The Regulatory Minefield
Government red tape takes time, money and skill to navigate. That's why you need a pro.
Some people don't realize how highly regulated the construction business has become. According to the National Association of Home Builders, the costs of complying with government regulations now account for nearly a quarter (24.3%) of new home prices—30% more than just five years ago.
Some of these regulations are specific to the project and noted in the job cost summary, while others are hidden from the homeowners but raise costs for all projects. Navigating them and staying in compliance requires time, effort and knowledge.
Plans and permits. To protect public health and safety, building departments want to make sure that homes are built to comply with all applicable codes—the building code, mechanical code, electrical code and others. That's why most municipalities won't issue a building permit until they review and approve the project plans.
Plans that aren't in full compliance will be sent back for revision. It's up to the builder to work with the architect (if there is one) and the subcontractors to identify and correct potential problems before submitting the plans for review.
Inspecting the work. Once work gets underway, inspectors must sign off on it at various stages. There may be separate inspections of the foundation, framing, wiring, plumbing and insulation. The municipality will also conduct a final inspection before issuing an occupancy permit.
In addition to confirming code compliance, inspectors compare what's being built to what's in the approved plans. If the construction doesn't match the plan, an inspector can stop work until the builder fixes the problem.
Inspections impact the job schedule. A crucial part of the builder's job is to work with subcontractors to make sure the home is ready for each inspection at each stage, and to schedule inspections to prevent delays. The time to manage all of this is factored into the builder's overhead. And of course, each inspection generally has a fee associated with it.
Other regulations. Depending on the project and the municipality, more red tape can come into play. The builder might have to apply for zoning variances or work with the planning or conservation commission during site development. Homeowners' associations will also have their own rules.
Some regulatory costs are hidden. Recently passed Occupational and Safety Health Administration (OSHA) safety rules include time-consuming recordkeeping burdens. A new Department of Labor rule mandates overtime pay for a wider range of employees. Some states have training, licensing and insurance requirements that cost time and money. Product manufacturers, distributors and suppliers also must comply with an increasing array of government mandates.
The combined effect of permits, inspections and other regulations is to raise the price of materials, labor and project management.
None of the above is meant to minimize the need for regulation. All professional builders want to pay their employees fair wages and provide them with the training needed to do quality work. All aim to maintain safe, well-insured jobsites. All appreciate code inspections that protect their customers and reduce their liability.
But the truth is that the regulatory landscape is a minefield. It's important for homeowners to understand the costs involved, as well as the time and know-how required to navigate that landscape without incident. It's one of the many reasons for hiring an experienced pro to build your home.