In Michigan, regulations contribute to high housing costs

Michigan has a housing problem. There were 46,904 housing units permitted in the state in 2005. But only 20,983 permits were issued in 2022, less than half that number.

The decline may explain why housing has become more expensive.

Household incomes have increased over the years in Michigan, but the cost of a house has gone up even more. The national median housing price went up 294% between 2000 and 2022, according to the Federal Reserve Bank of St. Louis. By contrast, the median household income increased by 77% over that same time.

Inflation is one factor behind the rising cost of housing, and it is beyond the control of state officials. But regulations, many imposed at the state and local level, add almost 23% to housing costs, according to the National Association of Home Builders.

The Mackinac Center for Public Policy illustrates how licensing requirements affect housing. Many occupations involved in building and maintaining housing require licensing. The state’s many occupational licenses increase costs to the consumer.

If a homeowner wants concrete poured, a hired contractor must have a license. The contractor must have 60 hours of training. The contractor also must take a residential builder exam, or a maintenance and alteration contractor exam, or have a military waiver. This person also must pay a $70 fee for the license.

If a homeowner wants to hire someone to build an asphalt driveway, by contrast, no license is needed. Other housing-related occupations, however, require a government-issued license. These include painters, carpenters, insulators, and tile and marble installers. People who lay wood floors, install siding, or add a new roof also need a license.

Suppose you want to get professional help for other kinds of housing work. In that case, your contractor does not need a license: drywall, sewer and septic, plaster, paving, carpeting, vinyl flooring, fencing, awning, and house moving.

Health and safety concerns may appear to drive the move to create an occupational license, but that is not always true. Sometimes the people who currently work in an occupation ask for a licensing regime as a way to keep newcomers from coming into the marketplace.

Licensing does not just affect homeowners and new construction. Landlords often increase rent to account for the costs of regulations lawmakers impose on rentals. If the “Renter’s Bill of Rights” were enacted into law, renters would likely end up paying more and perhaps have fewer options in housing.

Michigan Capitol Confidential has previously reported on how the legislation would increase rental costs. Readers who wish to reach their legislators may look up contact information on the Michigan House and the Michigan Senate websites.