Building permit delays creating new obstacle for homebuilders as market heats up
- Developers are reporting that permit processing turnaround time has almost doubled from four months in 2011 to seven months in 2015, according to the National Association of Home Builders and The Wall Street Journal. American Institute of Architects officials have reported the wait can take as long as six to eight months — up from two to three — in some booming markets like California and Florida.
- City governments have been slow to re-staff after massive layoffs during the recession and are overwhelmed by the number of permits, especially in busy markets, according to The Journal.
- The Denver building department, for example, had the biggest permit backlog in its history last summer, with projects taking as long as three times the normal review period.
According to housing market research firm Axiometrics, nearly one million apartments are expected to be built in the U.S. in the next three years, but such projects are stopping up the workflow in local building departments, resulting in even smaller projects experiencing significant delays.
This permit backlog problem comes at a time of a significant inventory shortage in the housing market. A recent National Association of Realtors report found that pending home sales dipped 2.5% in January, and NAR economists said that inadequate housing inventory was a contributing factor to that decrease.
Another problem born out of the building department logjam is that developers and builders now must bear the burden of staff payroll and other expenses during the down time, driving up the ultimate price of the finished product. The expenses incurred while projects are held up in permitting are "almost making us go bankrupt," Denver builder Jared Phifer told The Journal.
Denver building department officials said that since last summer, they’ve made changes that have reduced turnaround time, including a new software system, additional staff and hiring independent contractors to review projects.