How Regulatory Costs Fold Into the Cost of a New Home


It’s just a figure. A number. A statistic. But the reality is that 24.3% is standing in the way of homeownership for thousands of Indiana families. Government regulations account for nearly a quarter of a new single-family home built for sale; not only does this negatively impact individuals and families, but it also weakens the fabric of our communities. Adopting equitable housing policies promotes a balanced market, strengthening our economy while allowing neighborhoods to nurture their own unique character.

Government Regulations: An Often Insurmountable Barrier to Homeownership

According to data from the National Association of Home Builders (NAHB), government regulations at all levels (e.g. federal, state, municipal) make up 24.3% of the final price of newly constructed single-family homes. The bulk of this (14.6% of the final price) results from regulations relating to the lot’s development, while the rest (9.7% of the final price) results from costs taken on by the builder after the lot has been purchased.

How much of a lot’s price is due to government regulations? An astonishing 54.7%. Let’s see how these costs break down:

The “pure” cost of delay as a result of regulations, such as waiting for approvals and complying with various development regulations accounts for an average of 5.1% of the finished lot price and 1.4% of the costs paid by the future homeowner.

Other regulatory costs include: applying for zoning and subdivision approval; costs incurred after approval and before construction; value of the land dedicated/ left unbuilt; and the impact of changes in development standards, according to the NAHB. As you can see, this makes up nearly 55% of the final price on the development side, and 14.6% of the cost on the buyer side.

It’s not over yet. There are also onerous regulations during the construction phase:

There is no doubt that a level of government regulation in housing is not only appropriate, but beneficial for individuals and communities. However, too often, policies are not balanced or forward-thinking in terms of accessibility and diversity in the market; despite whatever intention they may have started with, the bottom line is that they are pricing hard-working Hoosiers out of homeownership. The cost of government regulations in new home prices is rising twice as fast as the average person/family’s ability to pay.

Diversity Matters In Housing

The average cost of a new home in Indiana is $354,164; 62% of Hoosiers earn less than the median household income of $58,000. “Affordable” at this range is $150,000: a majority of the population is being priced out of the market, and extraneous government regulations create an insurmountable barrier to the already challenging goal of homeownership.

Without these barriers, families and communities would thrive. Fair and accessible housing policies:

  • Promote diversity in the housing market, opening it up to the average Hoosier. Working families who are priced out of buying a new home, preventing them from establishing community roots, empty nesters on fixed incomes and millennials working from home or wanting short commutes who all want appropriately sized, low maintenance homes in desirable, highly amenitized communities.
  • Not only do equitable policies build diversity into the buying population, they build diversity into the types of homes available. Rather than a focus on outsized single-family homes, we can take advantage of the opportunity to increase urban density with mixed-used units, duplexes, town homes, smaller lots, etc.
    Diversity in the housing market and stock creates more resilient communities that are better able to withstand economic pressures.
  • Neighborhoods are allowed to form and sustain unique identities, making them attractive to buyers.
    Achievable housing builds strong ties to communities, and people reinvest in their own neighborhoods.

Indiana doesn’t benefit from restrictive and inequitable housing policies and burdensome government fees. We benefit from balanced approaches that allow folks to put down roots and build strong communities.

Hoosiers benefit from balanced approaches that allow folks to put down roots and build strong communities.

Join the Coalition

Build Indiana Roots is committed to raising awareness of these issues, educating people on achievable housing, and advocating responsible housing policies that benefit all of us. Join the coalition at; help make the dream of homeownership a reality for more Hoosiers.