Building Codes Ensure Affordable Housing

Access to affordable housing is becoming too difficult for too many Americans and more can and must be done. The root causes for the challenge are complicated and multifaceted. To effectuate change, solutions must address not only first costs but also costs associated with operation and maintenance. Getting a family into a home is not enough. They need to be able to afford to live there too. Cheap homes that blow over in the face of modest winds, suffer severe damage from minor flooding, become uninhabitable following low grade earthquakes, or impose unnecessarily high energy and water utility bills are not the type of homes we should be promoting. Their residents deserve more.

Low to moderate income families have the most at stake when it comes to protecting their property from natural hazards. Recent Bankrate studies have reported that only 39 percent of those surveyed could cover a $1,000 blow with savings. High energy and water bills also have disproportionate impacts. Middle-income and high-income ratepayers spend 1 to 5 percent of their income on energy bills, whereas low-income customers face energy burdens from 6 to 30 percent or more depending on their state of residence.

Modern Model Building Codes Reduce Operations Expenses without Impacting First Costs

Fortunately, we can promote homes that are affordable, resilient, and energy and water efficient. In January, a FEMA-funded study by the congressionally-established National Institute of Building Sciences (NIBS) found that up to date model building codes save $11 for every $1 invested through earthquake, flood, and wind mitigation benefits, with a $4 to $1 wildfire mitigation benefit. These benefits represent avoided casualties, property damage, business interruptions, and insurance costs, and are enjoyed by all building stakeholders – from developers, titleholders, and lenders, to tenants and communities. Keeping utility bills low also mitigates default risks, with one recent study finding that energy-efficient homes can reduce the risk of mortgage default by about a third.

Contemporary research continues to find that modern model building codes have no appreciable implications for housing affordability—in fact, no peer reviewed research has found otherwise. Improvements to model building codes’ resilience over the nearly 30-year period the NIBS report studied were found to increase a home’s purchase price by around a half a percentage point in earthquake country or in an area affected by riverine flood. Similarly, a detailed benefit-cost analysis of seismic code adoption for Memphis, Tennessee found that adopting up-to-date codes, for the apartment building studied, would add less than 1 percent to the construction cost (and less to the purchase price, since construction cost typically amounts to between 1/3rd and 2/3rds of purchase price), while reducing annualized loss—in terms of repair cost, collapse probability, and fatalities—by approximately 50 percent.

Additional analyses have made similar findings. After Moore, Oklahoma experienced its third violent tornado in 14 years, the City significantly strengthened its building codes. The Moore Association of Home Builders estimated a $1-$2/sqft resulting increase in the cost of construction. Yet, researchers found that the change to a stronger building code had no effect on the price per square foot or home sales. A study by Headwaters Economics last fall found that, in the county studied, a new home built to model wildfire-resistant codes can be constructed for roughly the same cost as a typical home. According to the Association of State Floodplain Managers, the insurance savings from meeting current codes’ flood mitigation requirements can reduce homeowners’ net monthly mortgage and flood insurance costs by at least 5 percent.

The cost effectiveness of modern codes is due in no small part to the active participation in the code development process of stakeholders representing development and property management interests. The Building Owners and Managers Association, National Association of Home Builders, and the National Multifamily Housing Council are founding strategic partners of ICC, with each devoting considerable time and effort towards ensuring code updates are practical and cut costs whenever possible.

Greater Uniform Adoption of Current Model Building Codes Would Promote Housing Affordability

Support for more uniform adoption of modern model building codes at the state and local levels could help tackle the affordable housing challenge – both for stick-built homes and modular homes built offsite. Modular homes show promise as an affordable housing solution, capable of curbing construction timelines and reducing costs by 25% or more. ICC is in the process of developing two standards that will help expand the use of offsite construction by promoting more efficient design, fabrication, and approvals.

For both modular and stick-built homes, a more unified code landscape would help minimize construction cost through clearer and more consistent design and construction requirements and quality standards—allowing greater efficiencies for builders, materials manufacturers, and designers. For communities, promoting strong codes can help reduce borrowing costs and incentivize economic investment through reduced threat of loss and better risk pricing.