The Glitch in Single Family Housing Starts

July 19, 2016

The Wall Street Journal reports that one of the reasons single-family housing starts are nearly 30 percent below the previous 30-year average is paperwork.

In new research by real estate tracker Trulia, metro areas with long delays for building and zoning approvals aren't attractive to builders. Ralph McLaughlin, Trulia's chief economist, says builders are wary of long approval times because the specter of an economic downturn in the time it takes to get permits and build a home is too risky. Those builders decide not to build, despite what the area's current supply and demand indicates.

McLaughlin correlated the rate of new housing supply with a land use and regulatory index developed by the University of Pennsylvania, which measures the amount of delays and other forms of real estate regulation in markets across the country. He found that the longer the average delay in getting building permit approvals in a market, the less responsive the housing supply was during periods of increased demand.

Metro areas with the longest approval delays include Long Island, New York at 11.5 months, Providence, Rhode Island at 11 months, and San Francisco at 10.2 months.

Las Vegas, Raleigh and Atlanta had average delays of about four months, compared with average delays of eight to 12 months in New York and coastal California markets.

Areas with the shortest permitting times are Houston, Texas at 2.9 months, Charlotte, North Carolina at 3.3 months; and Jacksonville, Florida at 4 months.

If the developer is also looking at new zoning, the delay increases. Frank Flores, development manager with Signature Development Group in Oakland, California said delays are factored into the cost of doing business but longer permitting times affect the builder's decision-making on whether to proceed or hold off on certain projects.