I’ve written extensively about how housing unaffordability is the biggest threat to the American Dream, highlighting the role of big Wall Street banks and mass migration in driving up home prices. But there’s a third head to the housing unaffordability monster that often gets overlooked: regulatory excess.
In a recent Substack article, real estate investor and popular YouTuber Graham Stephan took a deep dive into how government red tape is costing homeowners tens of thousands of dollars – and making it nearly impossible to build the mythical “starter home.”
“If you time-traveled to 1950, you could buy a home for 3x your annual salary,” Stephan writes. “Today, a starter home costs 11x. Why?”
The answer, he argues, has less to do with greedy Wall Street banks and more to do with what he calls the “bureaucracy premium” – costs incurred by builders and passed on to buyers purely to satisfy government mandates and permits. According to the National Association of Home Builders, “regulatory compliance accounts for nearly 25% of the price of a new single-family home.”
One study in Minneapolis found that a house that cost $182,000 in materials and labor ended up with a price tag of $372,000. Of that extra money, an astonishing $56,000 went just to cover regulatory compliance. “That is a $56,000 check you write for nothing,” Stephan points out. “No brick, no wood, no labor. Just permission.” This is the “ghost tax” that’s pricing millions of families out of their dream of owning a home.
Stephan provides a personal example from a recent experience building a rental unit in Los Angeles. While building, he found that he needed to fix a sewer line connection. “But the real problem,” he writes, “came in the form of a tree. To fix the sewer, I needed a permit to prune the root of a tree. But the tree was diseased, so I needed a separate permit to remove it. But to remove it, I needed a third permit to plant a replacement.” All those permits cost him $20,000 and delayed construction for weeks.
“This is the bureaucracy premium,” he continues. “Every week of delay adds interest costs to the builder, which gets passed directly to you, the buyer.”
But why does the ghost tax mean that builders can’t or won’t build more affordable starter homes? In the 1950s, the “golden age of housing,” the typical new single-family home was a bare-bones product – less than 1,000 square feet, one bathroom, with no A/C. Today, the size of an average new home has skyrocketed to more than 2,700 square feet and often includes luxury appliances, granite countertops, and more bathrooms than bedrooms.
The reason for this shift (which Stephan only briefly alludes to) is economies of scale.
Builders face a long list of fixed costs that apply to every project regardless of size, so a small home gets buried under the same fees, permits, delays, and compliance burdens as a much larger home. Because land is expensive and builders are usually limited to placing only one home per lot, they need a higher sale price to make the math work.
A luxury home is the only product that can absorb the fixed costs created by modern regulation. Banks reinforce this reality by refusing to finance projects that produce too little profit to cover the risks created by these rules.
In practice, this means that the ghost tax does not simply make housing more expensive; it also makes it unrealistic to build the low-cost starter homes that defined the 1950s.
The solution to this problem is straightforward: kill the ghost tax by cutting regulatory costs. Streamline approvals, lower administrative fees, and incentivize construction of affordable homes through tax abatements.
Arriving at this solution, however, will be anything but simple. The permitting process is a tangled mess of state, local, and federal jurisdictions. In blue states like California and New York, the prospect of the government cutting red tape is a laughable fantasy. But even in red states, interest groups and political factions will fight tooth and nail to extract their pound of flesh from builders.
Stephan downplays the influence of institutional investors on housing prices and ignores the detrimental effect of illegal aliens entirely. Ultimately, however, restoring the American Dream of homeownership will take an “all-of-the-above approach.”
Yes, the government at every level should intentionally work to eliminate the ghost tax. But nameless, faceless corporations also shouldn’t be allowed to buy up vast swaths of homes with the intent of pricing out everyday families and turning America into a nation of renters. Nor should Americans tolerate tens of millions of people living here illegally and increasing housing costs by the simple law of supply and demand.
We may never return to the housing market of the 1950s, but we can rebuild a market where ordinary families have a fair chance to own a home. That begins with confronting every factor that has driven prices out of reach to restore a system that works for the people who actually live in it.
Shane Harris is the Editor in Chief of AMAC Newsline. You can follow him on X @shaneharris513.
Government has essentially created a revenue stream that is impossible to challenge and is designed to evict homeowners long term. Property taxes never go down but increases each year with additional penalties if you fail to pay them on time. Foreclosure is an additional incentive as government threatens you into compliance. Homeownership doesn’t just stop at taxes, it’s also about permission to maintain or improve your home by way of fees: city building permits are government’s way to remind you that you don’t really own your property, but are responsible for maintaining it for them. A building permit allows them to raise your property value based on any improvement. City’s collect the fees and reports the improvement to the county who raises the value and ultimately your tax bill. Some local governments use drone technology to survey properties to detect undisclosed improvements with a surprise increase on your tax bill. The American dream is no longer affordable or viable and the number of government infringements keeps growing. Think you actually own your home? Nah, just the liability.
I have friends that have a house in the Tampa Bay area that was damaged by a late 2024 hurricane. Talk about “red tape” came from FEMA that took them nearly a year to repair and reoccupy. Forms and more forms, slow snail bureaucracy to process. They were totally fed up with the way that FEMA operates. Needs to be abolished since it is a waste of taxpayers’ money to support.
Question. What exactly makes Graham Stephan the sort of expert on the issues affecting the price of new homes?
I submit that you CANNOT ignore or dismiss the MASSIVE INFLUENCE which A MASSIVE INVASION OF ILLEGAL ALIENS, receiving MASSIVE GOVERNMENT HOUSING SUBSIDIES, has been a MAJOR factor in housing demand and upward pressure on prices for ALL housing. . Add this to “private equity companies such as BLACKROCK buying up single family housing for conversion to rental property, where they get their rental income from SUBSIDISED ILLEGAL ALIEN RENTERS.
Gee I wish political party loves regulation? That is the backbone of the Democrat party taxation and regulation. Along with bigger government waste fraud and abuse. Abetting drug runners and standing up for MS-13 gangbangers. In this country today as far as the Democrats are concerned you’re better off if you’re a criminal an illegal criminal
“If you time-traveled to 1950, you could buy a home for 3x your annual salary,” Stephan writes. “Today, a starter home costs 11x. Why?”
In 1976 a new Ford truck regular cab, 2 wheel drive, 6 cylinder automatic transmission was $5000.00. Now pickups start at around $55,000.00!
In 1985 ground beef was 49 cents per pound on sale every five weeks. Now one is lucky to buy it for $4.99 per pound.
The phone stayed on the kitchen wall and cost $23.00 per month. TV was free over the air waves.
Property Insurance – especially for fire, or natural disaster – is the one cost that is soaring and killing finances of homeowners, who violate their terms of mortgage if they don’t pay the Insurance (ransom) Rates. How could this be overlooked in this article?
Can you imagine the costs of the poor folks in the California Palisades fire area to rebuild? This is probably one of the reasons only a few homes have been started of the 1000’s burnt to the ground. These costs are being covered by our fire insurance, so what does that mean to the rest of us not living in the area, our rates will be going up, to cover these ‘ghost taxes”. The politicians of the state blame the ‘affordability’ crisis on the federal government, they need to look into a mirror, understand what is really happening and dump the BS!
I bought a 8×20 prebuilt shed and had to buy a house building permit for several hundred dollars because it was 20 feet long! I didn’t know about the regs that said it needed to be 5 feet from my fence, so I paid another $200.00 for the shed building company to come back out and move my shed 8 inches more away from the fence.
Trump says he wants Americans to own homes again. Well, Mr. Trump, fix this! And did I read correctly, that you have get a permit to cut down or plant a tree on your own property in CA. ? WTF? In the last year I’ve planted 6 trees on my 1/4 acre lot, in TX. I didn’t ask anybody or tell anybody. Thats one law I would be breaking regularly. Do they need permits to grow vegetables to eat too? Screw CA, along with NY and IL.
“Red tape” is a menace to all aspects of American life.
As a local government administrator and land developer for more than 30 years, I can state that the problem is not as simple as the HBA makes it out to be. The “ghost tax” isn’t regulatory greed because that fee also covers sewer, water, and road expansion so local residents aren’t paying for the new growth.
Personally much of the blame lays squarely on those controlling the land the developer needs. Everyone wants to make bank on the deal.
It is not only regulatory costs which add to the cost of a home: it is also time; time loss incurred by these regulatory requirements; the second is inflation; product and material costs have driven building costs out of sight. Building codes have existed for a long time. Why top the codes with regulations? Thus the added costs.
Greed, power and money (three EVILS that run through the veins of Democrat and RINO politicians and literally controls them. Democrats specifically are responsible for creating ENDLESS NEW taxes AND RAISING current ones to levels unheard of ten, twenty or thirty years ago. This same no common sense, insane Democrat blueprint includes ENDLESS LISTS OF UNNECESSARY REGULATIONS, WHICH CRIPPLE home building and prices homes out of reach. ALL THINGS which Democrats don’t give a damn about.
Their defense – “We must protect our new voting base, ILLEGALS, at all costs. Using TAXPAYERS MONEY, we are 100% dedicated to house them, feed them, give them driver’s licenses, and everything else they need, including hiding, defending and protecting them from ICE. Every ‘undocumented’ immigrant that gets deported means one less Democrat vote in all future elections.”
GONNA TAKE WORK – BUT WORTH IT!!!
OK, I agree there is a ghost tax, but the largest contributor to the loss of buying power is the Ponzi scheme of the Federal Reserve which is a private banking corporation – not a federal dept. The Federal Reserve creates money and loans it to America at interest then America uses inflation to reduce the debt. Inflation eats away your standard of living. One of the greatest learning tools was a video on you tube called Money as Debt. Your standard of living has been stolen and can’t be recovered. Without Trump it would only get worse – thank God for Trump!
Hi!
Thank you for all the valuable information you share with American patriots! After a lot of blood, sweat and tears, including many joint surgeries canvassing door to door across the country to save our great country, working hard 2016-present off and on, I saved $30000 & almost was able to purchase my house until 2020 election fraud. That being said, now only $20000 and I live in Florida, it’s impossible to afford a small home here. the cost are still skyrocketing with huge new developments being built. Loosing my rental during Biden admin, I rent a room and although in a great neighborhood, I’m miserable. How can seniors, 66 years old, obtain the American Dream of home ownership?
Let’s also read about the massive corporations that are buying up properties, controlling building and then keeping costs high for their profit. It is rare that independent builders get in on the action these days. It is major big businesses in control of housing across the nation. That must be stopped.
Sad that both examples here are from blue states…..
I especially had to laugh at the mention that NYS should consider cutting the red tape regulations that they add to everything related to property changes from how to sell the property and how the new owners are encouraged to change the former variance use of the property, to requiring new developers to upgrade everything on the property that should have been done by previous owners. All done in the name of “making” NYS a “Safer better environment” for future residents. The only future residents, NYS is encouraging is a flux of illegal immigrants, whom NYS is funding, without taxpayer approval, by creating short term benefit programs run by designated so-called nonprofit agencies headed by some new created LLC. Scamming/skimming the funds while providing the minimum of service benefits to those encourage to come to the NYS. That’s why they were so secretive about all those illegal immigrants, that they claimed were sent here by Texas despite already prearranging exactly which individuals came to NYS. The groups that were sent to the local Hotel in my neighborhood, were dropped off, without warning to the local authorities ( another false claim–they just forgot to past on enough bribery money to look the other way) Us locals, who actually questioned and actually visited the facility saw the reality of how “well’ was the aid given in getting these individuals assimilated into the path to citizenship—there was no aid to get any of the individuals documentation to apply for work permits/ proper Identification papers–any food given was pre-packed meals that offered no appeal to the being fed–ti definitely wasn’t hot meals– and no supplies for nursing mothers or baby care products.
What is most aggravating about this, is that when one as a concerned citizen raises questions about this fake show of piety and the negative effect on the neighborhood, you are treated as the negative person who should be silenced. I am not staying silenced anymore, and not accepting bad behavior anymore.Staring with my local authorities
What is going on with AMAC, the articles today are avoiding the biggest news facing USA today? Venezuela should be on all of our minds.
The permission or ghost tax in addition to state property tax, property home insuranace and cost of home repairs/upkeep add up to big-almost impossible of owning private property. What happened to owning private property when we are always charged state property taxes?
Is this Tax nationwide for homes?
I wonder if most folks realize what BO (Obama) DID to ruin ‘Housing’ with his ‘Affordable Housing Bill’. Clue: All Dem Bills are named THE OPPOSITE of what they REALLY ARE!! Do folks realize (it took me a long time…) that the Feds are paying $$$ to States for ‘developing Apartments, instead of Houses’. But THIS WAS A DISASTER! because the ‘brand new apartments’, built like the tenements in NYC that end up being rat-infested and uncared for, COST AS MUCH AS ‘HOUSES’ USED TO COST! And THAT THEN DRIVES UP THE COST of HOUSES, which have much more Sq. Ft. and Land!!! And NEITHER are ‘affordable’!!! to ‘low-income’ people anymore! while the ‘States’ are getting $$$ from the Feds that they then use to prop up their DEI and ‘Green’ stupid plans, and fight against Republican plans to IMPROVE THINGS, instead of fighting to ‘improve’ the lives of their Citizens!
But NO one ever mentions THIS PROBLEM! that ‘started‘ this MESS (not like it wasn’t bad enough! already.) And Apartments STILL keep going up all over – and I don’t know if Republicans are even AWARE that BO DID THIS TO America! But it needs to END!
And I just want to say that ALL OF THIS MADNESS hits HARDEST on our Youth trying to ‘grow up’ and ‘take responsibility’, and EVERYTHING IS OUT OF REACH FOR THEM! But it ALSO hits our Seniors who have but a very limited SS Income, and didn’t have a job that had ‘a pension plan’, like all Govt. employees HAVE! that WE (the Taxpayers) PAID FOR THEM TO HAVE! or even made enough to pay into an IRA, after Taxes.
And, fyi, many Seniors live in ‘Mobile Home Parks that are ONLY FOR people over 55’. Good, right? NO!!! SS doesn’t ‘go up’ with everyone else getting ‘raises in pay’ and all the ‘benefits’ for ‘no tax on tips’, and ‘parental benefits’, etc. So with everyone UNDER 55 getting so many ‘new tax benefits and higher pay’, Seniors GET NOTHING – yet all our Utilities, Gas, Food and Dr. Bills are just as HIGH as everyone else’s, while our ‘income’ remains as low as it has been for a long time! and doesn’t go up enough to even cover our yearly new Property Tax Increase, not to mention our annual Rent Increase! (which I believe should be unlawful without even ‘a cap’ on it! when a home mortgage DOESN’T increase every year, and eventually ENDS, and sets you FREE! Not so here.)
And included in that is our ‘Space Rent’ we pay the Park – that keeps increasing every year by10% from the prior year! We OWN the Mobile Home, but our monthly ‘Space Rent’ that started out at $500, is now $1000+, and we have to pay ‘Property Taxes’ of $1200+/yr. on our Mobile Home that we bought for $25,000 and was built in the ’70’s. And the State ‘bases’ that Tax on THEIR assessment of the ‘Property Value’ – which the State VALUES FAR IN EXCESS of what anybody can actually GET for these now very OLD and dilapidated ‘tin boxes’ we call ‘our Home’. And people get to the place where their ‘income’ doesn’t MEET their ‘Rent’ expense, and they have to just ‘move out’ and leave their only possession in Life BEHIND – and the Park then ‘gets it’, and finds a new sucker ‘owner’, and the Park gets the $$$ from the Sale, and gets the $$$ from the ‘new Renter Rate’ that was higher than before! And the Senior gets NOTHING – and if they don’t have a relative that will take them in, they end up just ‘on the street’, in their 70’s – 90’s, as part of the ever-growing trend of ‘Homeless’ people! while the Park profits from their Misery! Who will HELP US with THIS PROBLEM!?? because ‘that day’ is fast approaching; and when one of us dies, the other’s SS Income will be reduced by about ‘half’ – and we can barely make ends meet NOW – so just THINK of what it will be THEN! We are very frugal people, but you can’t get money out of straw!
And I’ve never heard of ANYONE NOTICING our plight! if they’ve EVER wondered just where all these ‘Homeless’ keep coming from, especially when we see so many ‘old women’ among them. Not everyone is as Rich! as the Somalis O-Biden brought here and GAVE THEM HOUSING and everything else! and now THEY’re $Millionaires! and WE (whose Taxes PAID for them to BE HERE) are poorer than ‘the Depression’. And I haven’t heard of anyone ‘caring’ about THAT! All we can hope for is that we DIE soon before that day comes when they kick us out of our own HOME, and then just snatch it away from us, with all our furnishings! and make themselves RICHER off of our LOSS. (You see, in our Park, ‘homes’ are going up for ‘sale’, and sit there for years. But the Park collects ‘rent’ until you provide them with a ‘new buyer’ who starts paying rent, and IF YOU CAN’T SELL IT, you are STUCK PAYING THE RENT, unless you just walk away from your Home you OWN, because you can’t pay the ostentatious ‘space rent’ anymore.
And I doubt very much if very many folks are at all AWARE of this! We weren’t either!
Commodity pricing of just about everything has led to the massive inflation for materials to build; during Katrina commodity buyers took trainloads of materials and warehoused them to leverage the price increases leading to them making several times their money on the commodity market they manipulated by their purchases. Just like Wall Street buying blocks of homes / apts. they create the shortage and then yield the commodity spike created thereto. Just as multi-family and multi-incomes have inflated the market by higher pricing in those created single family homes that aren’t single families. Take away the abuses and the prices likely will be forced to go down as the market will NOT allow the “rich” to manipulate the market. Along with the removal of multiple and piggybacked regulations to one simple permit to include all necessities to build and as few inspections as possible THE REVERSE OF WHAT NOW EXISTS.
Government is the cause of much of our costs. We need to cut out the hundreds of middle-men who steal our money for their benefit. We need Elon back in the White House!
Don’t forget how democrat Barney Frank and the democrats who were in charge of Housing intentionally collapsed the housing market by artificially driving up the price of housing for financial gains and they’ve done it again under 8 years of terrorist Obama and the 4 years of terrorist Obama and his puppets, Biden and Harris.
The named violaters in this article have one thing in common, and the voters in those states just keep voting for Democrats. You get what you vote for.
That’s way we have always bought an older model home not a new one. They’re a lot cheaper.Of course, sometimes they need a lot of repairs…