city in the country. State energy standards contribute to this cost."
- coredog64 7y ago
  In practice, we’re trying for perfect over good. Let’s say I’m a low income family and I’m trying to buy a house. Adding 10% might price me out of the new market and into an older house. Yes, the goal was to give people more insight into recurring costs, but now you’ve pushed them into older stock that may have maintenance costs that are an order of magnitude higher than the electric bill.
true_tuna 7y ago
Slowing down a project increases cost. Also if your total construction per year can’t keep up with incoming migration the net difference will be demand growth which necessarily raises housing costs.

Erik816 7y ago

If you slow down construction, you are inherently making it more expensive.

adamredwoods 7y ago
...if there is significant demand. Additionally faster construction can also imply higher costs (more workers needed for single projects to meet deadline, etc).

wahern 7y ago

Yeah, the question isn't whether stricter building regulations increase costs but by how much. And in the context of the housing crisis, how much does it increase the price of pre-existing housing. The costs are attenuated down market. And the benefits are shifted across time--the expensive single-family home sprinkler system today that seems like overkill is intended to prevent deaths when it becomes a multi-generational, multi-family home 20 years from now. Just like anti-lock breaks and crumple zones increased the price of cars but substantially increased the safety of used cars years later, and much if not most of the premium in costs was borne by the first buyer. As you say, labor seems like a much more significant factor. And restrictive zoning and NIMBYism even more so. But restrictive zoning is a sensitive topic for conservatives. Conservatives seem to be against regulation except when it's used to preserve the "character" of existing neighborhoods--not to be confused with historic preservation, which is bad restrictive zoning. Direct regulation is a more convenient target, ideologically. Likewise, I often hear conservatives lament the cost of labor but they're walking on glass by suggesting that working-class voters should be paid less. To be fair, progressives make the same mistake of assuming new housing should be built for the poor and working class. And NIMBYism knows no bounds. Indeed, it was progressive efforts to "empower" communities that opened the doors for NIMBY obstructionism. It's difficult to devise a political mechanism that won't ultimately benefit the rich and powerful more than the poor.

liber8 7y ago

If construction takes longer, costs increase. This is indisputable. Imagine you buy a piece of land for $100,000 with the intention of developing it. Until the property is developed and sold, you have numerous carrying costs (taxes, insurance, debt payments, etc.). In California, your annual carrying costs may easily be $8,000-$10,000 per $100,000. If it takes you one year to develop the property, you need to sell the property for $108,000 just to cover the carrying costs (i.e. this doesn't account for the actual construction costs or selling costs). If it takes you two years to develop the property, you need to sell the property for $116,000 just to cover the carrying costs. Keep in mind, the time to develop isn't idle time where the developer incurs only carrying costs. It's endless drafts, consultations, and meetings. It requires actual money to be paid not only to the city, county, and state, but to architects and planners and contractors to comply with increasingly byzantine and mercurial requirements. The longer this goes on, the more money a developer has to spend. The longer a developer is forced to carry the property, the more they need to charge to recoup their investment. Since no one is going to develop property without anticipated profit, this means prices necessarily rise.

adamredwoods 7y ago
Regulations are known upfront. Good contractors and architects know each city's processes and how to navigate through them.
- jdminhbg 7y ago
  > Regulations are known upfront. Ideally, yes. In practice, no. Capricious zoning and development regulators are on the HN front page at least weekly.
- analog31 7y ago
  That's probably true, but it also limits the number of available contractors to the ones who know a particular city's processes. It would be harder for a smaller contractor to operate across multiple jurisdictions. So it limits competition, which drives up prices.
- scarface74 7y ago

esmi 7y ago

Regulation most certainly increases construction costs. Safety features will definitely increase cost. So does environmental compliance. I don't necessarily think those are bad things, but they definitely increase costs. From the article: "These energy rules reflect an important priority for Californians, but they contribute to staggering construction costs and, in turn, higher house prices. Affordable housing builders spend $400,000 per unit, on average, for new housing in Los Angeles, more than any other city in the country. State energy standards contribute to this cost."

coredog64 7y ago
In practice, we’re trying for perfect over good. Let’s say I’m a low income family and I’m trying to buy a house. Adding 10% might price me out of the new market and into an older house. Yes, the goal was to give people more insight into recurring costs, but now you’ve pushed them into older stock that may have maintenance costs that are an order of magnitude higher than the electric bill.

true_tuna 7y ago

Slowing down a project increases cost. Also if your total construction per year can’t keep up with incoming migration the net difference will be demand growth which necessarily raises housing costs.