Federal Regulatory Reform

Excessive regulations are contributing to the housing affordability crisis. On average, regulations imposed by government at all levels account for nearly 25% of the price of building a single-family home and more than 40% of the cost of a typical multifamily development. NAHB believes that Congress must reassert its oversight authority over rulemaking agencies and that efforts to further regulate the housing industry must be subject to greater public scrutiny and based on sound data.

Policy Statement

NAHB supports federal efforts to address overly burdensome regulations, especially those that impact small businesses, and to ensure greater transparency and accountability in the federal regulatory process.

Why Federal Regulatory Reform Matters

As increasingly complex regulations are layered over existing ones, the growing mountain of red tape generates skyrocketing compliance costs that stifle business initiative and harm consumers. The housing industry provides a good example.

In a clear sign illustrating the severity of housing affordability challenges facing Americans, the NAHB/Wells Fargo Cost of Housing Index (CHI) found that in the fourth quarter of 2024, a family earning the nation’s median income of $97,800 needed 38% of its income to cover the mortgage payment on a median-priced new home. Low-income families, defined as those earning only 50% of median income, would have to spend 76% of their earnings to pay for the same new home. Likewise, a 2024 report by Harvard’s Joint Center for Housing Studies found that a record-high 22.4 million households are paying more than 30% of their income on rent and that among those renters, more than 12 million are paying more than half their income on housing, also an all-time high.

As a nation, we can and must do better. All home buyers and renters in America should have a choice in securing safe, decent and affordable housing where they want to live. America’s workforce families, including members of the armed forces, teachers and first responders, should be able to afford to live in homes or apartments in the communities they serve. NAHB strongly believes that increasing the inventory of new single-family and multifamily housing is key to improving housing affordability. Although there are many factors making it more difficult for builders to increase housing supply, excessive government regulations represent a major driving force frustrating the efforts of home builders and multifamily developers to build more housing and address the housing affordability crisis.

Residential construction is one of the most heavily regulated industries in the country. The prospect of an improved regulatory climate where federal agencies are limited to regulations that follow the letter and spirit of the law and are tailored to meet the needs of small businesses can lead to more informed, less burdensome rules and unleash home builders to increase supply and address the nation’s housing affordability crisis. In these challenging economic times, the significant undersupply in housing coupled with rapidly increasing home prices clearly indicate the need to reduce the regulatory burden on the housing industry.

Solutions

Reasonable regulations are essential to protecting the health and safety of workers, the environment, financial institutions, and other interests, yet they must strike a balance. Federal regulations must be carefully structured to achieve their intended benefits while minimizing the burdens on citizens — especially in light of the many oftentimes duplicative initiatives taken at the state and local levels. Likewise, they must be based on accurate, up-to-date information and supported by sound, science-backed data so that both the regulators and the public have assurances that the rules will help meet the intended outcomes.

The federal rulemaking process is governed by several laws and executive orders. In developing, proposing and finalizing a new rule (or amending or repealing an existing rule), agencies must follow the procedures set out within these laws, clearly stating why the rule is being proposed, conducting public outreach, and sharing the data, information, and analyses that were relied on to develop the rule.

Unfortunately, the federal agencies often fail to adequately consider how their proposed regulations will be interpreted, how they will be implemented on the ground, if and how they are compatible with other existing rules, or how they will affect the regulated entities or their output. Likewise, although there are processes in place for how agencies are to scrutinize potential regulations, a recent report found that many agencies have failed to properly analyze a proposal’s costs, impacts or reach. Ultimately, the failure to provide regulatory certainty or properly and fully assess a rule’s impacts and alternatives can have a significant effect on regulated industries and in our case, further exacerbate the ongoing housing affordability crisis.

Several reforms can fix the broken regulatory rulemaking process:

1. Support legislative efforts, e.g., the REINS Act, to fix the broken regulatory rulemaking process;
2. Ensure rulemaking agencies consider the disproportionate impact rules have on small businesses; and
3. Reconsider the rulemaking process.

Reasonable regulations are essential to protecting the health and safety of workers, the environment and financial institutions, but they must strike a balance. Federal regulations must be carefully structured to achieve their intended benefits while minimizing the burdens on small businesses.