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Regulatory costs increase new home prices

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Posted at 6:12 AM, May 08, 2021
and last updated 2021-05-08 06:11:59-04

PORTAGE, Mich. — The National Association of Home Builders announced almost a quarter cost of new homes is tied to regulatory fees at all government levels.

One West Michigan builder said it doesn't stop there, even if you're buying an older home.

About 23% of the cost of a new home is tied to regulatory fees, meaning on a $300,000 house around $71,000 goes to pay those fees.

"Our National Home Builders Association put out, showing that every new home has about 23-23.8% regulation into the cost," said Sable Homes and Sable Developing President John Bitely.

Across the country, the cost of homes continues to rise, but so does the demand for both new and existing homes.

In West Michigan, Sable Homes President John Bitely said local regulations have not only added more cost to the price of a home but have also slowed the process for the consumer.

"When the consumer, the person buying the home is being forced to spend an extra $30,000-$40,000 in regulations and extra code things, and realistically, if you just ask them if they want it, this is one of the things that always gets tricky in the surveys. If I just asked you if you'd like that you would say ‘yeah, I'd like that’. I would say 'Oh, but you have to pay for it' and you'd say ’oh, wait a minute," said Bitely.

Bitely said local regulations include things like larger lot sizes, increased stormwater retention for developments and communities requiring specific curbing and sidewalks.

Portage City Manager Joe La Margo said even though the costs of homes are high, there is more demand than supply.

"People are still wanting to build homes and build both new construction and buying existing homes," said Joe La Margo, the City of Portage's City Manager.

To go in-depth, there were 800 existing homes sold in Portage in 2020 and around 100 new construction homes sold.

The average cost of an existing home was around $245,000, and the average cost for a new build was around $350,000.

"The city of Portage did not raise any of their permit fees or construction fees in the last several years. We really kept it down over this past year as well consciously kept it down just because of the pandemic," said La Margo.

The Michigan Townships Association also released a statement regarding regulatory fees:

The Michigan Townships Association does not track construction-related fees for planning and zoning or construction code enforcement charged by townships. However, in our ongoing discussions and interactions with township officials and staff around the state on a day-to-day basis, we are not aware that there has been a noticeable increase in any of those fees specifically, in West Michigan or any other part of the state.

Land use regulations, usually in the form of planning and zoning, have been a lawful option for local units to use to improve life and business locally for over 100 years. As one of the original purposes for zoning in America, protecting home and family is still a primary consideration of planning and zoning programs.

In Michigan, it is a choice of each individual local unit, as no township, city, village or county is required to plan or zone or enforce the state construction code. Many Michigan townships have chosen to adopt some or all of those options, based on their determination of the benefit to their residents and their economy. But none of those forms of regulation come without costs, including the legal requirements for due process to protect property owners’ rights, enforcement costs, administration and providing for a planning commission and zoning board of appeals, inspectors and other staff, all with ongoing training and legal representation.

The legal basis for imposing fees is the recognition in law that there will be programs or services that incur additional costs to the local unit—and the taxpayers—when individuals or businesses seek an approval or license or permit. It is a policy decision by the township board or city or village council or county commission that those individuals or businesses should pay some or all of those additional costs, instead of the general public or taxpayers.

When a local government sets fees for permits or approvals, those fees are restricted by law to covering some or all of the actual, incremental (additional) costs that the local unit incurs in its specific permitting/approval process of individuals or businesses, and cannot be used to generate revenue. So, if a local unit increases a fee, it is doing so because those costs have increased--or the local unit was not previously covering any or all of its costs.

"We need to as consumers figure out how to control these costs before we drive off the cliff because we're going. We really are," said Bitely.

Bitely said it's important to make your voice heard in local elections when it comes to housing to ensure those living in the communities are getting what they want without paying a fortune.

To note, there are many new codes Bitely said are coming to be mandated. For example for a new garage, it will soon be required to install an electric vehicle charger even if you won't use it.

Bitely said that's an extra $2,000-$5,000 that homeowners don't really need to be spending.