Regulation Is One Market Force We Can Control

Posted by E.O., With 0 Comments, Category: Government, HOMEPAC,

-By Phil Crone, Director of Government Affairs

Homes are where the jobs sleep at night. The past few years have been a sobering reminder of how our industry, more than most others, is subject to outside market forces.

As the horizon brightens, everyone is now asking, “What is the new normal?” Like an old Polaroid (yes, I’m old enough to vaguely remember those) it will take some time still for that picture to really come into focus.

What we do know is that a slow and steady recovery is ahead of us. In baseball terms, the North Texas housing industry is going to be like a knuckleball; wobbling and fluttering some, yet continuing slowly in the general direction. Whether it hits the strike zone or not will depend, in large part, on the impact of the regulatory forces that surround it.

The region’s continued job growth and relatively low unemployment and interest rates, combined with a dwindling supply of vacant inventory, high multifamily occupancy rates and increasing rents, are among the factors that bode well for our future. However, we continue to face issues from foreclosures (1 in every 4 homes is still a lender-owned REO property) and lingering uncertainty from an impending Presidential election and ominous financial news from Europe.

So we just resign ourselves to the fact that we are at the mercy of the world that surrounds us and nothing we do can affect our industry for the better, right? Of course not!

Regulation, at the state and local level, has a tremendous impact on the price of a home. In fact, according to a recent NAHB study, government regulations account for 25 percent of the final cost of a new home. Two-thirds of the regulatory costs are related to the development of the lot, while the remainder is incurred by the builder after purchasing the finished lot.

If a similar study just focused on Texas, I doubt the cost of regulation would approach the national number. However, the margin for error is lower here, too. Our state continues to add jobs (and therefore, housing demand), but, according to David Brown with Metrostudy, 40 percent of new home demand is in the under $200,000 price range. Try building a house somewhere like Frisco in that price range. I dare ya.

The HBA recognizes that reasonable regulatory authority is necessary and warranted. However, when that regulation becomes burdensome and overreaching, it unnecessarily drives up the price of a home. This puts the American Dream of homeownership out of reach for many. According to the Texas A&M Real Estate Research Center, every $1,000 increase in the price of a home removes 28,000 Texas families from the market. That number was provided in 2007, so it is most likely higher with today’s tighter lending restrictions.

We try to convey this message to elected officials every time we meet with them. Regardless of what office they hold, their actions have a direct impact on our industry. Some candidates understand this, others do not. Unfortunately, some who understand this notion abuse it and promulgate onerous regulations to ensure that a new home in their city is a privilege reserved for the very few or to ensure that the “right kind of people” move to their city.

Those who invest in HOMEPAC, the Association’s political action committee, understand the impact that elected officials have on our industry, for better or for worse. HOMEPAC dollars provide the access we need to get our message to those in office. They also help elect pro-housing candidates and defeat those who wish to regulate outcomes that curtail the opportunities that home builders can provide to consumers.