Environmental Regulations and Housing Costs

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Overview

Many communities across the nation still lack affordable housing. And many officials continue to claim that “affordable housing” is an oxymoron. Building inexpensively is impossible, they say, because there are too many regulations. Required environmental impact statements and habitat protection laws, they contend, drive up the costs of construction. But is this actually true? In a comprehensive study of the question, the authors of this eye-opening book separate fact from myth.
 
With admirable clarity, they describe the policy debate from its beginning, review the economic theory, trace the evolution of development regulation, and summarize the major research on the topic. In addition, they offer their own research, accompanied by a case study of two strikingly different Washington, D.C., suburbs. They also include results of focus groups conducted in Dallas, Denver, and Tucson. The authors find that environmental regulatory costs—as a share of total costs and processes—are about the same now as they were thirty years ago, even though there are far more regulations today. They find, too, that environmental regulations may actually create benefits that could improve the value of housing.
 
Although they conclude that regulations do not appear to drive up housing costs more now than in the past, they do offer recommendations of ways in which the processes associated with regulations—including review procedures—could be improved and could result in cost savings. Intended primarily for  professionals who are involved in, or impacted by, regulations—from public officials, planners, and engineers to housing developers and community activists—this book will provide useful insights and data to anyone who wants to know if (and how) American housing can actually be made “affordable.”

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Editorial Reviews

Member of Congress - Earl Blumenauer
"In this book, Arthur C. Nelson, John Randolph et al. provide reasoned analysis for decision-makers in the public and private sectors about the effect of environmental regulations on housing affordability. It is an invaluable contribution to those concerned with the future well-being of our families."
co-director, Institute for Urban Research, The Wharton School, University of Pennsylvania - Dr. Susan Wachter
"A must read for environmentalists and affordable housing providers alike."
president and CEO, Smart Growth America - Geoffrey Anderson
"The authors provide clear-eyed, expert consideration of the interactions between environmental regulation and housing costs, toppling long-held 'truths' as they go. Finally, policy-makers have more than rumor and innuendo to inform decision-making."
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Product Details

  • ISBN-13: 9781597265591
  • Publisher: Island Press
  • Publication date: 4/16/2009
  • Pages: 288
  • Product dimensions: 6.10 (w) x 9.10 (h) x 0.80 (d)

Meet the Author

Arthur C. Nelson is Presidential Professor of City and Metropolitan Planning at the University of Utah.
 
John Randolph is a professor at Virginia Tech, where he directs the program in urban affairs and planning.
 
Joseph M. Schilling is a research professor at Virginia Tech.
 
Jonathan Logan is the design coordinator of the Rochester (New York) Regional Community Design Center.
 
James M. McElfish Jr. is director of the Sustainable Use of Land Program at the Environmental Law Institute.
 
Newport Partners, LLC is a consulting company based in Davidsonville, Maryland.

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Read an Excerpt

Environmental Regulations and Housing Costs


By Arthur C. Nelson, John Randolph, Joseph M. Schilling, Jonathan Logan, James M. McElfish Jr.

ISLAND PRESS

Copyright © 2009 Arthur C. Nelson and John Randolph
All rights reserved.
ISBN: 978-1-61091-068-2



CHAPTER 1

The Link Between Environmental Regulation and Housing Costs

This chapter reviews the federal concern about the role of environmental regulation as a barrier to the production of housing that is affordable to the largest number of households, summarizes research on the relationship of regulatory barriers to the production of affordable housing, acquaints the reader with the evolution of the residential subdivision process over the past century, and notes the conundrum of ensuring a high-quality environment while also meeting housing affordability needs. The chapter also describes a key consideration from the developers' perspective: how developers decide to proceed with a development proposal. The chapter continues with a review of the research design that guided the study leading to this book. In brief, in addition to extensive literature review, the research relies on a case study and on focus groups to inform its policy analysis.


While often motivated by good intensions, some local, state, and federal government rules and regulations can increase the cost of housing in certain communities. Although this book is not concerned precisely with affordable housing as defined by the U. S. Department of Housing and Urban Development (HUD), we think it is useful to look at HUD's idea of what constitutes a regulatory barrier to affordable housing. These are the requirements that frequently, without intending to do so, prolong the completion and raise the costs of new construction and rehabilitation.


THE FEDERAL CONCERN

The issue of regulatory barriers is not new.

In 1991, the President's Advisory Commission on Regulatory Barriers to Affordable Housing, popularly known as the Kemp Commission, published its report, "Not in My Backyard": Removing Barriers to Affordable Housing (1991). Its basic finding—that exclusionary, discriminatory, and unnecessary regulations constitute formidable barriers to affordable housing—is still evident in HUD's update of the report, Why Not in Our Community (2005).

The Kemp Commission report stated that, as a result of inefficient implementation, environmental protection regulation processes pose significant barriers to the availability of affordable housing. The report cited the following inefficiencies: (1) conflicting environmental regulations; (2) prolonged review processes; (3) lack of a clear rationale or justification for environmental decisions, and (4) regulations that extend beyond the scope of goals they seek to achieve. These four inefficiencies can result in increased unpredictability, delays, reduced land availability, and increased construction costs. Interestingly, the Kemp Commission report cites very little rigorous research but reports numerous anecdotes as the foundation for its claims and basis for its recommendations. In April 2004, HUD sponsored a Research Conference on Regulatory Barriers to Affordable Housing (the proceedings of which were published in Cityscape vol. 8, no. 1), which reaffirmed these environmental barriers as a major issue requiring systematic research (Schill 2005; Listokin and Hattis 2005; Quiqley and Rosenthal 2005; Been 2005; Kiel 2005; May 2005).

The major federal mandates that affect housing development include environmental impact statements, water quality management (especially stormwater management), air quality management, wetlands protection, floodplain management, coastal zone protection, endangered species protection, and site contamination. Many states in turn have added their own requirements, which increase the layers of regulatory review and even conflict with federal efforts.


SETTING THE CONTEXT: A SURVEY OF RESEARCH ON REGULATORY BARRIERS

Housing developers and affordable housing advocates have raised numerous concerns about the impact of regulation on housing production and especially on producing affordable housing. A 1998 survey by the National Association of Home Builders (NAHB) of its members found that about 10 percent of the cost of building a typical new home is attributable to what respondents describe as unnecessary regulation, regulatory delays, and fees (U.S. House of Representatives, Committee on Small Business 2000). Luger and Temkin (2000) used a more refined research approach to find that development costs associated with their definition of the "direct cost of excessive regulation," including delays plus financing costs affecting residential subdivisions in New Jersey, added $10,000 to $20,000 per new housing unit (in 2000 dollars)—roughly 2 to 4 percent of the sales price of new homes.

To assess trends over time, Eran Ben-Joseph (2003) replicated a survey undertaken in 1976 by Stephen Seidel (1978). In both 1976 and 2002, nearly 75 percent of the development community respondents cited "government-imposed regulations" as one of the three most significant housing problems. One area of particular concern for respondents was the time it takes to process residential subdivision approvals. Ben-Joseph's data indicate that between 1976 and 2002 the national average time to process approvals increased from fifteen to seventeen months, with much of the increase attributable to securing various forms of zoning relief (rezoning, variance, special exceptions, and so on.). One-fifth of the respondents to his 2002 survey noted waiting more than two years for approval. Luger and Temkin add further insights about the sources of delay for residential subdivisions in their surveys of New Jersey and North Carolina planning officials, noting:

"Organized citizen opposition" to subdivisions was cited by the greatest percentages of respondents, respectively followed by contractor or development error, inadequate staffing, and unspecified sources of delay in negotiations.... In response to other questioning, from one-third to over one-half of the respondents cited complexity in regulations or regulatory processes as a major factor in delays in regulatory approvals. (2000, 57, 61)


However, the extent to which environmental regulations affected housing costs—if at all—was not noted specifically.

May (2005) notes that solid research about delays is hard to come by with most allegations about delays being more anecdotal than empirical documentation—and the research team learned from local officials that the biggest source of delay is untimely submission of complete information by the developer.

Delays also vary by the complexity of processes. Regarding the high costs of new housing construction in New York City, Salama, Schill, and Stark (1999) note:

Because the Buildings Department is the single most important agency in the development process, its management and operations need to be as efficient as possible. In fact, the New York City permitting process is not—the process is arcane, cumbersome, confusing, complicated and paper-intensive. (108)


Euchner and Frieze (2003) and Field (1997) note that groups that do not want multifamily housing or other forms of affordable housing in or near their neighborhoods often use public hearings and review processes to create roadblocks to those developments. At the other end of the spectrum, however, are examples where affordable housing is given fast-track status (such as in Florida), and in Oregon land-use approvals are required to be given within 120 days of filing a completed application (Nelson and Duncan 1995).

May (2005) further notes that there are numerous anecdotes about how duplication of administrative structures and gaps in regulatory decision-making processes complicate regulatory implementation and often lead to delay. Euchner and Frieze (2003) review the effect's regulatory fragmentation in the Boston area as an example of housing barriers:

The lack of integration [of regulations] at the state level [then] can lead to confusion among local enforcement authorities such as building inspectors, fire chiefs, and boards of health and increase the number of appeals boards in front of which a builder has to appear. The process is especially complex (and confusing) in the case of environmental and handicap access regulations.

Public officials also regularly defer to "community process" when controversial projects are proposed. Many cities and towns specifically require that projects undergo community scrutiny, even when the projects fit into the existing look and feel of the neighborhood. Community process can be especially problematic in small communities with volunteer governance structures like town meeting and little professional staff in town hall. (7)


Although striking, these are not new insights. Pressman and Wildavsky's 1972 work concludes that decision structures that include multiple decision points between and across levels of government introduce delays as decisions are made and remade. More often, this redundant process introduces multiple opportunities for any given decision maker to veto decisions of others.

As May (2005) laments, however, without specific knowledge of actual situations, it is difficult to evaluate the extent to which regulatory processes actually increase approval periods. Helping close this knowledge gap is a principal purpose of this book.


OVERVIEW OF THE RESIDENTIAL SUBDIVISION PROCESS

America has built or rebuilt more than 2 million homes annually during most of the first decade of the twenty-first century. This does not include residential units converted from existing nonresidential structures such as warehouse loft conversions, recycling of office buildings and schools into residential units, and similar conversions. According to the U.S.

Bureau of the Census building permit statistics, more than two-thirds of all new residential units are single-family detached or attached townhouse units on individual lots. The production of these lots almost always requires subdividing land.

The process of subdividing land for residential development has evolved greatly during the past century. Before the mid-1920s, it was common for individual property owners to merely file a plat (typically with the local county recorder or clerk) showing numbered lots and blocks, streets dedicated to the public (not necessarily to any governmental unit, however), and occasionally land dedicated for public uses. The subdivision of land was seen merely as a way to sell lots more efficiently, bypassing the need to engage the cost of a surveyor to document each individual lot and have a title company accept it for title insurance purposes. For local governments, this process made real property taxes easier to assess and collect.

The Standard Planning Enabling Act (SPEA), drafted in 1928 by the U.S. Department of Commerce as a guide for individual states to adapt, saw the regulation of residential subdivisions as a way to plan or guide for community growth—and included giving local governments the authority to approve, deny, or set conditions for proposed residential subdivisions (see Juergensmeyer and Roberts 2007). The SPEA provided local governments with a list of design features—such as street design (length, width, intersections, and curvature), utility placement, lot and block design and dimensions, and open spaces—to consider in reviewing and approving residential subdivisions. Underlying the standard act was the goal of empowering local government to manage its density by setting minimum lot sizes as part of approval conditions. Although the standard act was not adopted uniformly among the states, it was adopted in most of the faster-growing ones. This second epoch of subdivision control extended through the Great Depression, the Second World War, and into the first generation of automobile-dependent postwar suburbanization.

In the early half of the twentieth century, subdividers all too often did not install roads or utilities to lots, leaving those costs to the lot buyers or, more frequently, having the buyers put pressure on local government to do so. Local governments came to see residential subdivisions as triggering a need to provide new parks and schools that governments often were unable to meet. In response, many states crafted subdivision statutes that enabled local government to require that subdividers install onsite infrastructure at the subdividers' expense and also to dedicate land for schools, parks, and other purposes or provide funds in lieu of this land that local government could use to acquire the necessary land outside the subdivision. During this period, the environmental and social impacts of new subdivisions were not usually addressed except indirectly as related to infrastructure.

Beginning in the late 1960s and into the 1970s, other issues affecting residential subdivisions began to emerge, many relating to the environmental and social impacts on the community. Water pollution from stormwater runoff, denuding subdivisions of trees during the land-clearing and residential home construction process, altering waterways with adverse downstream impacts, and relying on septic systems instead of sanitary sewers emerged as chief environmental impact concerns. States often amended their subdivision enabling statutes to account for these additional concerns, but in some cases, where states did not pass such statutes, local governments found ways to address the concerns.

During this period the federal government also began to exert its interest in protecting the environment—and, later, habitat. The National Environmental Policy Act, adopted in 1969, declares it national policy to prevent or eliminate damage to the environment and biosphere caused by human activity. It is implemented by the Environmental Protection Agency (EPA).

The process for creating and developing residential subdivisions has changed considerably during the past century. No longer can someone buy and subdivide a tract of land without being subject to planning review or required to install infrastructure. Currently, with the residential subdivision and development process extended, buyers and speculators of raw land will acquire land intending to hold it for several years. Prospective land developers often secure an option to buy the land, and will proceed with purchase only after a due diligence period and then only if entitlements from local governments are secured—a process that can take two to five years. Land developers often face a year of land improvement before selling finished lots to home builders—and if the market softens unexpectedly, the period of time to sell off all of the lots can be months or years longer than projected (table 1.1). For instance, many developers in the early to mid 2000s, invested substantial sums processing "entitlements" (legal authority to develop with little or no additional review) expecting they would build late in this decade. However, by the time the entitlements had been acquired or, worse, as the developers were building homes, the market softened, leaving them with unsold inventory.

The typical residential subdivision process is composed of several steps. Generally speaking, local government makes two important decisions about residential subdivisions: whether to approve the "preliminary" or "tentative" plat including the conditions of approval, and then whether to approve the final plat when those conditions are met. The procedural flow chart for each is illustrated in figure 1.1 (for the preliminary/tentative plat) and figure 1.2 (for the final plat). According to a national survey, 92 percent of jurisdictions require preliminary/tentative approval, and 99 percent of jurisdictions require final plat approval (Ben-Joseph 2003).

Combined, the typical residential subdivision approval process entails at least twenty review steps and decisions, any one of which can be delayed for reasons such as backlog of applications, vacation or sick leave of key staff, community opposition, and requests by staff for more information. Additional considerations imposed by state and/or federal agencies invariably extends the review period. If zoning relief—such as variances, special exceptions, and zone changes—is required, the process can be extended as well.


(Continues...)

Excerpted from Environmental Regulations and Housing Costs by Arthur C. Nelson, John Randolph, Joseph M. Schilling, Jonathan Logan, James M. McElfish Jr.. Copyright © 2009 Arthur C. Nelson and John Randolph. Excerpted by permission of ISLAND PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Preface
Acknowledgments
 
Introduction
Chapter 1. The Link between Environmental Regulation and Housing Costs
Chapter 2. Existing Research
Chapter 3. Excessive Costs and a Comparison of Historical Changes in Environmental Regulations and Approval Processes
Chapter 4. Case Study: Washington DC, Metropolitan Region
Chapter 5. Key Lessons from the Case Study
Chapter 6. A View from the West
Chapter 7. The Benefits of Environmental Regulations and a Summary of Key Findings
Chapter 8. Assessment, Lessons, and Future Directions
 
Appendix A:  Literature Review References
Appendix B: Chesapeake Bay Program
Appendix C: Outline of Environmental Regulations and Review Processes in Fairfax County, Virginia, and Montgomery County, Maryland
Appendix D: Special References for Cost Reduction and Best Development Practices
Notes
References and Selected Bibliography
Index

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