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Yeah, my sense is that that is a big factor. I have no statistics to back this up, but I live in the Northeast United States and my sense is that a lot of the new single family houses being built in the suburbs are very very far from the cities with the jobs. So that the average price of a house is misleading. And in fact, one of the results of building more housing far away from the city is that road congestion increases, arguably raising the premium for housing which is more convenient to the city.
I would have predicted that work from home would fix this problem, but at least for now, the situation seems pretty lousy.
Anyway, I think it's also worth noting that this is a factor which seems to have changed considerably over time. In the 1970s, notwithstanding the high interest rates, it was possible to buy a single family residence in the inner suburbs of Boston, New York, Philadelphia, etc. on a much lower income than what is required today, relatively speaking. Since then, it seems like things have really gone downhill. (Or uphill, if you happen to have bought a house decades ago.)
Newly constructed homes are also quite a bit bigger than they used to be, particularly in the Northeast.
https://fred.stlouisfed.org/series/COMPSFLAM1FQ
The higher cost of red tape means the fixed costs of development are higher and push builders into building larger, more costly homes to cover the higher fixed costs.
I agree with this based on my general observations.
Well suppose you buy a lot in a fancy suburb for $1.5 million; build some monstrous house for another $1.5 million, and sell the whole thing for $3.5 million, netting you a $500k profit (less the interest on your financing). How much of the money involved went into red tape? And how much would have been spent on the equivalent deal from 30 years ago?
The last time I saw any anecdotes about this was at leasr 6 years ago. From builders, it cost about $250k per lot after buying to buy a large parcel to have the legal right to build a subdivision.
If you buy a lot, the price likely already includes most of the cost. Its buying lots of land and getting the rights to build more than one home that is expensive.
That sounds high to me. Perhaps they are including the cost of building access roads; sewer connections; municipal water connections; etc.
And yet single lot developers are building much bigger houses nowadays than in the past. Which makes me think that there is much more in play than just the cost of red tape.
Yes, they were including all of those costs.
In that case, I would disagree with attributing $250,000 to "red tape." When you build a house you need to have a sewer hookup; water; electricity; and so on. I suppose one could argue that these things are legal requirements and therefore count as "red tape," but realistically who is going to buy a new house in a subdivision if there is no water, sewer, electricity, or road access?
Also, I am pretty sure that these things have been required for decades in new subdivisions.
One big recent increase in costs is driven by subdivisional development having a water runoff abatement infastructure.
Undeveloped land (especially forested) land is something like a sponge that the trees slowly return to the atmosphere, while paved/construction sheds water. New developments need to capture nearly all the excess shed water resulting from their development to reduce the water flowing through stormwater management systems and prevent flooding of older construction which generally didn't need to perform any stormwater abatement.
That may very well be, but I would like to see documentation showing (1) the breakdown of how that $250,000 figure is reached; and (2) how those components have changed over the years.
I would also like to see a plausible explanation for the situation with single lot developments.
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