NCPA - National Center for Policy Analysis

Case Study: Regulations Add To Housing Costs

December 8, 1999

The Small Business Administration says that the average per-employee cost of federal regulations is about $3,000 a year for firms with more than 500 employees and about $5,400 for those with fewer than that.

Here is an illustration of how regulations drive up costs for businesses and how they are eventually passed on to consumers.

It concerns developer Bob Kaufman who builds residential communities in Prince George's County, Md., a suburb of Washington, D.C. -- communities which win praise from environmentalists for his efforts to do things right. Kaufman says governmental red tape is killing such efforts and he'll never do it again -- at least not in that county.

  • Plans must win the approval of the Maryland-National Capital Park and Planning Commission, Prince George's County Planning Board, Price George's departments of Environmental Resources and Public Works and Transportation, Washington Suburban Sanitary Commission, Maryland Soil Conservation Agency and Prince George's County Council.
  • Kaufman must get approval for even the smallest changes -- down to the shape of windows.
  • The regulators review plans for architectural design, landscaping, topography, storm water management and parking -- and if neighbors object, they can tie up the project for months through public hearings and push up prices of the houses.
  • A building industry association has estimated that the county's regulations and inspections -- there may be as many as 30 of the later -- add more than 30 percent to the cost of houses there, or $34,000 on an average sales price.

Kaufman says he had to obtain government permission to make guard rails from wood and stone, rather than concrete or metal, to use narrower roads and less clearing around houses to save trees, to preserve trees on traffic islands and to have more attractive stop signs than the norm. To create a lake rather than a dry pond for drainage required permission from local, state and federal agencies.

Another builder reports that simply getting approval for adding a gazebo to the entrance of one of his projects has taken a year. He says he might give up on that idea, now that most of the houses are finished.

Source: Sandra Evans, "Thirty Inspections and Counting for Prince George's Builders," Washington Post, December 6, 1999.

 

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