The greedy rich continue to force middle America to its knees; Fatcats get rich while middle America goes bankrupt; insert misleading hyperbolic statement here.
This is a topic I’ve wanted to write about for some time, but it’s seemingly never a top story. It’s always in the background, a false assumption that everyone accepts as fact. So today I will take the personal liberty of shining a light on the free lunches that Americans have been enjoying, and paying for, for years.
If you ask most Americans about finances and the cost of living, a long string of blame and complaints will follow, and will likely include the cost of home purchase as proof of whatever accusation they are making. I mean, just look at the cost of housing. From 1994 to 2004, the median cost of a new home steadily rose from 130,000 to over 220,000. And that was before prices really skyrocketed in the boom(It jumped another 20k in just one year)! Clearly that means that the richest 1% are making $100,000 more on every house they sell. They are stealing from Americans and keeping all the profits for themselves, probably in some account in the Grand Caymans where they don’t even pay taxes!
I am a structural engineer, and my career is deep within the homebuilding industry, so please allow me to pull back the curtain. Every industry has been hit with increased government regulation over the last several decades, and mine is no exception.
If you bought a home twenty years ago, chances are an engineer never even touched the plans. A builder just built a house following rules of thumb that had been developed for decades and centuries. An architect was likely not involved in the process either. And many cities didn’t even have a building code that had to be followed. You showed up to the city office with a front elevation and a floor plan and walked out with a permit.
Today, there are teams of college educated, government registered architects, engineers, and designers that certify every plan that breaks ground. They have to be familiar with thousands of pages of code that reference tens of thousands of pages more. Everything is governed by a code.
These requirements make our houses immeasurably safer and better, but it isn’t free. The cost of my time and training is not free, and the cost of building a house that meets these stringent codes is even higher.
Every city has requirements for anyone to pull a permit and build a house. They have certain codes that builders must follow, and they have “Design Guidelines”. If you’ve ever driven through a neighborhood from the 80’s or 90’s, you see a lot of rectangular houses with gable roofs. They are ugly, and boring, and amazingly cheap to build. You do not see many new neighborhoods with this level of simplicity, and every year you see less and less. This is the result of design guidelines. Cities require that the outside appearance of a house meet certain minimums – a set percentage of stone/brick, a subjective use of design elements to provide variety, certain size requirements for front porches, and on and on. This is to reduce the cookie cutter stigma that has long dominated my industry. Well here’s how much it costs you:
One of my clients is a builder who constructs the exact same house in multiple cities. Each city has different design guidelines, so the builder changes the exterior appearance for every city. The cost to add stone, fake dormers, mass breaks and other design elements is nearly 15% of the cost of the home! In this specific case, the cost of building the house rises nearly 30 thousand dollars for the exact same floor plan. The builder doesn’t make any of that $30 thousand, that’s purely in the amount of materials and labor that each homeowner is buying with their house.
Of course the base house, the one that’s $30 thousand cheaper, is a complex house to start with, one that is already far more expensive than any 80’s cookie cutter beauty.
I can continue on, to highlight the permit fees, plan check fees, impact fees, etc. that builders must pay to the city government for every house they build (this can easily exceed $20,000 in many cities). I can highlight the increased liability that these companies face. I can discuss the worker’s compensation payment increases. What I can’t do is show you the extra profit that these homebuilders are making – because it isn’t there. Do they still get rich? Yes, some of them do, the same as they always have. But it’s time that people stop blaming the increasing costs on the 1% and greed. It is the homeowners, the communities, the cities that are getting the return on the higher costs of home investment.
Now this is just one example of many. The automotive industry suffers from the same issues. Increasing regulations, increased safety requirements, increasing fuel economy requirements, more expensive and extensive testing – they all add to the cost of a car. The automaker still makes profit like they always have, but with all those extra dollars the buyer is getting a car that is safer, nicer, and much more fuel efficient.
Pick an industry with rising prices, and similar examples can be found. There’s no increase in the greed of the 1% driving this new economy. No secret conspiracy to steal from the common man. It is the greed of Middle America, with its demands for bigger, better and safer, that is the true source of the increased cost of living.
Yes, that is correct. The greed of MIDDLE AMERICA is to blame.
As I see it, we have two choices:
-Go back to the good old days. The days when houses fell over in earthquakes. The days when cars weren’t required to have silly things like airbags or crash testing. The days when cancer was a death sentence. You know, the good old days.
-Accept that better things cost more and enjoy the highest quality of living that has existed in the history of the world.
It will always remain true, there’s no such thing as a free lunch. So let’s not complain when the check comes.