As the Pacific waves crash below, the frames of luxury homes rise above — in what is being called the last seaside development in Southern California. Sea Summit in San Clemente is finally open, selling million-dollar homes in a local housing market that can afford the lofty price tag. Arizona-based Taylor Morrison and its financial partners purchased the project two years ago, reportedly for $200 million. Previous developers, dating back 40 years, had failed to finish the project. The recession was the latest killer, but strict new regulation, federal, state and local, have made the project far more expensive today than it would have been decades ago.

"The requirements for this project have been enormous, there is no question about it," said Phil Bodem, president of the Southern California division of Taylor Morrison.

Contractors secure a wall section on a home under construction at the Toll Brothers Cantera at Gale Ranch housing development in San Ramon, Calif. David Paul Morris | Bloomberg | Getty Images

The boundaries of the original master plan area were about 250 acres; today 50 acres of that is commercial, and the rest is residential. Of the residential area, however, only 100 acres are dedicated to streets and home sites. Taylor Morrison has planned 309 homes, about half the number it could have built decades ago. The rest of the land is mandated open space, public trails and new vegetation, all funded by developers. The cost of new development, not just in California, but across the nation, is rising dramatically, due to new regulations.

"Every time you turn around there's a new regulation. If a piece of property has water on it for more than 30 days, it's now considered a wetland. The governments are worried about storms and the nails running into the ocean. Everywhere you turn it's getting more and more expensive to build a home, and it's taking longer to get it built," said John Burns of California-based John Burns Real Estate Consulting.

Burns surveyed more than 100 homebuilding executives across the nation and said he heard, "many horror stories of cost increases that were far more than just materials and labor." Erosion control, energy codes, fire sprinklers, mortgage documentation and closing costs under new mortgage compliance rules are all combining to drive costs higher for builders and home prices up for buyers.

"It's a lot of good things to protect the environment, but it's making building affordable homes virtually impossible," added Burns.

That is why Sea Summit will likely be the last of its coastal kind, and it is why the homes there start at just shy of $1 million and rise from there. Taylor Morrison bought the project when it was already mostly developed, but the company still had to invest more.

