This chapter is concerned with the latter few characteristics —in particular, with the operation of local building codes. The regulation of residential construction is typically delegated by states to local jurisdictions which, in turn, enforce standards and specifications governing the erection and construction of buildings. Communities may use building codes in the same way they have used zoning powers: to internalize neighborhood externalities. For labor, the benefits of intervention to promote adoption of a code change should be greater for innovations which have a larger impact on unit costs. There is conflicting evidence on the magnitude of excess costs attributable to variations in building codes. Several studies have suggested that the direct effect of building codes upon construction costs is small. In addition, there are indications that the fragmented regulatory process acts as a barrier to improved efficiency in housebuilding. The chapter explores those factors which affect the diffusion of improved techniques in residential construction.
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