How Municipalities Can Curtail the Wait for Permits
There is an interesting conundrum affecting several major housing markets across the country. Inventory is low. Demand is high. Prices are expensive. And getting building permits to add new inventory to the housing stock has lately been a sluggish process.
The median delay in 2015 for securing a permit for single-family homes was seven months, a stark contrast from the four-month median delay in 2011, according to the National Association of Home Builders. For markets like California where demand for homes is very high, the delay for permits today can take upwards of eight months.
One reason behind the delay: Municipalities that were hit hard by the recession slashed the number of staffers as a result.
Even with an improving economy, these municipalities have been slow to add much-needed manpower to deal with the increasing demand for more housing, says Paul C. Zucker, president of Zucker Systems, a company that consults with cities on how to improve their permitting processes.
“Places have trouble restaffing, or are not willing to restaff when there is a need to,” adds Zucker.
With the spring sales season under way, a “robust” real estate demand is being outweighed by a lack of affordable supply, says Fannie Mae Chief Economist Doug Duncan in an interview with Bloomberg News.
“Affordability is a challenge this spring,” Duncan said. “[Prospective buyers] would have gotten their credit in shape, and they’ll have a job. But they will be frustrated because, in their market, there simply won’t be affordable homes,” adds Duncan.
Permits Are Up
The job market has been growing at a steady pace—there were 215,000 jobs added in March. The national rental rate for an apartment also rose by $6 in March to an all-time high of $1,181, according to Matrix Monthly, a market report compiled by Yardi Matrix.
Many young people ages 25 to 34 see homeownership as more practical, financially speaking, than renting, according to Fannie Mae’s National Housing Survey.
But a shortage in affordable homes coupled with rising home prices are “opposing a strong rebound in first-time homebuying,” says Patrick Simmons, director of strategic planning in Fannie Mae’s Economic & Strategic Research Group, in an interview with The Home Story in February.
Prices for single-family homes across the country will likely climb by 5 percent in 2016 while sales will increase by 3 percent, says Duncan.
This is why building more homes to increase inventory is becoming increasingly important this year, especially for first-time homebuyers, experts say. There were 822,000 single-family housing starts in February, the U.S. Department of Housing and Urban Development (HUD) announced in March.
As for permits, issuances increased by 12 percent to 1.178 million units in 2015, according to HUD data.
But delays still persist, partly because of understaffed building departments in municipalities and partly because of the old way of doing things, says Zucker.
“On the positive side, what’s happening nationally is we’re in the midst of going electronic,” Zucker adds.
Switching to e-permitting will help many municipalities that are understaffed deal with an influx of permit requests, says Zucker.
Rhode Island recently announced it would be using ViewPoint Cloud, a digital platform that is “more user-friendly” than the old way of securing permits in person.
“We are creating a more business-friendly atmosphere in Rhode Island, which will ensure that high-value construction projects are protected from the needless and excessive building permit process,” says Donald Grebien, Pawtucket mayor and chair of the Municipal Advisory Council on Statewide Permitting, in an interview with NAHBNow.
Pierce County in Washington State also offers e-permitting to builders, even allowing inspections to be conducted via Skype.
In addition to advocating for moving the permitting process online, Zucker argues for full-cost recovery in which funding is secured for all costs involved in the permitting process.
“Whatever it costs the government to process these permits should be paid by the customer,” says Zucker. “If you go full-cost-recovery, there’s no reason to be understaffed,” he adds.
Making the permit issuance process a far smoother one will ultimately benefit customers, builders, and the housing market as a whole.
“This is not only good for the government, but it’s also very good for the customer side. You don’t have to drive to city hall and put your plans in,” says Zucker. “Instead of producing these huge rolls of paper, you just send [them] in electronically.”