In a recent interview with a US home builder, the subject of land cost emerged yet again and it was not exactly the understanding of land that most people think of. This was about the cost of land aside from the purchase price, and before any construction started.
In our quest to deliver more affordable housing options to not just those in poverty, but the millions who simply cannot afford a $950,000 home, the kind that reaps impressive profits for builders with similar effort and aggravation to building a much lesser priced, smaller house, but does not address the area with the biggest shortage of inventory, the solution may be under our feet....the land.
The actual construction of a home is notably more expensive today than it was 30 years ago due to regulations mostly governing structural resilience:
- Pouring a more flood-proof foundation typically increases construction costs by 3% to over 100%, depending on the technique, ranging from a few thousand dollars for enhanced waterproofing to over $100,000 for full elevation or major structural changes.
- Hurricane-proof windows typically cost 20% - 40% more.
- Installing a hurricane-proof roof generally costs significantly more than upgrading to hurricane-proof windows, often at least $10,000–$20,000+ more for a total home project.
- Some building requirements have become a bit excessive in areas and need to be adjusted to the real world, but still remain a relatively minor cause of unaffordability.
The big issue is around land. Not just the cost of the land itself, the purchase price. In several parts of the US, the excessive regulatory red tape and the time it takes to navigate this to get approval is far too long. While lots of it is necessary and meaningful (how will the land be serviced by roads, bridges, schools, infrastructure, etc), lots of the excess in some areas is being purposefully driven by locals who do not want any new construction, least of all more affordable home options. This, they argue, would bring down the value of their homes.
Neighborhood and local opposition to development is probably the key driver of the cost of land before a shovel hits the ground, sometimes as high as $150,000 for a $400,000 home! What might be the solution? Make all the homes attractive! Nantucket (which lacks affordable housing) has figured this aspect out, as have many other parts of the US. Small and more affordable does not have to be ugly. Too many "affordable" homes take on the look of "cheap" and/or hideous and yes, this can drive down the value of neighborhoods (and assessed values that drive real estate tax income, which impacts everyone!).
So let's think "MIPS"! Make It Pretty, Stupid! Top architects and designers around the US could provide pre-approved, aesthetically pleasing plans to accelerate approvals and construction, reducing or eliminating local opposition fueled by value-destruction fears. Everyone benefits from this, especially those living in these more affordable homes. A society that cannot house everyone is a society divided, less functional. Affordable housing is very different from "The Projects" and other housing often instantly associated with harsh, drab design and poor maintenance by inefficient local governments. Those don't have to be ugly or derelict either.....MIPS!
