Builders Tally Cost of Regulations for New Homes
March 3, 2025
Regulations accounted for nearly a quarter (23.8%) of the average cost of a new home ($394,300), according to the National Association of Home Builders (NAHB). The figures are based on data from 2021, the latest available information.
In a more recent study, the 2024 Cost of Construction Survey, the builders’ trade group reported construction accounted for 64.4% of the average home price last year. That’s the highest figure on record according to NAHB.
In its survey, NAHB broke down the average new construction home price in 2024, with several of the elements incurring inspection and impact fees. For example, the site work included $7,640 for building permit fees, $6,260 for water and sewer inspection fees, $6,480 for architecture and engineering fees, and an impact fee of $6,367.
For the earlier study based on 2021 data, NAHB concluded “Rising regulatory costs are a limiting factor on housing supply, particularly for the entry level market in need of inventory.” It used surveys of land developers and single-family builders for the report.
For the average price of a new home at that time ($394,300), regulation during development cost $41,330 with an addition $52,540 of regulatory costs incurred during construction for a total of $93,870. That’s up from the 2016 figure of $84,671.
NAHB said its study was not an argument that all regulation is bad or should be eliminated. Its underlying premise is that “in an environment where housing is regulated in a complex way by a variety of federal, state, and local entities, it is useful to have a numerical estimate of how much regulation exists and its aggregate dollar value at present when contemplating new policies or revising existing ones.”
All developers in the survey reported incurring regulatory costs after obtaining zoning but sometime later during the development process.
Also common, according to 94% of developers, were requirements to dedicate land to the government – whether for something like a park or leaving a portion undeveloped. “In these cases, the developer must pay for the land but is not allowed to derive revenues from it, driving up costs on the lots that can be developed and sold,” NAHB stated in its study. Together, theses costs account for 5.8% of the final house price.
Additionally, more than 85% of developers said they were subject to design standards that went beyond what they might ordinarily do, thereby adding to their costs and resulting in 2.3% of the final house price.
Complying with OSHA or other labor standards accounted for another 0.5% of the home price.
Not only does complying with regulations add costs, it also causes a delay, typically around six months, according to nearly all (95.9%) of developers.
The National Association of Home Builders (NAHB) represents the largest network of craftsmen, innovators and problem solvers dedicated to building and enriching communities. The federation of more than 700 state and local associations represents more than 140,000 members.