INSIDE TUCSON BUSINESS: Mon., Oct. 30, 2006
What Makes a Community “Builder-Friendly?”
By Edward Taczanowsky, President
Southern Arizona Home Builders Association
Not many people realize what an integral part new home construction plays in today's American society. In fact, a lot of people oppose it until they need one.
As the voice of the home building industry in Southern Arizona, Inside Tucson Business asked me to imagine the ideal “builder friendly” community. First, one has to understand some fundamentals of housing.
Producing housing is a complex dance that requires all the steps to align. If one of these steps, or factors, is not in line or unavailable, the builder's bottom line is affected and housing is not produced.
Housing is a business like all others, just like a newspaper. It requires a profit to stay in business.
What has happened recently to our housing market is a perfect example of this. Six months ago, consumer demand for housing was out of alignment with supply. Plus, there was an extreme shortage of labor and materials.
As a result, prices increased; profits did not. The bottom line was delivery times for pre-sold homes took up to a year.
Concurrent with that, we've seen an explosion in government fees and regulatory taxation in the past two years. Government fees on new homes now average $25,758 in the Tucson metro area. That is a 59% increase ($9,592) compared to a year ago.
Plus, environmental restrictions on where and how much a builder can build have caused a spike in land costs. A study being done for the US Department of Housing & Urban Development has put the price tag at some $20,000 per lot for Pima County-area residents due to environmental regulations.
When factored in to the price of a new home, the facts show:
~ $268,000 median cost of a new home
~ $25,758 average government fees
~ $20,000 due to environmental restrictions
The bottom line: these two factors add some $45,700, or 17%, to the cost of a new home. And this does not take into account the Sonoran Desert Conservation Plan, which could add another $10,000 per lot.
All these costs are beyond the control of builders. That is why SAHBA fights every day for housing affordability. We are the only organization standing up for citizens, working with politicians and sometimes challenging them to be reasonable regulators.
Government fees, environmental rules, and labor and materials are main barriers to producing affordable housing. So, with all those factors in mind, what would be the ideal situation for builders?
A “builder-friendly community” would have a general public that understands and appreciates the value of housing to our social and economic well-being. The public and politicians must understand that the price of land is key to making the bottom line pencil out.
Second, politicians must understand that too much regulation adds thousands of dollars to new home costs. But more importantly, the public must understand that everyone pays for over-regulation -- not just new home buyers.
When extreme regulations push up vacant land prices, nearby neighbors also get whacked. Their land, home, property value, and property taxes jump. Government gets a double benefit: it collects more fees from new homes and higher property taxes from existing home owners.
Sadly, Forbes rated Tucson as the nation's seventh most-unaffordable area. To change that, and to make this area more builder-friendly, local governments need to freeze fees. Immediately.
They need to find alternative ways to finance public infrastructure and not rely solely on impact fees. They must find a mechanism for broad-based funding that benefits the entire community. The RTA was a good first step. The next move could be regionalized services.
Another positive step would be streamlining the development process. Why does it take a year or more in some municipalities to get a plan reviewed and approved at a time when home building has slowed dramatically?
SAHBA itself is taking responsibility for starting “a renaissance” in vocational training. We are addressing the local labor shortage in partnership with the National Association of Home Builders, the Acosta Job Corps, Catalina Magnet High School, and our own SAHBA Institute of Construction.
We must re-position skilled trade labor as a career that is honorable, rewarding and profitable.
Together, all of these steps would make an ideal business plan for local governments to adopt. Our slowing housing market has put thousands of jobs at risk. Now is not the time for even more regulations on new home construction.
Taczanowsky has over 25 years of association management experience and has led SAHBA since 2003. SAHBA is a trade association representing 700 businesses in Southern Arizona, in Pima, Cochise and Santa Cruz counties.