The narrative pushed by the National Association of Home Builders (NAHB) claims that modern building codes are driving up housing prices and making homes less affordable. It is a convenient argument, but one that does not hold up when you look at the actual data from markets where the codes have not changed. Montana is a clear example. The state followed the 2009 IECC energy code from 2010 through early 2022 with no significant changes to residential building codes during that time. Yet despite the code being frozen for more than a decade, the cost of new construction continued to rise sharply.
According to U.S. Census data, the national median sales price of new single-family homes increased from $245,000 in 2014 to $433,500 in 2024, representing a more than 75 percent rise over ten years. That rise occurred across both states that had aggressive code adoption and those that did not. In Montana, where the building code remained static, the median home price nearly doubled between 2020 and 2022, from around $296,000 to more than $446,000. The Federal Housing Finance Agency (FHFA) House Price Index for Montana shows consistent year-over-year increases regardless of the regulatory environment.
To understand the FHFA index numbers, it's essential to comprehend what they represent. The index does not reflect a dollar amount. Instead, it is a measure of appreciation over time, with 100.0 set as the baseline value in January 1991. An index value of 798.45 in early 2025 means that home prices in Montana have increased by nearly 700 percent since 1991, almost eight times higher. It is a standardized way to measure price growth over time, regardless of changes in home size, features, or sales volume. When the index rose from 759.06 in early 2024 to 798.45 in early 2025, that reflected significant year-over-year appreciation, even though the code had already changed in 2022.
In Bozeman, Montana, where demand has been particularly strong due to population growth and out-of-state migration, median home prices climbed above $740,000 by mid-2025. This growth occurred while the state was still under the 2009 IECC and continued after the code update. Builders in Bozeman and other parts of Montana did not lower their prices when the code was unchanged. They raised them in response to demand, land constraints, and increased material and labor costs. This proves that code stagnation does not equal price stabilization.
What also needs to be clearly understood is that the price of new construction is economically tied to the price of existing homes. A builder is not going to sell a brand-new home for less than a comparable existing one. When existing-home inventory is tight and prices rise, new-home prices follow. It is basic market behavior. If a resale home is selling for $600,000, a builder will price a new home near that amount, or higher, especially if the new home includes modern materials, warranties, and energy-efficient systems. Builders often reduce square footage or trim design features in response to affordability pressures, not because of code requirements, but because of buyer budget constraints.
NAHB frequently cites its 2021 study claiming that government regulation accounts for nearly 24 percent of a new home’s price, with code changes over the previous 10 years representing 2.7 percent of that. However, their methodology relies heavily on builder surveys and national averages based on a single model home. Independent reviews, including those by the Department of Energy and the Pacific Northwest National Laboratory, found much lower costs associated with energy code updates, often 50 to 70 percent less than NAHB’s estimates. More importantly, even if you accept NAHB’s code cost figures, that 2.7 percent does not come close to explaining the dramatic price increases seen in areas with no code changes.
The NAHB has a vested interest in limiting code changes, especially those that require higher performance or better construction practices. Their studies are often cited to resist the adoption of newer standards, but the actual market data paints a different picture. In real terms, stagnant codes have not prevented prices from increasing. Builders raise prices because they can, and because the market allows them to do so, not because they are forced to by local or state code changes.
If building codes were the root of the affordability crisis, we would expect to see a price plateau in states where codes remained unchanged. But that has never happened. New-home prices have risen steadily due to supply and demand, land costs, rising wages, supply chain disruptions, and most of all, builder behavior. Blaming building codes for affordability problems may make for a convenient sound bite, but it does not align with reality.
References:
According to U.S. Census data, the national median sales price of new single-family homes increased from $245,000 in 2014 to $433,500 in 2024, representing a more than 75 percent rise over ten years. That rise occurred across both states that had aggressive code adoption and those that did not. In Montana, where the building code remained static, the median home price nearly doubled between 2020 and 2022, from around $296,000 to more than $446,000. The Federal Housing Finance Agency (FHFA) House Price Index for Montana shows consistent year-over-year increases regardless of the regulatory environment.
To understand the FHFA index numbers, it's essential to comprehend what they represent. The index does not reflect a dollar amount. Instead, it is a measure of appreciation over time, with 100.0 set as the baseline value in January 1991. An index value of 798.45 in early 2025 means that home prices in Montana have increased by nearly 700 percent since 1991, almost eight times higher. It is a standardized way to measure price growth over time, regardless of changes in home size, features, or sales volume. When the index rose from 759.06 in early 2024 to 798.45 in early 2025, that reflected significant year-over-year appreciation, even though the code had already changed in 2022.
In Bozeman, Montana, where demand has been particularly strong due to population growth and out-of-state migration, median home prices climbed above $740,000 by mid-2025. This growth occurred while the state was still under the 2009 IECC and continued after the code update. Builders in Bozeman and other parts of Montana did not lower their prices when the code was unchanged. They raised them in response to demand, land constraints, and increased material and labor costs. This proves that code stagnation does not equal price stabilization.
What also needs to be clearly understood is that the price of new construction is economically tied to the price of existing homes. A builder is not going to sell a brand-new home for less than a comparable existing one. When existing-home inventory is tight and prices rise, new-home prices follow. It is basic market behavior. If a resale home is selling for $600,000, a builder will price a new home near that amount, or higher, especially if the new home includes modern materials, warranties, and energy-efficient systems. Builders often reduce square footage or trim design features in response to affordability pressures, not because of code requirements, but because of buyer budget constraints.
NAHB frequently cites its 2021 study claiming that government regulation accounts for nearly 24 percent of a new home’s price, with code changes over the previous 10 years representing 2.7 percent of that. However, their methodology relies heavily on builder surveys and national averages based on a single model home. Independent reviews, including those by the Department of Energy and the Pacific Northwest National Laboratory, found much lower costs associated with energy code updates, often 50 to 70 percent less than NAHB’s estimates. More importantly, even if you accept NAHB’s code cost figures, that 2.7 percent does not come close to explaining the dramatic price increases seen in areas with no code changes.
The NAHB has a vested interest in limiting code changes, especially those that require higher performance or better construction practices. Their studies are often cited to resist the adoption of newer standards, but the actual market data paints a different picture. In real terms, stagnant codes have not prevented prices from increasing. Builders raise prices because they can, and because the market allows them to do so, not because they are forced to by local or state code changes.
If building codes were the root of the affordability crisis, we would expect to see a price plateau in states where codes remained unchanged. But that has never happened. New-home prices have risen steadily due to supply and demand, land costs, rising wages, supply chain disruptions, and most of all, builder behavior. Blaming building codes for affordability problems may make for a convenient sound bite, but it does not align with reality.
References:
- U.S. DOE Building Energy Codes Program – Montana Status
Montana | Building Energy Codes Program
www.energycodes.gov
- Montana Department of Labor and Industry: Housing Affordability Report
- Federal Reserve Economic Data (FRED) – Montana All-Transactions House Price Index
All-Transactions House Price Index for Montana
Graph and download economic data for All-Transactions House Price Index for Montana (MTSTHPI) from Q1 1975 to Q1 2025 about MT, appraisers, HPI, housing, price index, indexes, price, and USA.fred.stlouisfed.org - U.S. Census Bureau – Median Sales Price of New Homes Sold in the United States
- NAHB Special Study: Government Regulation in the Price of a New Home (2021)
- ACEEE Report on Code Cost Analysis vs NAHB
- Bozeman Real Estate Pricing Trends
I loved life in Bozeman, Montana, but I got priced out. Luckily, moving 100 miles away felt like an upgrade.
Living in Bozeman got too expensive, so I moved to rural Montana near Butte. I miss city life but love the affordability and beauty of where I am now.
www.businessinsider.com
- Flathead Real Estate Blog – Build vs Buy Comparison
Should you Build a New Home or Buy an Existing Home?
Discover whether building or buying a home saves more money and suits your needs based on costs, timelines, and long-term value.
blog.flatheadrealestate.com
- Montana New Construction Price Trends – 2025
Thinking About Buying New? Here’s What a New Construction Home Costs Across the U.S.
Buying a new home has its perks—modern layouts, energy-efficient features, and a clean slate to personalize. But what does it really cost to trade up to something new? A newwww.montanarightnow.com
