The Washington, D.C.-based American Institute of Architects (AIA) released a report on Feb. 1, 2006, showing that communities with a more efficient building permitting process can gain millions of dollars in tax revenues and significantly bolster their economic development. The AIA commissioned PricewaterhouseCoopers LLP to study the relationship between building permit processes, local economic activity, and government tax revenues. The study concluded that the implementation of a more responsive permit process over a 5-year period could result in a 16.5-percent increase in property taxes and a 5.7-percent increase in construction spending.
The report, “The Economic Impact of Accelerating Permit Processes on Local Development and Government Revenues,” presents calculations assuming 3-month acceleration in total development time. It focuses on nonresidential projects that accounted for $295 billion in new investment in 2004, according to the Department of Commerce.
“Within the last 5 to 10 years, there has been a substantial increase in delays in building permit approvals,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Architects have frontline experience dealing with these delays, and the AIA commissioned this study to shed light on this problematic situation that works against the best interests of businesses and communities.”
The costs of regulatory delays on economic development are largely unseen because it is not readily apparent that buildings are not being built, potential tax revenues are not being collected, and related jobs are not present.
“Inefficient permitting processes are equivalent to a drain on economic development. Project delays lead to higher costs that either will be passed through to occupants or will discourage new construction. Less new construction, by reducing the total supply of buildings in a community, will tend to lead to higher rents for everyone,” said Linden Smith, managing director, PricewaterhouseCoopers. “Conversely, a municipality with an efficient and predictable permitting process will attract investment by reducing the risk of scheduling delays and cost overruns. All else equal, investment dollars will be drawn to these municipalities.”
- A 3-month acceleration in permit approval on a 22-month project cycle would make a project more financially attractive and could determine whether the project is undertaken at all.
- Higher rents for all tenants are caused by permitting delays.
- Improving permit processes can attract investment from areas outside a local community.
- Accelerating the permitting process can permanently increase local government revenues.
- Increasing construction spending caused by more efficient permitting processes will provide broader economic benefits.
Prior to the recent U.S. Conference of Mayors, this report was sent to 1,000 mayors, local building permit officers, city council members, and local municipal and county officials. This report is the first step in encouraging local governments to invest in programs and technology that will create state-of-the-art building departments that are more agile and better equipped to expedite the building permit approval process.
James N. Bartl, AIA, director of code enforcement, Mecklenburg County, Charlotte, NC, said, “In order to keep the permitting and inspection process well ahead of customer demand, we initiated several far-reaching measures aimed at modernizing processes and automating our systems so that our inspectors and plan reviewers are as productive as possible. Through a combination of technological upgrades, the use of mobile devices, Web-enabled records access, and permit process changes we have absorbed a two- to three-fold increase in volume and also improved our plan review and inspection times. One non-technological improvement is the Commercial Technical Assistance Center that provides quick answers to commercial code questions, which frees plan reviewers to concentrate on their primary service.”
The complete report is available at (www.aia.org/SiteObjects/files/permitstudyfullreport.pdf).
This information was reprinted with permission from the Washington, D.C.-based American Institute of Architects (AIA). For almost 150 years, members of AIA have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. AIA members have access to the right people, knowledge, and tools to create better design, and through such resources and access, they help clients and communities make their visions real. For more information about the organization, visit (www.aia.org).
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