Friday, January 20, 2006

Gone With The Wind

A lot of residential developers and contractors are opposing the implementation of stricter residential building for fear of rising construction costs. While keeping costs down does have its benefits to the homeowner, making them safer also has its benefits.
According to researchers:

They calculated that applying the new rules would add a maximum of 4.5 percent to new home construction costs.
So for a $100,000 home, the new building code would add about $4,500 to the loan. When amortized at 8% APR over 30 years, this will add about $33 to the monthly mortgage note. It seems reasonable to think that some or most of the additional cost could be offset by savings in insurance premiums though I haven't found any research on that.

What builders really need to do is redirect their resources to developing cost-saving methods to impliment these changes instead of waging a loosing battle by fighting better building codes.

UPDATE: A Blog For All has a roundup.


lawhawk said...

Interesting observation. From what I've read, the costs could be as high as 10% greater to implement the more stringent codes, which means that you'd more than double the amortized rate you presented.

However, the benefits of a stronger and safer design shouldn't be underestimated. Perhaps some kind of targeted program to assist in bringing these areas up to code or incentives to builders/developers might be in the works as well.

There's also the fact that people might look at the new homes and see that their construction to the higher standards will be a selling point. That shouldn't be underestimated either.

Kinch said...

I too have seen the 10% costs of implementing a more stringent building code, but I guess it depends on your staring point.

If your looking to upgrade from say Homestead pre-Andrew, then, yes, 10% more could be expected. However, if your upgrading from a residence build to CABO, then 4.5% may be more accurate.

But its one thing to implement a building code, quite another to enforce it.

We shall see.