Ronald Reagan once said that “part of the American dream has always included safe and affordable housing.” For an increasing number of Tennesseans, that part of the American dream is growing further out of reach. State data show the median home price has risen 200 percent in a decade. Home construction has also not kept up with demand, with 315,000 homes needed by 2035.
Tennessee is an attractive state for individuals, families, and businesses, so population growth often gets the blame for higher housing costs. But some of the biggest drivers of increasing prices receive far less attention. Government regulations like zoning, codes, and permitting delays add high costs to the price of a new home. National research shows government regulations make up more than 26 percent of the cost of a new home. These government-imposed costs have risen, increasing by more than 55 percent in the last decade.
Beacon’s new brief looks at how local zoning, a multi-tiered building code landscape, and slow permit approvals are making housing more expensive. It also shows where state and local policymakers can remove government barriers to allow for building more homes for Tennesseans.
Key Findings:
- Starter homes are disappearing. Entry-level “starter” homes made up 40 percent of new construction in the 1980s. By 2019, that share fell to just seven percent. Minimum lot sizes, setbacks, parking requirements, and density limits push builders towards larger, and more expensive, homes.
- Changing building codes adds to housing costs. Changes to the building code make up eight percent of the cost of a new home. The U.S. Department of Energy estimates that moving to a newer code would add $10,000 to $15,000 to a new single-family home in Tennessee.
- Code enforcement depends on where you live. Tennessee has multi-tiered code enforcement, meaning a home built by the same builder can face differing rules and requirements, based on where it is built. The state has an adopted code, local governments can adopt the same or more recent and stringent codes, and some can opt-out of building code enforcement altogether.
- Government regulations add real cost. National data show government regulations cost $131,734, or over 26 percent, of the average new single-family home.
- The state and some local governments have made progress in trimming the bureaucratic hedge maze that stands between Tennesseans and a home to call their own, but more can be done. If Tennessee wants to keep Reagan’s words true, the most durable path to making housing more affordable isn’t a new government program; it’s getting government out of the way.