Death by a Thousand (Policy) Cuts
On a crushing accumulation of costly rules
Policy Gripes is a series that combines our two highest forms of expertise: economic policy and complaining.
States can suffer from a crushing accumulation of well-intentioned but costly housing policies. Take Maryland, for instance, where minor housing regulations add up to major home price increases.
Sprinkling on Additional Costs
Two states require sprinklers in all new single family homes: California, where there are massive, frequent, and hellacious wildfires, and Maryland, where there aren’t.
Sprinklers cost about $2.00-$3.00 per square foot, so a new 2,500 square foot home costs about $5,000-$7,500 more because of this requirement.
Yes, sprinklers significantly reduce the threat of home fire fatalities. Some estimates put the decrease at about 90%. That sounds incredible—90% less likely to die in a home fire!—but fewer than 50 Marylanders die per year in residential fires (about 0.09% of statewide deaths).
And that’s fire deaths in all housing units. New single family homes built since 2015 (the only ones subject to the sprinkler requirement) account for less than 5% of the state’s housing stock.
Back of the envelope model: this requirement leads to about 1.5 fewer deaths per year. But even that’s generous because new homes are almost certainly less likely to catch on fire than older ones.
Maybe you still think $5,000 added to the cost of a new home is worth 1.5 lives saved every year. It sounds worse when you say that Maryland homebuyers are paying about $35 million every year to maybe save one life.
But That’s Just Sprinklers
Maryland is one of just five1 states that requires EV chargers (or at least wiring for it) in new homes, and the State updates to the newest international energy conservation code faster than most others. These two policies tack on another couple thousand to the cost of a new home.
Individually, these policies can be justified, or at least excused. But policies don’t exist in isolation, and an accumulation of cost-boosting regulations is particularly pernicious; overturning one bad policy is a lot easier than dozens of tiny ones.
What’s Next?
We’ll have a post on the amusement and recreation construction segment out tomorrow morning.
After that is Week in Review, our every-Friday post that gives you everything you need to know about the economy in a breezy, five-minute read. Week in Review is just for paying subscribers. If that’s not you and you want it to be, just click the button below:
There’s a lot of gray area with different requirements for different housing types across states. Five is about right, though.