You libertarian, there is no way in hell it's
only 500 pages. No, don't take advantage. Ever
wonder what really happens behind the scenes
in construction, real estate and development?
We pull back the curtain on the new home construction
industry the real estate market and the trends
shaping it all Discover the stories insights
and expertise behind the process of building
a new home Join us for trust the process podcast
and let's build something great together Welcome
back to trust the process podcast where we talk
about real estate market new home construction
and everything in between. Today as we talk about
those in -betweens we're going to look at codes
and regulatory standards that are affecting the
build process both here in Nevada as well as
nationally. We're going to look at the Nevada
ones today and kind of talk about that, but we
know that it's happening across the entire country.
Everything is changing. Builders building standards
are changing and the number of codes and regulatory
standards that are being put in place. How that
affects things and and what what that means for
us as a builder and for the future of building
as a whole. Yeah, it's um, boy, what a lead and
we're gonna talk about building codes and regulation.
I think I think only I can get excited for that
episode I tune in. So I what I what I wanted
to talk about today was on the heels of our last
few episodes, which are have a somewhat of a
negative tilt and a negative tone about when
it pertains to codes and regulation, I feel like
I might be a little jaded and even I might lose
sight. in what codes are for and why we need
them. I read a great quote. I can't remember
who it was attributed to, but he said codes are
painted in blood. Actually, I think the quote
is codes and regulations are painted in blood.
It's dark, right? And when you think about why
we have regulation and you look at maybe other
countries or other eras in history when we had
zero regulations and how fast fire swept through
houses and how fast cities burn and how homes
could fall into the coastline and how things
would just fall over or before streets were regulated
and air travel was regulated. I don't even think
twice to get on a plane because I trust obviously
the regulations and I think there's an argument
without going too far down the rabbit hole that
in a true free market the market would regulate
itself, right? You would be a competitive firm
by putting out a quality experience or product.
However, because of barriers to entry to certain
industries, you might find industries dominated
by one or two players. Therefore, you need a
third party, an adult in the room, i .e. government,
that regulates it for you. Because I can't go
start a jetliner company tomorrow. Although don't
put it past me. That's true. But I think don't
give me any ideas. But if you look at industries
that are controlled by a few players, and that's
honestly largely every industry, look at the
automotive industry and how many cars there are
versus how few players there are when you really
look at, oh, well, Jeep is part of Chrysler,
part of Dodge, part of ramp. It's Stellantis
and you think all those cars fall under that
umbrella and everything that Volkswagen controls.
And so you think about how few players there
are in any industry. And in our other episode
where we talked about how many publicly traded
home builders there are just nationwide and how
many homes they put out and how much they can
corner the market. One large publicly traded
company in our market controls about 20 % of
new rooftops, and I won't name them, but it starts
with a D and ends with an R. And they control
about 20 % of our market. So yes, the free market
should regulate everything, but that's with the
assumption that there's enough choice in the
market to allow customers to vote with their
feet. and to say, well, you don't build a sound
home, so I'm going to choose this other home.
So I understand the need for regulation. And
I do love the idea that homes are better today
than they were 30 or 40 years ago. And I appreciate
the leaps and bounds we've made with energy efficiency
and how much more earthquake resistant, fire
resistant, weather resistant, age resistant our
structures are today versus even 40 years, 30
years in the past, let alone 100 years in the
past, where the adage of they don't build them
like they used to, which makes the hair on the
back of my neck stand up, because tear apart
at home built from 1955. That thing is built
out of cardboard and paper. That is not - I'm
grateful they're not built like that. I'm grateful
they're not built like that. You could punch
a hole in the siding and your fist would go through
into the bedroom. Sometimes they didn't even
have insulation. So we're looking at the other
extreme of it. I understand and I have to take
a step back and breathe as to give myself context
in terms of why we have these regulations and
you can't count on the free market to iron all
those hiccups out. Take a trip to a third world
country and get in a 1984 Sentra that is your
Uber driver and drive through those streets and
alleyways that are not regulated some are seven
feet wide and some are 70 feet wide and the structures
that are built over top of each other with the
laundry hanging out and you think Well, I don't
want zero regulation because this is what it
looks like And just the standardized right there's
this just to know that that there is a general
safety component that's been considered before
That's right. That's right. It does give you
a great sense of comfort to know that so Well,
we're doing it temporary while we're dealing
with the temporary pain of building the structure,
which is a nine to 18 month process. We have
to think that structure is going to be there
for 100 to 200 to 300 years. We don't know. And
there's homes in England that are 500 and 600
years old. So I understand why. And I, and I,
I want to, I wanted to give our viewers that
context that I, I'm not anti -regulation. I love.
the idea that we have better building standards
today than we did even 20, 25 years ago. So that
being said, I want to trash the coast for once.
I think that no, I think that's a good way to
make that. I mean, it isn't an anti -regulation.
It's a brutal crossing. It is. And I think what
does get a little frustrating is that there's
never a push to cut any regulations at all. That
is so unpopular. And there's really no will In
the regulatory agencies, because by doing that,
they're shrinking their footprint. So the Department
of Building and Safety wants robust codes. It's
job security. And most home building permits
are minimum of $5 ,000. You really could go up
to 12, 15, 18, $20 ,000. And you look at a municipality
like Clark County, now it's broken up. Sometimes
the City of Henderson gets that permit fee. There's
always County always collects a certain impact
fee, but there's always something collected on
every rooftop. And we know that last year we
built around 12 ,500 rooftops by 10 ,000 and
my math doesn't even go. My mind doesn't work
in numbers that commas that long. So I think
that we have to remember that there are some
perverse motives that people don't want to see
regulations, any regulations roll back. In fact,
They have a vested interest in increasing regulations,
and I feel that certain agencies locally might
exist for that purpose, and you might see them
growing for the sake of growth. So I thought
of something last week that I found exceptionally
clever, but you might not. Regulations, i .e.
building codes in our industry, is kind of like
a garden, and once you plant it, the garden just
keeps growing and germinating a bigger garden
right and of course it wants to grow bigger it's
just naturally plants and weeds want to grow
it's not all crop it's just growth so if you
have a garden and you're watering it it'll grow
it might not be the stuff you want so you could
make a case for that garden and say it's choked
out by the weeds and that's kind of how i feel
that many times when i'm scratching my head or
Beating my head against the wall quite frankly.
I wish I was only scratching it. It's not It's
a lot of that. It's it feels like regulation
and regulation for regulations sake and I think
that that's where my biggest frustrations come
from because I Believe in the spirit of regulations
and I believe in the spirit of building codes
But I did a little exercise on our local Clark
County building codes and what is referenced
on a general set of stamped blueprints that I
submit to the city. And without boring our readers,
I'm going to bore them. 2021 International Building
Code, 2018 Universal Mechanical Code, 2018 International
Energy Efficiency Code, 2018 International Residential
Code, 2018 Uniform Plumbing Code. 2021 International
Wildland Urban Interface Code. I don't know what
that is. 2020, we'll talk about that. 2021 International
Fire Code, 2017 National Electric Code, and the
2009 ICC, which is kind of an accessibility,
how structures are accessible to the population.
These all have to be referenced on a set of plans,
that we've reviewed these plans to these codes.
Then I did a little exercise, if our audience
is still awake. How many pages those codes encompass?
Total. If you had to just guess all those codes,
how many pages, if we printed them out, how many
pages would all those codes take up? How many
reams of paper? Yeah, I'd say probably 500 pages.
I mean, if you're looking, it would sum up to...
You libertarian, there is no way in hell it's
only 500 pages. There is no way it is four thousand
nine hundred and twelve thousand pages of code
thousand four thousand nine hundred twelve pages
of code. That's pages of code. If you print it
out, all the codes that I just mentioned, mind
you, those are the codes in their entirety. All
of our codes have a parentheses that says with
local amendments. So twenty twenty one international
building code with local amendments. So that's
saying, yes, all of these codes, we're also going
to amend it to our codes that pertain to this.
So the uniform plumbing code is something that
is observed nationwide. But then Clark County,
our local jurisdictions, your local jurisdictions
are going to have additional overlays and amendments.
On top of that, I would imagine that's another
three, 400 pages. We're over 5 ,000 pages of
code. I thought I was thinking big when I said
you were like gosh there's because if I didn't
have this when we were talking in our previous
episodes I would have thought it was on the order
of three to seven hundred pages worth of code
and I just didn't really put my head around it
until I pulled up a set of blueprints and found
that all of these code books are referenced and
it's nine by the way it's nine code books and
I thought wait a minute if it's nine books of
code. I mean, pages of code is that and that's
how we come up with. I mean, for instance, the
International Building Code is 832 pages. The
International Wildland Urban Interface Code,
which is a code for when properties are built.
Yeah, it's a face -only regulator, good luck.
That code is for basically growth impeding into
nature. And it's 78 pages on codes related to
your building this subdivision and on the other
side of it is nature, desert, forest, whatever,
nothingness, whatever it is. And there are 78
pages of code for that and certain things that
you need to address. So it is bloated to say
the least. So although I believe in the spirit
of the codes and I know that we need to be a
well regulated industry. After all, people live
in these structures. These structures are meant
to be here. It's not a coffee mug. This coffee
mug, it's inconsequential, right? If the coffee
mug fails, terrible, throw it away, get a different
one. It's not meant to last 100 years. And they're
also major investments and their insurance liabilities,
right? Every home that's built needs to be insured.
So when you think of it under that context, is
this growth encodes part of What has helped our
real estate become such a bulletproof asset?
Because it's presumed that when they're built
to 4 ,900 pages of code that they are going to
be here for a while and that that investment
is safe. Is that part of why we've seen homes
go from a place to live to an asset class in
really two generations? Because they were not
an asset class. A home was worth what it could
be either lived in for or rented for. It was
never considered a speculative investment until
probably maybe the 70s, right? The idea of a
landlord being anything more than, oh, my grandmother
left me this home in her will, and now I rent
it to a tenant. And it's worth the $500 a month
that I get from that tenant. That's what it's
worth to me. And then it's worth to someone else
what it saves them in rent and housing policy.
It became something that was a utilitarian good
to something that became a wealth creation juggernaut,
honestly. And I just wonder if, and that's why
I wanted to be introspective and fair to say,
is it part of why there's such wonderful wealth
generating machines? Is because when insurance
companies see 400, 4900 pages of code, they know,
okay, well, this home, and that's when you look
at insurance rates, one of the single greatest
Factors for dictating insurance rates is the
age of the structure not the size not the location.
It's the age of the structure It's just presumed
that there's less neglect but also that they
were built 4900 pages of code different standards
great way to sum it up succinctly. So I think
that When I look at it through that lens, I try
to be a little fair to say yes, it is frustrating
Do I think we could cut 4 ,900 pages of code
down to, I don't know, 4 ,800 pages of code?
I'd settle for that, maybe. And I think it's
only growing. That's what worries me is that
I remember building to 2014 International Residential
Code, and now it's 2018. And last I heard, we're
going to start adopting 2021 International Residential
Code. And then there's other things that best
laid plans, right? There's a push for energy
efficiency and it's very important completely
understand it Do I wish the free market handled
that more do I wish? That the free market valued
energy efficient homes and then would pay accordingly.
We didn't have to legislate energy efficiency
into homes Yes, is that is that a luxury a lot
of home buyers might have when their budget constraint
probably no But the buyers end up paying for
it anyway, and if you look at a lot of the regulations
from 2010 onward so a lot of the low -hanging
fruit Needed to be addressed certain are values
in the ceiling and just insulation in general
Window our value things like that that all matters
and it does However, if you look at new regulations
because they're never gonna pull back environmental
and energy efficiency regulations They only add
to them since 2010 those the new regulations
on the books. I can't remember which Think tank
did a study on it and it's worth the researcher
that did it so I hold it with you know, you never
You can pick these things apart, but it's estimated
that new energy efficiency pushes are about 86
years worth of time to recoup the added cost
of those initiatives. So it's definitely a thought
that that's why I said best laid plans. The intentions
are there and I get it. But when you look at
an overall cost, what is the functional? lifespan
of a home before it would have a substantial
renovation anyway. Taste change, functionality
changes, zoning changes, now it's allowed you
can do a two -family home there and just tear
it down and put a two -family house. So things
change and is that beyond the average lifespan
even of a home before you have gotten back to
zero on that energy investment. So there's definitely
an argument on both sides for it. And when we're
in an affordability crunch, it feels a little
counterintuitive to keep increasing to say, why
is a home built to 2018 standards no longer relevant?
Do we really think we've come that far in technology?
What has changed that? The cost that's associated
with each of those. So while we're not building
homes like we were, they're also not the same
cost that they were for that building standard
that we're now having to be, that we have to
meet because each new code assesses another...
You know X number of there's a multiplier on
a different product type or it's a different,
you know, right? I don't know engineer that has
to look at it or whatever. Of course another
set of cost slows it down Even if nothing else
it just slows it down and that's more end of
the day that home is gonna cost more to put out
to market because it costs you more to build
and so are we going further from from bridging
our avoidable short answer is yes, I mean You
can only change two things right your inputs
and your throughputs To get to the same output.
So if your inputs are higher, eventually the
market will. So you'd say, well, it doesn't a
great example. In 2020, it became mandatory in
the entire county to have fire suppression, active
fire suppression, so fire sprinklers, whereas
it was a Henderson only, which is one of our
suburbs, a Henderson only just that that jurisdiction
was the only one that required sprinklers and
then all of Las Vegas and Clark County, which
represents probably. 75 % of the Las Vegas Metro
population so with this was a new thing for us
and and it added about 12 to $22 ,000 worth of
cost hard construction costs for me hard construction
costs to the cost of every single house even
a entry -level home 10 % below the median sales
price it added that to that home because there's
a certain just to do fire suppression is $10
,000 and then the size of the home starts to
factor in but just doing it as $10 ,000. And
then it costs more, you know, as it goes up in
terms of square footage and how much suppression
you're installing, but there's a certain kind
of action potential. So to every home, every
new permit from 2021 onward. So when you look
at that, yes. It did automatically mean that
homes became $15 ,000 more valuable. No, but
what it does is put supply constraints into the
marketplace and then the market adapts quickly
and says, so builders like myself, just you add
it right on to the price. The first people to
feel it are new construction buyers because the
bill is just going to say, you know what it is.
I was already going to get 1 ,750 ,000. I'll
get 1 ,765 ,000 and someone will still pay it.
And it puts that upward pressure on prices. That's
one example. so if you think about what that
looks like and that you're using a million dollar
home as the that's right as a percentage of that
take that back to the percentage of 375 versus
390 or the $400 ,000 entry -level home what that's
a huge margin now you're the same number to that
greater percentage and again that buyer is who
that's right and it's best laid plans the intentions
are pure They who wants to lose their home in
a fire. Nobody wants to lose. And then there's
an insurance piece that that's right, that there's
a savings that comes with insurance. So now is
does it come up? However, if you talk to actuarial,
or actuaries and insurance companies, they see
it as a net zero most that I've talked to, because
now you have all this running water in your ceilings.
And water loss is a bigger loss leader for insurance
companies and fire. So it's actually about a
zero. Like a zero, zero sum game. Yeah. So as
using that as an example, just to, it's to me,
that's just a great relatable example. And when
you look at that times 4 ,900 pages of code,
you can imagine why it's challenging. So I get
it. And I understand we need codes. Our first
building codes. I have to sprinkle in a little
bit of history, about 1700 BC, Hammurabi's code.
We're just going farther and farther back in
time. There were codes for construction standards
and the penalty for building a home that was
substandard and collapsed or killed someone was
death. So, thankfully, I feel over - I feel over
-regulated, but I don't think I'm as regulated
as Trust Home Builders' Hammurabi stuff. Yeah.
So I understand and I just feel like there's,
can we thin it down a little bit? Can we thin
down the herd a little bit and get some of these
off the books or send them a little bit? Literal,
the weeds start choking out the... The weeds
start choking out the garden because you've made
this fertile soil. So that's one regulation breeds
two, two breeds four. Are they just regulations
for the sake of regulation or how they really
move the needle in terms of the end quality of
the home that's being built? Exactly. And how
much of that would have been market driven anyway?
So that's kind of the bounce, right? Maybe people
would have paid more for spring homes, the sprinklers.
And what kills me is that we have all this housing
stock. Las Vegas is a relatively new market.
When you think about most of our growth has been
since 19 Jamie, right? So a lot of our housing
inventory here is under 30 years old. And you
look at the standard of a 1995, the home to 2025,
the home wildly different, but we have all this
housing inventory and housing stock that is Inferior
in the eyes of these codes. I mean technically
right? So why is it okay for? This is two or
two point three million people here Why is it
okay for two million people to live in this squalor?
Right, right You mean you don't have our 19 and
you're come on. How do you even get up on how
do you get out of bed? So there's just a lot
of a lot of that pun pondering that I do to think
how much of the free market I've taken care of
And how much are we worsening those increases?
Yeah. And we haven't even talked talked about
zoning codes and land use codes. And that's something
that I have a really hard time reconciling when
you have old outdated zoning laws that favor
suburbia that favor big cul -de -sacs that let
kind of the market decide what the market wants
instead of this city. Over regulating it and
we'll talk about that and maybe in our land podcast
and our land episode But there's these are just
Department of Building and safety codes. This
is not the amount of codes conclusive list of
codes That exist in our town. This is just for
new residential construction. There's no ADA
codes in here Nothing for commercial right because
these are residential only structures So there's
a ton of coats and there's a ton of land use
coats. We have something odd in Henderson and
our Henderson suburb of a hillside overlay so
if a certain percentage of your parcel is subject
to The hillside then you have to do 3d maps and
renderings and you have to say how many Desert
scorpions are going to be displaced you have
to do an environmental study and you have to
say oh this is I'm clearing off 18 dead sage
brushes. That's the environmental impact. It's
a lot. It adds another 50 ,000 and six months
worth of work to an average parcel, an average
five acre subdivision. So there's a lot of, and
that's another set of codes. So it's a lot. It's
challenging to navigate through, but we do it.
Who gains from that? I mean, I'm thinking about
that specific example. If you think about it
without getting on a soapbox, the types of people
who are writing these codes are generally not
business minded people. So they might be looking
at it from a very limited lens. They're not economists.
They're looking at it. Someone gets in their
ear and says, Henderson has some beautiful hillsides
and some beautiful mountain ranges and we need
to ensure that we develop those properly and
Again, best laid plans. Of course we want to
keep the city desirable, but maybe let the market
determine that instead of legislating it. So
something like that was just a person got in
an era of a lawmaker and it was, you know what?
That's a really good idea. I think we should
do that. We don't want unfettered development
of our hillsides. I mean, if you drive 15 minutes
outside of the city, you'll see all the mountains
and hillsides you want. We need them in Henderson.
But, and I do understand, I completely understand
development standards. When you're talking about
the other codes, again, I think it's the intentions
are there. It is not the city's job in their
mind. It's not their mission statement to make
the city marketable to make building pencil out.
Their job is to preserve the life of their citizenry
and to protect their safety. And another kind
of interesting thought, and this is way down
the rabbit hole, but the city kind of owns your
property too. You're basically in business with
your city. And if you don't think that just stop
paying your property taxes for a while. And that
house becomes theirs. So really every home that's
built, the city might see as their home. They
have a vested interest in that home as well.
It's their tax base. So they might own that house
one day if you're not careful, if you don't have
your taxes set up on auto pay. So that's, I don't
know if that's where their minds are at, but
I do feel like that potentially was where it
started to say we need regulation. We need standardization.
We're tired of deploying our entire fire crew
because someone was running a business in the
second floor of their house okay now we need
a zoning code okay you can't do that here oh
they had all these combustible materials and
there were no fire escapes and people died and
kids you know fire crews couldn't get in there
and the floor collapsed. And I mean, how many
of those do I say regulations and codes are painted
and are written in blood? You can see again,
the intentions are pure, but regulations tend
to breed regulations and codes tend to breed
codes. So I feel like that's where we let, we
opened up Pandora's box. So what is, is a sweet
spot? Is there a happy medium? Obviously. Do
I want to go to a Model of pure free market and
you can build anything anywhere and do I want
to live in a city like that Do you want to live
in a city like that? Probably not but you want
to live in a place where it takes three years
to get to get a home approved or that where there's
a stack of coats this thick just because 500
feet of your five acre parcel might have a slope
greater than 25 % and that's hillside probably
not either so I think it's just like everything
it's common -sense reform and We had a massive
lawsuit with the city of Las Vegas that it's
about a half a billion dollar settlement for
one of our golf courses that went belly up and
was sold to a developer. And the city, as the
judgment said, deprived him of his use to develop
that and his enjoyment to develop that parcel
by putting these roadblocks in to prohibit the
development starting back from 2000. Eight I
believe so is it and the settlement just came
down the line in twenty twenty four so we're
talking it was a what is it sixteen years worth
of litigation going back and forth so that's
some of the most egregious examples that might.
Maybe wake up the city to say look we have to
find a happy medium here we are growing city
were desirable city and ultimately people deserve
peaceful enjoyment of the property and that includes
improving it and making it better and. putting
it into the city itself. Otherwise, we're a city
of just raw land, and then we're not a city.
So it's, it's interesting that it's kind of a
fine line to walk, right? We want the safety
and the, you know, we want the standardization
and safety, the standards, right? All of that
that would come from we want to live in a beautiful
city. That's such a hindrance to some of those.
It is. Yeah, it is. It's challenging. So I again,
again, I do full wholeheartedly believe that
regulators and lawmakers have good intentions
when it comes to building codes. I don't think
that there's any nefarious because it's really
hard to track who benefits from it. It's just
that they're not wired that way. Right. They
do. Right. But are there some are there things
that don't make sense anymore? Right? Exactly.
That maybe the fair market would would bear out.
So I find it interesting. Yeah, it's interesting
conversation and things that I hadn't considered.
I do know that the codes are growing. I do know
how nefarious those can be. I do know that they're
all in place and challenges for a lot of things,
but hadn't really considered the the big play
on all of that. And when you look at those two
things as the The two sides of the coin, you
know, the regulations and and try to be fair.
Let's just try to be fair to say, OK, well, I
can bellyache all day long about 5000 pages of
code. But. What are what's their perspective?
Play the play, play the devil's advocate. God
knows they don't play that for me, but I'll play
devil's advocate for that. So it is interesting.
And it's something that I ponder a lot at night,
you know, before when when everything gets quiet,
you think I am building their city because cities
don't. do much building they don't do much in
the way of building right they might build some
of the municipal buildings but for the most part
cities are built by private enterprise cities
are built by developers cities are built by people
improving on their own land we are the city and
it's interesting that sometimes the city is your
biggest enemy so great so great multiple perspectives
and lots of thought -provoking topics and conversation
there so Love it. Thank you. Yes. Thank you guys
for joining us. Hopefully you learned something
today too and kind of get your thoughts going
on how those things come together and what builders
and developers are up against in terms of the
codes and the regulations that go into each bill.
Thanks for joining us again today and we'll see
you next time. Bye bye. Thanks for tuning into
the Press the Process podcast. Make sure to follow
us on Spotify to stay in the loop with the latest
insights, project updates, and everything in
between. See you next time.