{"id":184570,"date":"2025-09-04T10:52:56","date_gmt":"2025-09-04T16:52:56","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=184570"},"modified":"2025-09-04T10:53:36","modified_gmt":"2025-09-04T16:53:36","slug":"how-local-politics-is-ruining-the-american-dream","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-local-politics-is-ruining-the-american-dream","title":{"rendered":"Local Politics is Ruining the American Dream With Overbearing Regulations"},"content":{"rendered":"\n

Let\u2019s get something straight from the start: America doesn\u2019t have a housing \u201cproblem.\u201d That makes it sound like a small leak under the sink. <\/span>Rather<\/span>, what we\u2019ve got is a housing disaster\u2014the kind of thing you don\u2019t just patch with duct tape.  <\/span><\/p>\n\n\n\n

We\u2019re short somewhere around 5 million to 6 million homes right now, and if you\u2019re apt to believe the economists at Morgan Stanley and J.P. Morgan, that gap isn\u2019t closing anytime soon. In fact, if we keep building at our current rate (which is laughably slow, given demand), we\u2019ll be staring down the barrel of a 15 million-home shortage in the next decade. That\u2019s not a problem\u2014that\u2019s a catastrophe.<\/span><\/p>\n\n\n\n

Now, let\u2019s back up for a second. How\u2019d we even get here?  <\/span><\/p>\n\n\n\n

People tend to forget that this didn\u2019t happen overnight. It started with the Great Recession, when the entire housing market imploded. Circa 2008 to 2012, builders hit the brakes hard\u2014so hard that the skid marks are still visible today. Permits collapsed, projects died on the vine, and lenders shut the doors. <\/span><\/p>\n\n\n\n

For years, homebuilders <\/span>were basically told<\/span>: \u201cDon\u2019t even think about buying dirt.\u201d  Everyone was licking their wounds.<\/span><\/p>\n\n\n\n

The trouble is, demand didn\u2019t stop. Families kept forming. Millennials grew up. Immigration continued. People still needed roofs over their heads, but for most of the 2010s, we weren\u2019t building anywhere near enough houses to keep up.  <\/span><\/p>\n\n\n\n

By the time the market came back to life, we were already millions of homes behind. That shortage snowballed year after year until we arrived at today\u2019s shortfall: about 5 million to 6 million homes missing from the market.<\/span><\/p>\n\n\n\n

Now here\u2019s where it gets messy. One would <\/span>be forgiven<\/span> for thinking, \u201cOK, so just build more houses. <\/span>You\u2019re a builder<\/span>, right?<\/span> Put hammer to nail and fix the problem.\u201d <\/span><\/p>\n\n\n\n

If only it were that simple. The truth is, it\u2019s not a lack of lumber, or nails, or workers. We know how to build. We\u2019ve been building since before this country was a country. The underlying problem is that we\u2019re not allowed to <\/span>build<\/span> the types of homes that would actually solve the affordability issue.  <\/span><\/p>\n\n\n\n

Here\u2019s where you ask: \u201cWhat on Earth are you even talking about?\u201d<\/span><\/p>\n\n\n\n

The Regulatory Elephant in the Room<\/span><\/h2>\n\n\n\n

Let me be completely blunt here: Regulatory costs are the <\/span>biggest<\/span> reason housing isn\u2019t affordable. Don\u2019t get me wrong\u2014materials are pricier than they used to be, and labor isn\u2019t cheap, either<\/span>, but the<\/span> primary driver elevating home prices is regulation: zoning ordinances, permit fees, impact studies, arbitrary lot sizes, design requirements that have nothing to do with safety and everything to do with keeping \u201cundesirables\u201d out.<\/span><\/p>\n\n\n\n

I\u2019ve sat in city council meetings where a group of well-off, incumbent homeowners showed up to protest 1,500-square-foot starter homes on 40-foot lots. Why? Because they were worried about \u201cneighborhood character.\u201d That\u2019s code for, \u201cWe don\u2019t want people who make less money than <\/span>us<\/span> living nearby.\u201d  <\/span><\/p>\n\n\n\n

And it works\u2014man, does it work. These are the same folks who, when it suits their high-minded purposes, will praise this country\u2019s “laissez-faire\u201d approach to property rights as a cornerstone of American Exceptionalism, yet they can\u2019t wait to tell you what you should do with your property. They bring their lawyers, they have time to show up on a Tuesday night, and they know the politicians by their first names.  <\/span><\/p>\n\n\n\n

Meanwhile, where are the people who actually need the attainably priced homes? They\u2019re working double shifts, raising kids, and can\u2019t be at city hall to fight for themselves.<\/span><\/p>\n\n\n\n

So what happens? The small-lot, small-home community that would\u2019ve sold out in weeks gets killed before it even leaves the planning stages. Instead, the only thing that gets approved is another subdivision of 3,500-square-foot mansions on half-acre lots that start at $700,000. Great if you\u2019re already wealthy and looking <\/span>to maybe scale up<\/span>; worthless if you\u2019re a first-time buyer.<\/span><\/p>\n\n\n\n

And this is happening everywhere\u2014not just in and around big cities. Even in places you\u2019d think would welcome growth, like small towns in North Carolina, local politics get hijacked by a handful of loud voices and influential people.  <\/span><\/p>\n\n\n\n

Try getting approval for manufactured homes, modular homes, or even townhomes in certain counties.  You\u2019ll hear every excuse in the book: \u201ctraffic concerns,\u201d \u201cstormwater runoff,\u201d \u201cschool capacity,\u201d \u201ccrime.\u201d All valid issues, for sure\u2014but notice how they magically vanish when a luxury development <\/span>is proposed<\/span>? Funny how that works.<\/span><\/p>\n\n\n\n

The Political Capture Problem<\/span><\/h2>\n\n\n\n

Here\u2019s the ugly truth: Local politics <\/span>are too easily captured<\/span> by incumbents\u2014wealthy homeowners who wish to close the door behind themselves. <\/span><\/p>\n\n\n\n

They\u2019ve got their <\/span>equity<\/span><\/a>. They\u2019ve got their view. They\u2019ve got theirs, and they don\u2019t want anyone else moving in unless they can pay the same entry fee. It\u2019s like joining a country club\u2014sure, you can schedule a tee time\u2026but can you afford the initiation fee?<\/span><\/p>\n\n\n\n

The result? You\u2019re living it. We\u2019ve locked the door behind an entire generation of would-be homeowners. Prices shoot up, supply stays stagnant, and the entry-level homes that used to be the backbone of the American Dream have basically vanished.  <\/span><\/p>\n\n\n\n

Thirty years ago, a builder could put up a neighborhood of starter homes\u20141,200 to 1,800 square feet, on modest lots\u2014and families lined up to buy them. Today, those same projects die in the zoning phase nine times out of 10\u2014and that\u2019s modest.<\/span><\/p>\n\n\n\n

So when economists tell you, under the light of a flashing red alarm, we\u2019ll be short 15 million homes by 2035, don\u2019t be surprised. At the rate we\u2019re going, that might be conservative.<\/span><\/p>\n\n\n\n

A Builder\u2019s-Eye View<\/span><\/h2>\n\n\n\n

From my side of the table, the frustration feels almost endemic. We\u2019ll run numbers on a site\u2014say, a 100-acre tract in a growing county in North Carolina. <\/span><\/p>\n\n\n\n

In theory, you could easily fit 300 modest homes there that would actually sell in the $250,000\u2013$300,000 range, right where demand exists. Families would love it. Builders would happily build it. Banks would finance it.<\/span><\/p>\n\n\n\n

But, alas, let\u2019s check the zoning ordinance: minimum lot sizes of a quarter acre, setbacks so deep you could land a plane in the front yard, mandatory brick facades, and lot widths that force infrastructure costs toward the moon. Suddenly, your 300-home project shrinks to 120 oversized houses that only upper-middle-class buyers can afford. The math changes completely. You can\u2019t hit the price point buyers actually need. <\/span><\/p>\n\n\n\n

So what happens? The project gets shelved, or it gets turned into luxury homes<\/span>. Another<\/span> missed opportunity.<\/span><\/p>\n\n\n\n

Builders get blamed:  \u201cWhy don\u2019t you build affordable housing?\u201d Trust me, we\u2019d love to, but you can\u2019t sell what you can\u2019t get approved.<\/span><\/p>\n\n\n\n

If you\u2019ll indulge the civil engineer inside me and come along with me on a simple exercise, a simple thought experiment can be <\/span>very powerful<\/span>. I\u2019ve read that Einstein, without putting pen to paper at first, worked out the <\/span>basic<\/span> inconsistency between the relationship of space and time in Newton\u2019s equations with a simple thought experiment involving two lightning bolts and a train. I won\u2019t ask that much of you, I promise.<\/span><\/p>\n\n\n\n

Imagine a house that\u2019s two stories, three bedrooms, 2.5 baths, a<\/span> two-car garage, and 2,200 square feet of living space. The physical dimensions of the house are irrelevant. They can change without impacting the cost to construct. We need somewhere to put this house, so we have to develop some raw land.  <\/span><\/p>\n\n\n\n

What are the costs to develop this land? <\/span>Well, we have<\/span> to do the earthwork<\/span>, put<\/span> in the<\/span> piping for stormwater, potable water, sewer, electrical lines, data, and<\/span> natural gas.<\/span> On top of that, we need to build roads complete with curb and gutter, and asphalt surfaces. <\/span><\/p>\n\n\n\n

What if I told you that the average cost to develop one linear foot of residential street is around $4,000 in the Southeast U.S.?  <\/span>You<\/span> have houses on both sides of the street <\/span>in most situations<\/span>, so the cost of one linear foot of lot frontage is <\/span>more<\/span> around $2,000.<\/span>  <\/span><\/p>\n\n\n\n

Put another way:<\/span> Walk out to your street and look around. It would cost me $2,000 per front foot to re-create your lot (ignoring the house itself).<\/span><\/p>\n\n\n\n

Now, consider two types of lots:<\/span><\/p>\n\n\n\n