MAKING A HOUSE MORE AFFORDABLE
Affordable housing is something that is a perennial issue that never is properly addressed. First, what is considered affordable? I believe that housing should be no more than 40% of a household’s gross income. If a single person is employed at $12/hr full time that works out to about $770/month available for housing.
Depending on where you live in Minnesota that can be an apartment that is easy to find or one that is impossible to find. A 30yr mortgage on a $200,000 home with a 25% down payment and 4% interest comes out to about $715/month. Now that we have some perspective on monthly cost let's take a look at what is driving the cost of construction up. Having worked in the construction industry for the last 25yrs I can tell you that the main
driver of price increases is the never-ending addition of excessive codes. In the last 25 years we have added at least 50% to
the cost of the electrical installation alone and that is in constant dollars.
Before we go after the code Structure, I want you to understand that I believe codes are necessary and good, but as with most things in life it must remain in balance and currently it is way out of balance. Why? Lobbyists. Manufacturers bring proposed code changes to the code making body, by doing this they cement the demand for their product because who doesn’t want to be safe right? In an effort to keep you safe the code making body, manufacturers and politicians bring about these changes, some good, some not but who is the one left with the bill? You. We can relax some of the existing codes which would create more affordable housing without sacrificing your safety. By doing this we would open the door to a new generation of home buyers, your children might have a place to raise your grandchildren that actually includes grass not a concrete high-rise apartment. How many of us have actually been in a house that was built since the ‘70’s, maintained properly and not felt safe? Yet we have added insane amounts of expense through well intentioned codes. Am I saying that we should pull out a code book from 1970 and adopt that, of course not but the reality is we were quite safe then and housing was much more affordable back then than it is today. Now I will touch on another factor in the affordability of housing. Land. If you are going to build a home you need some land. The cost to develop a single-family lot in town has skyrocketed. One of the largest contributors to this increase is the environmental regulation involved. Having been around land development for most of my life I also know a thing or two about this. Simply put our state is far too aggressive in their effort to contain storm water. Take for instance my last subdivision, it is a small 10 acre, 29 home development. I will need to purchase at least two acres of land for construction of a pond to contain the stormwater. Sounds small right? I mean two acres is no big deal. Two acres of development property after streets are taken out will equate to the elimination of four lots. In other words I would have to increase my price by about 15% just to cover the loss of those sales, then I still have to construct a pond which brings the total impact to nearly a 25% increase just for that one item.