Tuesday, July 5, 2016

Indiana Builders Facing Ridiculous Ordinances

If you think California and Maryland have tough state building codes and regs, well it’s time to see what Greenwood, IN is about to force on all builders, both site and modular.

It seems that the town has adopted architectural standards on new houses that will drive up prices so significantly that the costs would preclude home ownership for thousands of residents.

The Greenwood Common Council adopted an ordinance on Sept. 9, 2015 that beefed up architectural design standards for all new local residential construction that  will add between $15,000 and $30,000 to the sales price of a new home.

Mark Richards, city engineer and director of the Greenwood Department of Community Development Services, said in an email that "The local ordinance enacting residential architectural standards was a valid use of the city’s zoning authority and is being properly applied by the Community Development Services Department," he said. "Ordinances containing residential architectural standards are commonplace in Indiana communities and throughout the country. Greenwood is committed to requiring builders to construct high-quality housing at all price points so that residents are protected in what is oftentimes their biggest investment—their homes."

Local site builders say they are being required to follow the new standards even if they received permit approval and began development of a subdivision prior to the approval of the ordinance.

When a town’s new homes typically sell for between $130,000 and $175,000, what effect do you think the appraisals will have for new homes built with $30,000 in architectural add-ons that new homeowners neither want or can afford?

Imagine the planning commission meeting where this ordinance was passed. Probably a 5-7 member board, all old family townspeople wanting to leave their mark on what the future of Greenwood should be. Nobody was there to speak out against it and it passed the vote. Probably none of those members were building a new home so what did they care.

National data shows that nearly 25 percent of the final price of a new home is the result of government regulations. The end result is that important members of a community—police, firemen, military personnel, teachers, and even our own adult children—are priced out of home ownership in the cities and towns where they work and live.

The cost of regulations are even higher and more vigorously enforced for modular housing.


Unknown said...

BAGI (Builders Association of Greater Indianapolis) has filed a lawsuit in conjunction with the largest "First Time Home Buyer" site builder, Arbor Homes, to challenge the City of Greenwood's new architectural requirements. The issue at hand is not exactly the additional requirements the City has implemented, they have every right to do so, its the timing of the effectiveness of the changes to the architectural requirements. What has happened is that already existing communities are having the new requirements effective with permit dates of the homes as opposed to the time when the community was platted. For instance, a home built during an older phase of the community could be $15K - $20K cheaper for the comparable new home which in turn will create an issue when the newer home comes up for appraisal. It's creating a bit of a catch 22, the home price needs to be raised to accommodate the higher hard costs but getting a mortgage is tougher as the appraisal won't come in high enough therefore requiring more money down, which most in the entry level price point don't have. That's with out getting in the real problem in the home building industry in general is that housing is becoming less and less affordable and therefore less accessible.

The other underling issue is that in Indiana, property tax for a primary dwelling is capped at 1% and multifamily housing is billed at 3%. Therefore, cities are claiming they need homes to be accessed at $350K or above for city services to be paid for. Hence, the cities around here do not want entry level housing as it's bad business for them and the city coffers.

Tom Hardiman said...

At least Greenwood is applying the standards to all buildings not just modular builders - like they are trying to do in O'Fallon IL. 2nd reading of the proposed ordinance banning modular homes to be on the agenda tonight at the O'Fallon city council meeting. MHBA has an attorney heading to that meeting to get the vote pulled/delayed/killed.

These barriers are occurring at an increasing rate as cities and towns look for money grabbing opportunities. I do wish they would realize that they are truly biting the hand that feeds them.