“Every $1,000 added to a home will price out 2,200 Nevadans.” – Nat Hodgson, CEO, Southern Nevada Home Builders Association”
The issue of housing affordability is a growing concern in our state as well as the nation, and we’re certain that various policies will actually raise the cost to build a home, in turn raising the cost to purchase a home.
In the last 24 months, costs associated with utilities, agency processing times, material, labor, land and regulation, have gone up an estimated $35,000 to $45,000 per home. Every $1,000 added to a home will price out 2,200 Nevadans. Further, the pandemic and its wider effects have exacerbated this increase amid the already mounting fees and costs for builders.
We are dedicated in our work with various municipalities, interest groups, with a goal to educate and encourage pragmatic policies that do not increase the cost per home, but rather realize the best solution across the board. Stabilizing the cost and processing times of building a home is essential and will be beneficial to all parties, from home builders, to future homeowners, to the wider Southern Nevada community.
Did you know the true cost of building a home? It’s more than you would think. Aside from the basics like labor and materials, home builders are subject to a number of fees that vary across federal, state and local jurisdictions. Here are a few things we’d like you to know about:
Federal Lands Bill
Roughly 83% of Nevada is owned by the Bureau of Land Management (BLM). In the Las Vegas area, developers are dealing with an artificial lack of supply of land. The home building industry and municipalities are in support of the Federal Lands Bill that is before the U.S. Senate and Congress. If this bill does not pass, Southern Nevada has less than five years of developable land left to build our city. Over the last five years, the land has increased from $350,000 to an average of $750,000 per acre. The cost of land is the most impactful driver of our expenses increase in the Las Vegas valley.
Since the Las Vegas region has developed over the years, the Bureau of Land Management (BLM) has sold off pieces of land to developers. The BLM has charged builders after the land is sold (several years or decades later) for mineral rights. This is an added cost passed onto both builders and consumers.
Inclusionary zoning is a municipal or county planning ordinances that require a given share of new construction to be affordable by people with low to moderate incomes. Homebuilders must sell homes through structures programs at 60 to 120% of area median income to enforce these policies. The majority of these programs include a fee in lieu of structure that requires the builders to pay into a fund where the reserves tend to sit without being built.
Construction Defect has a long history in the state of Nevada. In 2019, legislative changes were made and legislators and home builders are waiting to view the outcomes. Cost increases were added due to insurance premiums increases. Costs must be factored in for the next ten years or more. The home building industry does not support any changes made to the existing law due to supporting consistency and seeing what the future holds with the current regulation.
State of Housing Main Points
2019 PTO Bill
During the 2019 Legislative Session, a paid time off bill was passed that adds to costs to home building. For the average company with roughly 100 employees, this can add up to $200,000 of costs per year.
Fire Sprinklers are an essential life and safety resource added to homes due to jurisdictional code; since the implantation of these ordinances, the cost of homes has increased $3,500 – $5,000 per house.
Fees in Each Jurisdiction & Agencies
Most of the building departments that home builders conduct business with have enterprise funds, which allow the builders to pay for their own growth and the resources required in each jurisdiction. The home building industry does support the fees that are put into place to build these homes. However, in the last few years, several fees have been put into place or have increased to help offset costs on infrastructure. For example, in 2021, we are seeing an increase of Public Needs Facility Assessment (PFNA) by 100%, West Henderson Utility Facility Needs Assessment (WHUFNA) by 5%, and Southern Nevada Water Authority’s (SNWA) new lateral.
Price of Land
Since 2011 to 2020, the price of land per acre has increased by 500%.
Supply and Demand
Southern Nevada has been pulling roughly 10,000 permits the last few years, and we are still seeing a shortage of houses being built. However, with the amount of land and the labor, the different builders and contractors have hired, this is a very consistent number of development growth in the homebuilding industry.
April 2020 stand down –
The original COVID-19 shut down created several new challenges for residential building in Nevada. Thankfully, construction was deemed essential, however, none of the building departments had access to conduct business online. The municipalities and various departments were able to transfer their processes online within a few days. The home building industry is grateful to have these processes transition to work online; however, the timeframes are much longer, and the time to get through the entire process has been delayed days, weeks, or months.
Supply shortages have significantly spiked the last few months due to the COVID-19 shutdowns. For example, we are seeing back-ordered items delayed up to 3 months, which causes postponements to the rest of the home building process. Specifically this includes items like trusses and A/C condenser units – as factories that build those products are shut down worldwide.
Further questions? We’re happy to discuss. If you have any other questions about affordable housing and the many issues that threaten the stable growth of home development in Nevada, please reach out to Cassidy Wilson at firstname.lastname@example.org