The Georgia Public Policy Foundation was pleased to officially kick off its 2022 statewide housing policy tour with a robust discussion in Savannah on April 26.
Nearly 30 civic leaders, elected officials and local policymakers joined the Foundation for the public event at historic Vic’s on the River. The presentation focused on the Foundation’s recent study, “Government Regulation in the Price of a New Home: Georgia.” The statewide survey of developers and builders shows that regulations imposed by government at the federal, state and local levels account for nearly 27% of the final price of new single-family homes in Georgia, higher than the national average.
The Georgia study, like its national equivalent, does not argue that all regulation is bad. However, it does provide a reference point for policymakers when considering policy approaches to housing affordability.
Participants were especially engaged to discuss the differences between the direct fees paid directly to their local governments and the indirect costs builders and developers incurred to comply with various regulations.
Some of the local issues currently affecting the Greater Savannah area that came up during the discussion included the use of local impact fees, the consequences of “inclusionary zoning” policies and how local architectural design standards affect housing affordability.
Impact fees were first established in Georgia in 1990 as a tool for local governments to account for growth in the community and the increased need for infrastructure such as public safety facilities, libraries, water treatment, roads and parks. Using this funding for schools, hospitals or landfills is not among the allocated expenditures allowed under the law.
In the Georgia study, the developers and home builders surveyed responded that impact fees and similar regulations accounted for 5.6% of the cost of a new single-family home.
The Savannah City Council is considering an inclusionary zoning proposal that would require a certain percentage of units in new developments to be priced based on the area’s median income in an attempt to increase affordable housing.
While the regulatory cost of inclusionary zoning policies was not directly surveyed during the most recent study, this type of regulation negatively affects many of the households it is intended to help. Builders are forced to shift costs within the development, financially incentivizing higher prices for the other units. In addition, families excluded from the new housing are forced into the existing housing market, thus increasing demand, and further raising the price of available homes.
Many cities have implemented architectural design standards in recent years. These regulations are often motivated by aesthetics, while some are motivated by a desire to price less affluent residents out of the community. One common example includes citywide bans on vinyl siding.
In the Georgia study, the developers and home builders surveyed responded that architectural design standards accounted for 6.7% of the cost of a new single-family home.
Most alarmingly, Georgia developers experienced architectural design ordinances at a rate that was 7.5 percentage points higher than their national counterparts, and Georgia builders experienced this at a rate that was an astounding 13.7 percentage points higher than the national average.
Overall, the Georgia survey data showed that regulatory costs during the lot-development phase account for 11.3% of the final house price. Regulatory costs during the construction phase averaged 15.6% of the final house price. Combined, the total cost of regulation accounts for 26.9% of the final price of a newly built single-family home.
Additional housing affordability events will be held in Atlanta on May 11 and Fayetteville on May 25, with further statewide events to be announced in the fall. The Foundation has also presented the results of this study with the Georgia Association of Realtors “Days at the Dome” Legislative Conference and the Home Builders Association of Georgia 2022 Spring Meeting.