Editor, Manteca Bulletin,
The home building industry and those who make a living from it are still mired in the worst recession since the 1930s. For the overall economy the recession has ended and a slow recovery has started, however in the world of new construction the recession lingers on. The year 2009 set a record with the fewest new homes built since records have been kept. The year 2010 will be much the same.
That means much fewer local jobs, and therefore much fewer local paychecks turning over dollars spent in the local economies (when our carpenters spend money at our grocery stores, whose clerks then buy clothing, whose employees then buy school supplies, and so forth).
It is no coincidence that the Great Recession started when home prices collapsed and home building came to a near standstill. Construction is a large sector of our economy. Large enough that home building was the leading catalyst to propel America out of our last three recessions.
This time is different. Without home building leading the way this recovery will be far more anemic than recent recoveries. Although we provide 1/3 of the basic necessities (food, shelter, clothing), the home building industry is regulated as stringently as alcohol, firearms or tobacco. In all three “basic needs” sectors, food, shelter and clothing, the costs of materials and labor have seen a recent pullback, but on average these costs will generally increase with the annual inflation rate. The difference between providers of food and clothing and us in the home building industry is that we must go before local governmental entities and get permission to create shelter on a unit by unit basis.
Every year, including 2009, the cost of a permit to build shelter has increased more than the rate of inflation. Over the past ten years, building permit costs for a single family home have increased by 500% (that’s an average increase of 50% per year for a decade!). In San Joaquin County, the total fees now paid for the average building permit is over $50,000. On the median sales priced home this equates to a 25% sales tax. Ten years ago when the median priced homes were about the same as they are today, permit costs were in the range of 5% of the sales price.
In a free market economy, as the demand for a product comes down the price of the product also comes down. Today as everyone knows, home prices have dropped significantly. So has the cost of land, labor, lumber, drywall, concrete, tile and paint. But, despite our Great Recession, government’s charge for a building permit continues to climb!
Until local governments acknowledge their impact on a major portion of our local economy and reduce the price of building permits – if even temporarily to help people get back to work and stimulate our local economy - our housing industry cannot begin to recover and play the positive role it needs to play in helping lead our communities out of the Great Recession.
Thank you for your consideration.
The home building industry and those who make a living from it are still mired in the worst recession since the 1930s. For the overall economy the recession has ended and a slow recovery has started, however in the world of new construction the recession lingers on. The year 2009 set a record with the fewest new homes built since records have been kept. The year 2010 will be much the same.
That means much fewer local jobs, and therefore much fewer local paychecks turning over dollars spent in the local economies (when our carpenters spend money at our grocery stores, whose clerks then buy clothing, whose employees then buy school supplies, and so forth).
It is no coincidence that the Great Recession started when home prices collapsed and home building came to a near standstill. Construction is a large sector of our economy. Large enough that home building was the leading catalyst to propel America out of our last three recessions.
This time is different. Without home building leading the way this recovery will be far more anemic than recent recoveries. Although we provide 1/3 of the basic necessities (food, shelter, clothing), the home building industry is regulated as stringently as alcohol, firearms or tobacco. In all three “basic needs” sectors, food, shelter and clothing, the costs of materials and labor have seen a recent pullback, but on average these costs will generally increase with the annual inflation rate. The difference between providers of food and clothing and us in the home building industry is that we must go before local governmental entities and get permission to create shelter on a unit by unit basis.
Every year, including 2009, the cost of a permit to build shelter has increased more than the rate of inflation. Over the past ten years, building permit costs for a single family home have increased by 500% (that’s an average increase of 50% per year for a decade!). In San Joaquin County, the total fees now paid for the average building permit is over $50,000. On the median sales priced home this equates to a 25% sales tax. Ten years ago when the median priced homes were about the same as they are today, permit costs were in the range of 5% of the sales price.
In a free market economy, as the demand for a product comes down the price of the product also comes down. Today as everyone knows, home prices have dropped significantly. So has the cost of land, labor, lumber, drywall, concrete, tile and paint. But, despite our Great Recession, government’s charge for a building permit continues to climb!
Until local governments acknowledge their impact on a major portion of our local economy and reduce the price of building permits – if even temporarily to help people get back to work and stimulate our local economy - our housing industry cannot begin to recover and play the positive role it needs to play in helping lead our communities out of the Great Recession.
Thank you for your consideration.
John Beckman
Chief Executive Officer, BIA Delta
May 20, 2010
Chief Executive Officer, BIA Delta
May 20, 2010
