The Expert Podcast

A few weeks ago, we did an article about what is really behind the housing crisis and the shortage of homes. We talked a lot about how in many markets it's very difficult and time-consuming to get a project permitted and off the ground. A lot of viewers wrote in and said, "Does it really take that long?"

Coincidentally, an article in a local newspaper to San Francisco ran an investigative report about how long it takes to build in San Francisco. The title is "Yes, it takes forever to build anything in San Francisco," and that is why luxury housing is all that gets built, which is exactly what we talked about a few weeks ago. So the question is: how long is forever in San Francisco?

Before we scroll down and take a look at the times, what is your instinctive thought? How long does it take to get permits? A few weeks? A few months? Right? So let's take a look at the actual times between the planning department, department of building, and various other city agencies that have to sign off on every plan and every revision.

Small-time builders face three or four years of bureaucracy before they can start a construction process, which itself could take over a year. What may take a few months in other parts of the country, the entitlement and permitting process in San Francisco has become an industry unto itself, employing consultants and expeditors, which only the richest developers can afford.

What are the times that they found? The report went back and looked at every permit issued over the last few years and found that it takes an average of 627 calendar days for a multi-family development. For single-family homes or duplexes, it’s even worse—861 days. That's two and a half years, and none of this even includes the planning or entitlement process that comes before permits are sought.

When you first buy a property, before you start getting permits, you have to make sure that it matches their planning for that area and the entitlement for the community. It has not gotten better. The Chronicle, which is the paper that conducted this investigation, found that times for permits have increased 83% since 2012.

That's 10 years—not a huge amount of time. You would think that technology, efficiency, and automation would bring down permitting times, especially in an environment like San Francisco, which, in theory, would want more houses being built to address their housing issues. But in the last 10 years, the permit times have gone up, not down.

People in the field suggest that the reason so much luxury housing gets built, as opposed to anything else, isn’t greed as much as the fact that nothing else is profitable. If permitting takes two years—and we talked about this in the last video—if you have to wait two or three years to get your permits and approvals done, you have to pay carrying costs on that property for that period of time. Taxes, insurance, interest, ownership fees, plus the carrying cost of your business and all your fixed overhead and equipment, all have to be factored into what you’re going to sell that property for.

If you’re going to look to sell something that is entry-level or first-time buyer type pricing, it can’t be baked into that kind of property if you have all those fees. Supposedly, the government says it has some type of permanent streamlining process, but no one has seen any results of this.

In the last decade, 270 projects in San Francisco took more than four years to get their approvals.

What are your thoughts on this? Do you find that permitting is difficult where you're located? As a contractor, are you finding that streamlining has gotten better or worse in the past few years? How do you think this may affect the housing market in certain areas?