The High Cost of Housing Approval Processes
How circuitous approval processes make growth and modernization less likely in highly regulated cities
I have written many articles for Catalyst and other outlets that describe how different land-use regulations increase home costs. But really I’ve been burying the lede; the approval, bureaucracy, review, gauntlet.
While standard regulations like zoning, parking minimums and building codes certainly do this, almost every city has them. So why are some cities way more expensive than others?
To a degree it’s their demand: more people want to live in New York City than Topeka, but it is also due to regulatory factors that are beneath the surface, not stated outright in most codes. The main one is housing approval processes.
In pro-growth cities, approvals are short and straightforward; in anti-growth ones, they are hijacked by delays and lawsuits, hindering or sometimes killing projects. These approval processes vary by city, and most projects don’t endure all the listed hurdles. But they sometimes can, especially high-profile ones that draw lots of public attention.
Planning and neighborhood review: This describes the informal review that developers endure before (or sometimes after) they face formal voting boards. Some of it can be predicted, like the fees required to apply for a permit. But mostly it’s subjective, based on how the community reacts to a project.
A typical scenario goes like this: a developer applies for a waiver to increase a project’s legally-allowable density. The developer must draw an advanced rendering, meet with city staff, fill paperwork, and hold neighborhood hearings.
These hearings often lead to an elaborate extortion process. A neighborhood group or community board will arrive knowing that although their input is advisory, their approval may dictate whether the project gets favorable votes later. So, they milk the opportunity, demanding that the project has open space requirements, affordability set-asides, specific architecture, and other pet preferences. Other times they demand that developers fund public goodies that aren’t even tied to the project.
In some cases though, neighborhood groups simply don’t want the project to be built. So, the process becomes less a negotiation than open NIMBY maneuvering. Neighbors might collect signatures to appeal a project after it’s already been approved; or file a lawsuit, causing the developer to spend years in court. The stated goal is to address neighborhood “concerns,” but the implicit goal is to stop the project.
Design Review Boards: As if architectural nitpicking from neighborhood groups isn’t bad enough, development proposals often go before a professional design board. Sometimes there are design laws in the zoning code on which the board educates the developer. But usually it is a half-dozen or so people with subjective opinions, each voicing what they dislike about the project.
DRBs can enhance project architecture, discouraging the use of cookie-cutter designs and materials. But other times they strip projects of detail; the mix of opinions leads to the lowest common denominator, as a safe design is the only one everyone can agree on (note what design review did to this Portland building). Above all, DRBs force an aesthetic sensibility that satisfies the DRB, but isn’t preferred (or affordable) to consumers.
Environmental Review: This is a more valid public protection—nobody wants development that emits pollutants, causes runoff, or unearths contaminated soil. For this reason many cities mandate environmental reviews of projects, often in conjunction with state laws.
But the process gets abused when neighborhood groups use it to file lawsuits. Even after developers pass the assessment, the groups will claim that certain things were ignored, sometimes even making spurious arguments about the shadows a building will cast. These litigiousness groups find in their state governments a robust regulatory structure to work with. The California Environmental Quality Act, for example, has overwhelmingly been used to block infill housing. That is ironic, since this forces sprawling development, defeating any environmental purpose.
Planning Commission Vote: A project may have spent several years in the aforementioned review stages before it reaches the Planning Commission, which then determines if the project moves forward. Commissioners are appointed by city councils, and judge projects on their design, traffic impacts, and other community concerns.
In a standard hearing, commissioners might call for alterations, and developers must return with a new proposal at a later date. That in itself costs time and money. But in the worst cases, commissioners, caving to public pressure, intentionally delay or block projects. San Francisco’s discretionary review is an example: it lets any resident who dislikes a project file an appeal even after it’s been approved. Planning can then agree to hear the appeal, further delaying things.
City Council Vote: Upon getting Planning’s approval, proposals go for council vote. The political culture of many cities is anti-development, driven by a “bootleggers and Baptists” coalition of homeowners who have a financial interest in limiting housing supply, and activists who oppose gentrification and developer profits. This is reflected in the elected councilors, who are also frequently NIMBY. Council hearings on projects can thus be extreme political theater, with large sign-wielding crowds and open displays of anti-developer populism—followed by resounding “no” votes. Sometimes upon being voted down, developers return to Planning to tweak their proposals. But only big sophisticated ones can afford to do this for any prolonged period.
This list isn’t exhaustive. If proposed developments are in historic districts, they face preservation committees. If they receive federal funds, they must comply with enhanced guidelines and inspections. If they require permits from multiple city departments, they may suffer unnecessary confusion and delay.
In the worst cases, megaprojects that are proposed in hyper-regulated cities will fight through multiple lawsuits, hundreds of meetings, years of delay, and millions in lobbying costs. Even a recent proposal to build 4 small homes on an empty lot in San Francisco has dragged on 4 years—and still isn’t approved. The approval process in other cities isn’t that bad, but it all has the same effect: increase home construction costs, causing the costs to get passed onto consumers.