The housing market has an inventory problem. Even in the peak of spring and summer selling season, the number of resale homes on the market is at historic lows across the country. In Colorado, home prices are coming down but the number of new listings is less than it was this time last year. As the housing market continues to struggle, people are looking to developers and builders to create more housing inventory. But the headwinds facing them are a challenge, especially when it comes to building more attainable housing that is critically needed for entry-level and lower-income buyers.
There are a number of regulatory factors that impact home prices and construction. Here in Colorado, rigid design guidelines, created by well-meaning municipalities to maintain the look and feel of their neighborhoods, are becoming barriers to housing affordability. We’re seeing this issue play out not only in our state but in many regions across the country. In addition to zoning changes, design guidelines also deserve a thoughtful review in order to revise or remove language that hampers creative solutions to today’s housing affordability challenges. In this blog, we’re highlighting areas of opportunity to improve guidelines that promote buildable and thoughtfully designed homes across all price points.
Table of Contents
- Arbitrary and Overly Complex Design Guidelines
- Higher Regulatory Costs
- Lack of Housing Diversity
- Inadequate Industry Representation on Design Committees
Arbitrary and Overly Complex Design Guidelines
City planning committees develop housing design guidelines in good faith and with good intentions. The specific guidelines and restrictions they create ensure new construction conforms to certain visual standards to maintain or enhance neighborhoods’ visual appeal. For municipalities that include historic districts, design guidelines also serve to preserve and protect a city’s history and values.
They also prevent residential development that lacks connection to the city’s existing communities and neighborhoods. For example, design guidelines prevent homogenous box-like structures with unbalanced massing that had been an unwelcome byproduct of affordable housing in years past (something we in the design community are grateful for!).
But, also speaking as architects who review and reference these guidelines for our clients and our work, we are seeing the pendulum swing too far in the direction of stringency and restriction. “Design standards are vital, but they’re becoming increasingly formulaic and a kind of check-boxing exercise that doesn’t necessarily create good design,” says KGA Senior Architect Travis Hendrix.
Regulation is good and has its purpose, but in the case of many cities’ guidelines, there is such a thing as too much of a good thing. Moreover, some of these guidelines, however well intended, often add incremental costs to a home that price buyers out of the market. For instance, one city’s building design standards require specific vertical articulation for building heights of 30’ or more. Another city requires windows for 20 percent of a building’s street-facing facades. A building’s net facade must include a minimum of 15 percent of masonry. Each of these requirements adds material and labor costs, presenting a real struggle for architects and builders who are trying to produce more affordable housing in these municipalities.
These few examples illustrate a broader trend across the country of municipalities’ good intentions backfiring, adding unnecessary costs, and driving up housing prices — usually the exact opposite of their objectives.
Higher Regulatory Costs
Regulatory fees are a necessary part of home construction, and they add up quickly. Regulatory costs add an average of $93,870 to the price of a new home, according to the National Association of Home Builders. The public tends to hear more about impact fees and required studies, but architectural standards are also part of this equation. “Out of ordinary” architectural design standards account for $10,794 or 11.5% of this total. The specific design guidelines previously mentioned are examples of “out of ordinary” standards.
“The design guidelines piece has been a growing concern among builders as local governments dictate specific features like window sizes and garage orientations for example, that become barriers to producing more housing in a cheaper way,” says Ted Leighty, CEO of the Home Builders Association of Metro Denver. Without a doubt, a sizable chunk of these regulatory dollars can be reduced through more thoughtful and flexible housing design guidelines at the local level.
Another factor that will affect design guidelines here in Colorado is this year’s development of electric and solar ready code language for new home construction. While we fully support industry efforts to improve sustainability and reduce greenhouse gas emissions, the design ramifications remain unclear. In a joint study from the Colorado Association of Home Builders and Home Innovation Research Labs, early estimates indicate 2021 IECC code adoption will add approximately $11,450 to the price of a new home. For energy code adoption that goes beyond the 2021 IECC, the study projects a $46,200 cost increase.
The myth of deep-pocketed developers and builders pervades the public’s perception of our industry. Judging from the 11% increase in regulatory fees over the past five years, it appears compliance agencies feel the same way. The reality is developer and builder margins aren’t as large as people think, certainly not ample enough to absorb these increasing fees. Regulatory costs inevitably get passed to the home buyer, and at a time when housing affordability is at historical lows, even incremental costs can make a new home out of reach for many households. For instance, 1,305 Colorado families are priced out when the state’s median home price increases by $1,000. There’s a real opportunity to address some of these regulatory housing barriers to keep housing prices more affordable.
Lack of Housing Diversity
Residential zoning is also a factor that impacts home design guidelines. Zoning affects the type of housing that can be built, its density, and how it looks. It contributes to the lack of higher-density workforce or missing middle housing that’s often the market entry point for millions of American households. There is a great opportunity to revamp municipal zoning to include more flexible and creative approaches to medium and higher density home design that includes:
- Cottage courts
- Townhomes
- Duplexes
- Accessory dwelling units (ADUs)
A tangential issue that is also worth mentioning is the higher liability risks to developers associated with condominium and higher-density residential construction. Colorado’s construction defect laws in particular are a major cause of condo development slowing to a trickle statewide. Ironically, it’s exactly this tier of housing that’s so sorely needed to help families gain a foothold in the housing market and build equity and wealth. The necessity of tort reform is also a factor here to further mitigate the state’s punitive and hostile litigation environment for construction and other lawsuits like personal injury and medical malpractice.
Inadequate Industry Representation on Design Committees
Homebuilding industry inclusion is essential to municipal design committees. Municipalities need more industry voices to help create a more flexible framework of guidelines. Architects, builders, and developers currently working and building should be invited to participate. Civil, structural, and other engineering disciplines participation is also a benefit, as their expertise fosters an environment of collaboration and problem solving, especially as it relates to site development and improvement.
As industry professionals, we have current and firsthand knowledge of design practices, methods, materials, and costs. Our inclusion can provide a perspective that balances pragmatism and creativity that encourages more long-term attainable housing. Together, we innovate, think outside the box, and create homes that are buildable, keep production costs down, and appeal to buyers. Collaboration between city planners and industry professionals encourages good design practices that produce more attainable housing quickly and at the scale cities desperately need. Let’s make it happen.
The KGA team has visibility into today’s challenges facing housing affordability on the local and national levels, from zoning and regulatory issues to water access and financing. To learn more about the services we offer, contact us for a consultation.
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