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Mike's avatar

“My point is that to be an explanation for the productivity stagnation in construction, regulation needs to be a much greater burden on construction than it is in other sectors, and it’s not obvious that that’s the case.”

This assumes the cost of complying with regulation is same for construction as for other industries which I do not think is the case. For a manufactured good or an large online service, the cost of figuring out how to comply is amortized over 1M or even 100M units. The impact to the bill of material is still paid by every unit but the substantial costs of understanding the regulation and engineering a solution are not as they are amortized over the whole production. For construction, the cost of understanding and figuring out how to comply has to be done for every single building.

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Scott Baker's avatar

Regulation compliance is absolutely harder for MF construction than for single family homes. Furthermore, single family homes have an inbuilt advantage of being more generally acceptable, at least in neighborhoods already zoned for them, which is more often the case than for MF construction, which often requires multiple layers of approval (here in New York City, that means the dreaded ULURP - Uniform Land Use Review Process - which can take a year or more, and pre-ULURP, which is basically unlimited, or until somebody's will breaks). In New York City, a major set of LSRD (Large Scale Residential Development) buildings was already at the foundation laying stage when it was challenged by a new New York Constitutional amendment guaranteeing clean air and water. This amendment wasn't voted in by referendum until AFTER the foundations were being laid, so neighborhood groups convince the judge to suspend construction while they argued the projects (3 towers, 4 developers) would violate the new amendment. While this delay takes place, the developers are losing millions, and one has already sold the lot to another developer (i.e. their will was broken).

Extra regulation is inevitable to some degree in a growing population, especially in cities - which residents of SF home communities fight like dogs not to join, in spite of the inefficiencies of suburbs over time - but when almost all groups are NIMBY, including many of the politicians elected, it's hard to see how anything developers or construction professionals can do, can counter that.

Also, even SF homes contain the result of countless regulations going into every component and facet of a home. Not all of this is bad: today's homes come with built-ins that weren't available in the 1960s, as well as safer electricals, plumbing, etc. (also, MORE outlets for all the stuff we plug in now). But it seems like some things have actually gotten worse: hollow doors instead of solid wooden doors, oversized windows and column-free rooms, weakening homes in the event of storms/hurricanes (are these more frequent due to climate change now, or are houses just built worse now? This documentary makes a case for the latter: https://www.thelasthousestanding.org/).

No one would take the chances workers took when they built the Empire State Building in 18 months, today, and such towers are both more complex and more regulated. It's certainly more than 0.5% extra time, when you factor in all the supply chained components.

I see there was a very sharp dropoff in regulations in your Figure 5 about the Federal Registry, in 2016, at the very end of the measured time period. Did construction productivity jump after that?

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