Housing Affordability Institute’s Affordability Roadblocks series highlights housing policy issues which can adversely impact housing affordability and access.
Efforts by building product manufacturers to create or increase product demand through mandating its use in either the model building codes, local code adoption or through local zoning controls are commonly known as “regulatory marketing.”
Regulatory marketing is centered around a classification of products, often which consumers do not rank as a basic home option or for products for which there is minimal consumer demand. Regulatory marketing is distinct from other marketing efforts as it is brand-agnostic and uses government mandates as a sales channel.
Simply, if a product classification is dependent on government mandates as a sales or growth channel, this is classified as regulatory marketing.
What distinguishes regulatory marketing from other affordability roadblocks is that it is oftentimes an effort initiated by the members of the housing industry. Common examples are insulation mandates in the energy codes, residential fire sprinklers, and components added to the model plumbing and electrical codes. Regulatory marketing isn’t just about achieving product mandates, it also generally includes opposing any efforts to increase consumer choice or to introduce competition into the market.
The model code development process itself has become a business model for the code promulgation entities who have come to rely on changes to the code every three years. These model code organizations not only develop the model codes, but also serve as the book publishers for the code books, from which they derive much of their revenue, creating a direct financial interest in short-cycle repeated code changes.
At the local level, local zoning controls explicitly requiring specific materials to be used is another form of regulatory marketing, when the building product firms and trade groups are involved in the establishment or protection of these mandates.
REGULATORY MARKETING AND HOUSING AFFORDABILITY
The true cost impacts of this practice are hard to gauge as the process has been so intertwined within the model code process over the past decades. Local adoption of the model codes in cities, counties, and states across the county also varies.
Up To $20,000 Per Unit
Four-Sided Aesthetic Mandates
More Than $7,500 per unit
Fire Sprinklers (Mandated In Model Code, Minimal Adoption )
Up to $7,400 per unit
Continuous Foam Insulation, Zone 6, Rambler-Style Home
ADDRESSING REGULATORY MARKETING
Since regulatory marketing exists at the model code level, in state and local code adoption, and in some cases local zoning codes, there is no single solution for this practice. The simplest solution is for the industry to voluntarily end the practice and focus on performance-based regulatory goals. As this is unlikely, options exist at various levels to address this affordability issue.
None of these reforms would inhibit local jurisdictions from making code modifications when life, health, and safety are at issue.
Model Code Organizations: Regulatory marketing begins within model code development; these organizations could embrace a more proactive role in addressing the practice within their programs. This includes requiring financial disclosures by special interest groups, shifting to longer code intervals, and modifying voting practices to strengthen the role of contractors, building officials, and building science experts.
State or Local Code Adoption: State and local bodies could also require additional financial reporting by trade associations and product manufacturers to report how much money is spent directly on code adoption in that particular jurisdiction. Zoning Controls: Local zoning controls should also be better defined to eliminate the practice, particularly when relating to aesthetic mandates. Absent voluntary municipal action, state legislatures can get more engaged in eliminating local mandates.