Pennsylvania is one of two states where the typical newly constructed home costs more than twice as much as the typical existing home, according to LendingTree, an online lending marketplace.

Municipalities’ approaches to development and the cost and availability of land help explain why, said Andrew Kaye, who has spent almost four decades in the home-building industry and leads a residential development company that builds in the five-county Philadelphia region. Home building has gotten more expensive.

“The cost to buy ground is bigger, the cost to develop ground is bigger, the cost to build a house is bigger, and the for-sale price is bigger,” he said. “So people are getting locked out. And they’re moving to areas where housing attainability is easier.”

Kaye is a past president of both the Home Builders Association of Bucks & Montgomery Counties and the Pennsylvania Builders Association. And he currently is Pennsylvania’s representative and a board member at the National Association of Home Builders.

The Inquirer talked to Kaye about the state of home building today. This interview has been edited for length and clarity.

Q: What are you seeing in terms of demand for newly built homes?

A: Good land in good areas will always sell. It’s just a question of what profitability level and how long it’s going to take to sell.

We’ve got some ground up in central New Jersey, just outside of East Brunswick, and the demand is fantastic. And even though we’re selling houses in the same town that we sold four years ago, we’re selling for 40% more and nobody’s blinking. And in areas throughout Montgomery and Bucks County, we have the same situation. We can sell a house in, let’s say, Whitpain Township, Blue Bell for 30% more than we sold it for a few years ago, and nobody is blinking an eye.

Most of the areas in Bucks and Montgomery Counties are rate proof. If mortgage rates go to 7% or come down to, let’s say, 5.5%, that’s not going to affect this buyer. [For buyers who have a couple million dollars to spend], they’re not shying away from this market.

If we’re building product for a $600,000 or $700,000 buyer, they are much more rate sensitive. So with rates where they are now, that’s going to keep them on the sidelines.

Q: What are some of the challenges home builders face?

A: It is, unfortunately, a constant uphill battle. Obviously, there is always a limited amount of land. But when you take that limited amount of land and you start applying zoning regulations, development regulations, things like that, it becomes harder and harder.

And then add in, you know, labor costs, supply chain issues, manufacturing problems, tariffs.

One day, copper import tariffs are 50%. A couple of days later, they come back down to 15%. Tariffs on lumber coming out of Canada have been bouncing all over the board. We’ve lived with 14% for a while. Now we’re 35%. We don’t have enough domestic lumber to meet anywhere close to our needs. So we turn to Canada and other trade partners for that. It’s hard to try to get a handle on where that’s going.

In some cases, I have vendors that won’t guarantee a price for more than five days. But I cannot say to my buyer, “We’re selling you this house for $1.1 million, but if my costs go up, I need an escalator in your contract, so it’s going to be that plus 8%, plus 5%.” That’s not gonna fly. Nobody is going to buy a house with a flexible price.

A recent [National Association of Home Builders] survey indicated that the typical cost of materials in a home from six years ago — just pre-COVID — to now, is up 42%.

Attaining capital has become extremely difficult. When the markets get more volatile, when rates are higher, and there’s a certain amount of anxiety with buyers, lending dries up. And if it doesn’t dry up, it becomes more difficult, and that becomes prohibitive and adds to our costs.

Q: Why is home building more expensive in Pennsylvania than in other states?

A: It’s a lack of zoning flexibility, and it’s overregulation.

I sit on a committee with the National Association of Home Builders that tracks problems and achievements around the country. And I’ve seen builders go into major municipalities and propose major zoning changes, major zoning overlays to create certain areas for multiuse development. There’ll be a commercial aspect, retail, housing, parks. There’ll be everything. And the municipalities welcome it. And, you know, in Pennsylvania, we don’t have that same type of reception.

There are other areas in this country that do want affordable housing and do welcome builders and do create incentives.

Let’s say we find a piece of ground right now in Bucks or Montgomery that is zoned for a dozen houses. If we go through the approval process and we’re asking for no zoning changes, no variances, no waivers, no anything, it’s probably two years before that ground will be approved. And we’re lucky if it’s two years. We need help with time frames. When you [plan out] a job and you think you’re going to get certain numbers, and two years go by, your numbers are worthless.

Q: What makes you hopeful about home building in our area?

A: (Home builder associations for Bucks, Montgomery, Chester, and Delaware Counties invited local legislators to a conference this spring to talk about home builders’ challenges.)

To a person, didn’t matter what side of the aisle you were on, everyone was receptive. And everyone said, “OK, maybe we do have an issue here. Let’s see what we can do about it.”

But the proof will be in the pudding. Everybody walked away feeling great. The question is, what’s going to come out of it?

And we hope that when they come back in session, there are some incentives to loosen up zoning regulation, address some of the stormwater management regulation problems, reduce some municipal fees, speed up approval times.

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