The NMHC-NAHB Cost of Regulations Report found code changes over the past 10 years were the single largest cost driver to multifamily development costs. Since the release of this report in 2022, additional, significant building code revisions have been explored by policymakers at all levels of government nationwide. In an effort to gain more clarity on specific building code cost drivers and feasibility deterrents, NMHC conducted a survey of its membership.
The NMHC Pulse Survey on Building Codes and Standards was conducted from March 5 -19, 2024, and received 41 responses from multifamily builders, developers and operators across the United States. All data are available in a downloadable PDF.
On average, respondents reported that more than half (55%) of the projects they are involved with are townhouse/garden style, while a third (34%) are mid-rise and 10% are high-rise.
Respondents Report Code Compliance Challenges
Building codes and standards have an important role in the apartment sector, as they establish the minimum requirements for the design, construction, alteration and maintenance of apartment buildings. However, as government officials look to implement additional layers of code regulations, housing providers continue to grapple with increased costs and technologically or structurally infeasible requirements.
As part of this survey, respondents were asked to what extent they agreed that codes and standards related to certain topic areas caused significant challenges for their business:
- Over two-thirds (68%) of respondents agreed or strongly agreed that mechanical/electrical codes posed significant compliance challenges, followed by compliance challenges related to energy performance and efficiency (66%), electrification/net-zero emissions (63%) and fire protection (61%).
- Over half of respondents agreed or strongly agreed that codes and standards related to sustainability/green building (54%) and accessibility (51%) caused them significant challenges.
- Although 49% of respondents agreed or strongly agreed that structural codes and standards caused significant compliance challenges, another 49% of respondents reported being neutral or disagreed about the challenges related to structural codes and standards.
- Codes and standards related to existing buildings as well as those related to resiliency were reported as less problematic. The largest share of respondents for both groups reported being neutral—37% for codes and standards related to existing buildings and 63% for those related to resiliency.
Compliance Challenges Brought on By Lack of Clarity, Enforcement Inconsistencies and Increased Costs
For those respondents who agreed or strongly agreed that at least one area of codes and standards posed significant challenges for their business, they heavily attributed those challenges to a few key factors:
- Of those respondents who reported challenges, 92% agreed or strongly agreed that those challenges could be attributed to variation in code requirements/interpretation between jurisdictions. Respondents noted that interpretations of fire codes, for example, could even differ depending on an individual fire marshal.
- Similarly, 82% of respondents agreed or strongly agreed that interpretability (i.e., that codes are difficult to interpret) was a source of significant challenges.
- Eighty-nine percent of respondents agreed or strongly agreed that compliance challenges could be attributed to the effect of construction costs.
- Separately, 89% of respondents agreed or strongly agreed that building code requirements in general impact the cost and viability of construction projects.
- Respondents also largely agreed that challenges could be attributed to design issues (82% agree or strongly agree), material selection and availability (79%) as well as enforcement and inspection (79%).
- Compliance challenges were less attributed to workforce availability and training (50% agree or strongly agree; 47% neutral or disagree) or resident preferences and marketability (37% neutral and 26% disagree).
Multiple respondents highlighted Austin as a place where these issues were particularly acute, as well as locales in North Carolina such as Chapel Hill or Charlotte.
Patchwork of Specific Code Requirements Contribute to Compliance Hurdles
Housing providers are impacted by an array of code requirements—resulting in a sometimes burdensome and confusing compliance patchwork, as evidenced by the aforementioned data. In fact, multifamily builders are affected by 15 international model codes and dozens of industry standards. Given the patchwork of codes housing providers must comply with, respondents were asked about the extent to which they agreed that a set of specific code/standard requirements posed a significant concern for their business:
- Respondents were likely to report concerns with electric vehicle requirements (70% agree or strongly agree), conflicting or uncertain accessibility requirements (70%), net-zero emissions requirements/ building performance standards (65%) and use of uncertain or unavailable products and technologies (59%).
- Respondents were also asked about fire-specific measures—issues related to height and area limitations were cause for concern amongst the highest share of respondents (59% agree or strongly agree), followed by egress requirements (54%) and sprinkler requirements (51%).
- Fifty-seven percent of respondents reported they agreed or strongly agreed that issues related to significant insulation requirements was a concern; 54% cited on-site renewable energy requirements as a concern and 46% noted life cycle operations and maintenance concerns.
These requirements often drive the cost of projects, with some respondents reporting that they make development and/or building in certain markets economically unfeasible. Roughly half (49%) of respondents agreed or strongly agreed that building code requirements impact their decision of where to develop, build or invest in projects.
Latest Energy Codes Could Deter Future Housing Development
Currently, there are policy efforts proposing that jurisdictions adopt the latest energy code editions, and/or that projects with certain funding sources use the latest energy code editions, regardless of the code editions currently required. These energy code initiatives are largely driven by climate change goals, but may not appropriately balance aggressive energy efficiency requirements with housing affordability needs. In the absence of existing research on the financial impacts of these revisions, respondents were asked to provide their feedback on such efforts:
- Forty-nine percent of respondents agreed or strongly agreed that their business would be less likely to develop, build or invest in a project where the latest energy code edition was required. Twenty-two percent of respondents were neutral on the question, and an additional 22% of respondents disagreed with the statement.
- Multiple respondents highlighted the increased costs this would lead to either directly from the requirements themselves or implicitly from the time it takes for markets to understand and fully digest changes.
- Many of those same respondents raised as an important consideration the effect any policy that increases costs would have in an environment of already difficult underwriting. Increased costs could mean additional projects won’t pencil, they said.
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