The Kingdoms of Shelter. Affordable Housing in America

A common question many consumers ask is, "Why is housing in America so expensive?" This question is becoming more prevalent as the cost of housing continues to rise, making it increasingly difficult for people to achieve the dream of homeownership. The cost of housing is affected by many factors, ranging from the cost of construction and building materials to the regulations and fees associated with development, sales, and finance. We can better understand the associated inflation triggers by breaking down the different sectors, or “Kingdoms,” as each has complex walls built around them restricting a collaborative affordability strategy. Housing consumers can become more educated, get involved in their marketplace, and be better equipped to navigate the complex world of homeownership.

 The Kingdoms of Shelter: Understanding the High Cost of Housing in the United States

         This is a complex issue that impacts millions of Americans. The dream of homeownership is becoming increasingly difficult to achieve, with the cost of housing rising. To understand the reasons behind this trend, it's important to break down the different sectoral kingdoms that contribute to the high cost of housing in the US and the inflator triggers associated with each one.

 The Kingdom of Land Development: Inflator Triggers

        Land development is a complex, risky, and crucial aspect of the housing industry. It involves the process of purchasing, subdividing, and preparing land for residential development. Land developers purchase large plots of land and subdivide them into smaller lots for residential development.

 Inflator Triggers:

·     Cost of infrastructure like roads, water, and sewage systems

·     Environmental remediation required to prepare the land for development

·     Cost of permitting and approval processes required by government agencies

·     Cost of financing the land acquisition and development process, including interest payments and fees

         Costs of infrastructure, like roads, water, and sewage systems, and environmental remediation required to prepare the land for development can be major inflator triggers in the land development kingdom. These can add significant costs to the development process, which can be passed on to homebuyers. 

       Land developers need to purchase land at wholesale prices, and the land cost can be a major inflator trigger. In addition, developers may need to pay for infrastructure like roads, water, and sewage systems to make the land suitable for development. This can add significant costs to the development process. Furthermore, these projects are financed, and the debt service burdens can go well beyond the forecasted timelines due to unforeseen delays in any aspect of the development phase. Environmental remediation, like removing hazardous waste or cleaning up contaminated soil, can also be required before development can begin, which can add significant costs to the project.

 The Kingdom of Regulation: Inflator Triggers

        Regulations play a crucial role in the housing industry, as they help ensure that homes are safe, habitable, and environmentally friendly. However, complying with regulations can add significant costs to the development, construction, and management process for housing in America.

 Inflator Triggers:

·     Fees for permits and inspections

·     Environmental impact studies

·     Compliance with building codes

·     Political obstacles and bureaucratic red tape

         Compliance with building codes, environmental impact studies, fees for permits and inspections, political obstacles, and bureaucratic red tape can be major inflator triggers in the regulation kingdom. These can result in delays in obtaining permits and approvals and additional costs associated with navigating complex political processes.

        Regulations can vary depending on the level of government, including Federal, State, County, and City. Federal regulations, like the National Environmental Policy Act, can require environmental impact studies for larger development projects, which can be a major inflator trigger for developers. State and local building codes can also require specific building materials and design features, adding significant costs to the construction process. Compliance with building codes and regulations can require additional labor and materials, adding to the project's cost.

        Overall, regulations can be an important tool in ensuring the safety and sustainability of the housing industry. However, it is important to balance the benefits of regulations with the potential inflator triggers that can add significant costs to the development, construction, and management of housing in America.

The Kingdom of Environmentalists: Inflator Triggers

        Environmentalists ensure that development and construction processes do not harm the environment. Compliance with environmental regulations can add significant costs to the development process, but it is necessary to protect the environment and the health of residents.

 Inflator Triggers:

·     Additional testing and remediation

·     Permits and compliance with environmental regulations

·     Cost of implementing sustainable and eco-friendly practices

·     Increased scrutiny and potential fines for non-compliance with environmental regulations

·     Risks of having a project “pink-slipped.”

         Additional testing and remediation required to comply with environmental regulations, as well as permits and compliance with environmental regulations, can be major inflator triggers in the environmentalist kingdom. These can add significant costs to the development process, which can be passed on to homebuyers.

Environmental regulations can vary depending on the location and the type of development. Developers may need to conduct environmental impact studies to identify potential risks and remediation efforts may be required before construction begins. This can add significant costs to the project. In addition, compliance with ongoing regulations like stormwater management and wetland mitigation can add additional expenses to the development process.

 The Kingdom of Legal Process: Inflator Triggers

        Legal processes are an important aspect of the housing industry, as they help protect the rights of homebuyers and ensure that all transactions are conducted fairly. However, legal processes can add significant costs to the home-buying process. 

Inflator Triggers:

·     Legal fees for purchasing or selling a home

·     Litigation costs for disputes related to the sale or construction of a home

·     Escrow management and title fees

         Legal fees for purchasing or selling a home, litigation costs for disputes related to the sale or construction of a home, and title insurance fees can be major inflator triggers in the legal process kingdom. These can add material costs to the home-buying process, which can be passed on to homebuyers.

        Legal fees can vary depending on the transaction type and the sale's complexity. Litigation costs can also add up quickly if there are disputes related to the sale or construction of a home. Escrow and title insurance fees are necessary to protect the buyer from any defects in the title, but they, too, add costs to the closing process.

 The Kingdom of Building Materials and Construction: Inflator Triggers

         Building materials and construction costs significantly impact housing affordability. This multifaceted kingdom is riddled with unforeseen challenges, and risks are typically passed on to the consumer. The cost and availability of building materials are one of the most volatile aspects of the housing industry.

Inflator Triggers:

·     Lumber price swings and increases

·     Cost of other materials like concrete, steel, and roofing materials

·     Availability of materials in specific locations

·     Markups from sub-contractors

·     Labor costs vary widely depending on the location and availability of skilled labor.

·     Additional costs associated with complying with building codes and regulations

·     The inability of contractors to hedge the volatile materials markets

         Lumber price increases, the cost of other materials like concrete, steel, and roofing materials, and the availability of materials in specific locations can be major inflator triggers in the building materials kingdom. These can add significant costs to the construction process, which can be passed on to homebuyers.

        Sub-contractors often markup their costs to cover their expenses and ensure a profit, which can further increase the overall cost of construction. In addition, labor costs can vary widely depending on location and the availability of skilled labor. Builders must also navigate the complexity of complying with building codes and regulations, which can add additional expenses to the construction process.

        Furthermore, materials costs have seen significant price increases in recent years, particularly for lumber, concrete, and steel. This can be due to factors such as supply chain disruptions, increased demand, and trade tariffs.

 The Kingdom of Real Estate Sales Industry: Inflator Triggers

  Real estate sales agents play a crucial role in the housing industry, as they help buyers and sellers navigate the complex process of buying and selling homes. However, like other essential ingredients in the US housing market, these costs further add to the overall economics of homeownership.

 Inflator Triggers:

·     Sales commissions paid to real estate agents

·     Additional fees, such as administrative fees, marketing expenses, and transaction fees

·     Costs associated with home inspections and fixing up the in-preparation marketability.

        Real estate agents typically receive a commission of around 3% to 6% of the home's sale price, which is split between the buyer's and seller's agents. This cost is passed onto the consumer, as it is factored into the home's overall price.

        In addition to commissions, real estate agents may charge additional fees, such as administrative fees, marketing expenses, and transaction fees.

        Furthermore, buyers may be required to pay for home inspections and appraisals as part of the home-buying process. These costs can vary depending on the home's location and size.

The Kingdom of Mortgage Financing: Inflator Triggers

         Financing is a crucial aspect of the housing industry. It enables developers to acquire raw land, develop neighborhoods, manage regulatory and environmental processes, and take the project vertical through home construction. Financing also gives consumers the purchasing power necessary for such a significant transaction.

 Inflator Triggers:

•     Interest rates on long-term mortgages

•     Margin add-ons along the supply chain of money, from wholesale to retail lending markets

•     Closing costs associated with long-term mortgages

•     Professional and Loan Originator fees

         Various inflator triggers can influence the cost of long-term mortgage financing for consumers. Interest rates on long-term mortgages can significantly impact the cost of homeownership. When consumers obtain a long-term mortgage to purchase a home, they typically pay interest on the loan over several years or even decades. Even a small difference in interest rates can add up to a significant amount over time.

        In addition, there are various margin add-ons along the money supply chain, from Wholesale Lending to Retail Lending. These can include fees and expenses added by lenders, mortgage brokers, and other intermediaries involved in the mortgage financing process. These costs are typically passed on to the consumer.

        Furthermore, there are various closing costs associated with long-term mortgages. These can include fees for appraisals, inspections, title searches, processing, and underwriting. These costs can add up quickly and further increase the overall cost of homeownership for consumers.

        It is important for consumers to carefully review all aspects of their long-term mortgage financing options to understand the various inflator triggers that can impact the overall cost of homeownership. By being informed and proactive, consumers can make better decisions about their mortgage financing and ultimately reduce the overall cost of homeownership.

 The Kingdom of Utility Services: Inflator Triggers

         Utilities like water, gas, and electricity are crucial for a home, but the cost of utilities can add up quickly over time.

 Inflator Triggers:

•     Rising utility costs

•     Additional fees for connection or installation

         Rising utility costs and additional fees for connection or installation can be major inflator triggers in the utility kingdom. These can add substantive costs to the ongoing maintenance of the home, which can impact the affordability of homeownership.

        The cost of utilities can vary depending on the location and the provider. In some areas, there may be additional fees for connecting to the utility network or installing new meters, which can add to the overall cost of utilities.

 The Kingdom of Insurance: Inflator Triggers

         Insurance is an important aspect of homeownership, as it protects the homeowner from potential losses. However, insurance costs can vary widely depending on the type of insurance and the home's location.

 Inflator Triggers:

•     Rising insurance premiums

•     Additional coverage requirements for specific locations or property types

  Rising insurance premiums and additional coverage requirements for specific locations or property types can be material inflator triggers in the insurance kingdom. These can add significant costs to the ongoing maintenance of the home.

        Insurance costs can vary widely depending on the location and the type of insurance. Homeowners in areas prone to natural disasters may pay higher premiums or require additional flood or earthquake damage coverage.

 The Kingdom of Maintenance: Inflator Triggers

        Maintenance is an ongoing aspect of homeownership, as homes require regular upkeep and repair to remain habitable and safe.

 Inflator Triggers:

•     Rising costs of labor and materials for repairs

•     Costs of ongoing maintenance like lawn care and cleaning

         Rising labor and materials costs for repairs and ongoing maintenance like lawn care and cleaning can add up quickly. The maintenance cost can vary widely depending on the location and the type of home. Homeowners may need to pay for regular upkeep like lawn care or cleaning and unexpected repairs like fixing a leaky roof or replacing a broken appliance.

 The Kingdom of Home Services: Inflator Triggers

        Home services like solar, home security, and internet can provide additional benefits to homeowners, but they also are often overlooked as a contributor to home affordability.

Inflator Triggers:

•     Additional fees for installation or connection

•     Rising costs of service or subscription fees

Home services can vary widely depending on the location and the type of service. Homeowners may need installation or connection fees for services like solar or home security and ongoing subscription fees for internet or cable.

      In conclusion, the high cost of housing in the United States is a multifaceted issue that requires a comprehensive approach. The complex kingdoms and organizations establishing each sector are critical and necessary in supplying Americans with safe and comfortable households. Still, they also contribute to the high cost of housing, often beyond the control of the individual parties or industries involved. It's time for each sector to 'break down the walls,' so to speak, and work together to identify innovations, efficiencies, and cost savings to make homeownership more affordable for everyone. This can be achieved through increased transparency, education, and collaboration between developers, builders, regulators, financiers, real estate professionals, and consumers. Working together can create a more sustainable and affordable housing market for generations. Consumers can also play a more active role in advocating for education, transparency, regulatory modernization, and efficiencies across all aspects of the housing industry in America.

         In the end, the goal should be to create a housing market that is accessible and affordable. This requires a commitment to finding solutions that balance the benefits for the consumer and all industrial sectors involved - including the government. By working together and staying informed, we can build a better future for homeownership in America.

by

Dave G. Zitting