I've done research on housing costs, inflation, and regulation many times over the last decade or so. See my previous article for background information that might be useful in the following. Recently I claimed that over 70% of material costs for housing are due to building cost, and someone challenged this claim, asking for sources.
Now, I may have gotten ahead of myself, and I need to explain a few things. First, I don't actually think the costs are directly due to building codes. Rather, building codes require specific types of materials. Many other viable options exist that are much cheaper, but building codes generally don't allow them to be used. These include things like compressed wood products that are stronger, more fire resistant, and often even cheaper than the much more heavily regulated 2x4s, plywood, and drywall that are practically mandatory. (In fact, compressed wood products are even more fire resistant than most steel studs, which will weaken and even melt with heat that would require many hours to get through compressed wood.) Why aren't modern homes just built with poured concrete? Because electrical code has requirements that don't make sense and thus cannot even be followed with poured concrete walls. There's a reason we don't see extremely cheap 3D printed concrete houses flooding the market. It's because building codes assume houses must all be build with hollow walls where plumbing and electrical can go, and the requirements making those assumptions cannot be satisfied with any other architecture, even if it is far more fire proof, earthquake resistant, water proof, and generally safer and technically superior in every way than "traditional" construction.
If you need evidence of the above, see this source on legal problems with 3D printed construction. If you need more, you can also look up legal problems with very low cost tiny homes and with cantilever homes. Building codes also get in the way of underground construction, which can be much cheaper in some areas than traditional construction (and which can significantly reduce heating and cooling costs).
So, the point here is that building codes restrict what construction materials builders are allowed to use. This is where regulatory costs of these "legal" construction materials becomes a building code cost. I don't have the time or energy to find sources on every construction material used in modern home construction, but I can give you one very solid one: Wood. Here is a 2018 article about the impact of tariffs (a form of regulation) on home construction costs. It is estimated in the article that this increased home construction costs by an average of $9,000 (and apartment construction by $3,000 per apartment). That's on the low end of regulatory cost increases, likely running around 0.25% to 0.33%. And keep in mind that this is just one regulation increasing the price of wood. EPA regulations on logging and on energy (used for milling and kilning the lumber) likely add significantly more than that. That article also estimates that regulatory costs make up 32% of multifamily developments (mainly apartment complexes).
I also have some personal knowledge of concrete production processes, and one the steps is heating limestone to high temperatures and maintaining those temperatures for several hours. This causes the calcium carbonate to release its carbon component in the form of carbon dioxide. EPA regulation over the last ~10 years or so has hit the concrete industry hard both with regulations increasing energy costs and with CO2 emissions regulations, making concrete foundations (also legally required by most building codes) significantly more expensive.
A more recent article explores how lumber price volatility, caused in part by concerns about regulatory changes and the impact of U.S. Treasury interest regulation, has caused significant increases in home construction costs. This article estimates that regulations on construction materials increases home construction costs by 14.94%. I don't have data on what percentage of home construction costs goes to materials, but labor is generally the bulk of the costs, so the regulatory costs included in material costs are almost certainly well over 30% and it's certainly conceivable that they are as high as 70%. (Also, thus far I've not seen a study that takes all regulatory costs into account, including trickle down costs like transportation, EPA energy regulation costs, and such. So that 14.94% likely only includes direct regulatory costs at the last step before the materials are bought by the construction company, which is only a small portion of total regulatory costs.)
This paper explores the regulatory costs of construction during development and construction (which doesn't even include the regulatory costs that went into the gathering, fabrication, and transportation of materials), and it estimates a total regulatory cost during those stages of 23.8% for single family homes.
This article discusses the study and includes some nice breakdowns of data from the paper. It also includes some additional data about regulatory price increases of lumber (mainly tariffs and market volatility caused by unpredictable economic regulatory changes) and lists a number of other materials impacted. It also mentions delivery delays caused by pandemic regulations, which also contribute to cost increases significantly.
On top of all of this, I did construction work off and on in my late teens and early 20s, and I learned about additional impacts of regulations that don't typically get counted in estimates. On one construction site I worked on, a team of plumbers spent their entire work shift sitting around doing nothing, because the electrical union had convinced the state government to add to building code a restriction on who can even touch electrical equipment. Some electrical equipment, I forget what but something like a breaker box or some such, had been left too close to a sewer line or water line, such that the plumbers couldn't do the work they were supposed to do, and they couldn't legally move it. The electrical workers weren't scheduled to come in until the next day, but the plumbers couldn't just take the day off, because they had families to feed, so the construction company paid for a day worth of labor from some 3 or 4 plumbers for nothing. And it actually ended up costing a bit more than that, because the plumbers weren't scheduled for the next day, and they had to get their job done before insulating (what I did) and drywalling could be completed. Delays caused by regulations don't just cost time, they also cost the wages of people scheduled to work who can't because of the delay, because people still need to make a living, whether everything is ready for them to work or not.
Anyhow, I don't have the time or energy to go step-by-step through the supply line working out the exact percent of the cost that comes from regulations. I've provided plenty of sources showing that individual steps can end up costing at least 30% each in regulatory costs for the end product of those steps, and there are many more steps than just one for any kind of construction material. Just 30% per step hits 69% in a mere two steps. (This is a compounding increase, not an additive one, so the math is 1.30^2, which gives 1.69 or an increase of 69%.) The truth is, I was really hedging when I said 70%. It's probably closer to 80% or 90%, and that's just material costs. When you include labor regulations, direct costs of build codes, licensing, and all of the other stuff, the total cost of a home is probably no less than 60% to 70% regulation, likely at least 80%, and if the math on regulatory compounding in my last article is right, it may be as high as 90% or possibly even higher.
The fact is, a significant majority of the cost of houses today is regulatory costs. Even before loan costs and bank fees, you are mostly paying for the regulation. You are paying for contractors to use more expensive, inferior materials. You are paying for vehicle safety regulations that provide only marginal safety benefits. You are paying for emissions and energy restrictions intended to solve problems that haven't even been proven to be real problems. You are paying for plumbers to sit on their butts all day, so that the electricians can feel more secure demanding excessive pay for their labor. And after all of that, the little bit of money remaining is what is actually paying for your house and the legitimate labor that went into its construction.
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