4 ms·

Permitting, zoning, etc are all like <3% of a construction project’s cost. This is a meme with no basis in reality. All of the cost is labor and materials. Th

Permitting, zoning, etc are all like <3% of a construction project’s cost. This is a meme with no basis in reality. All of the cost is labor and materials. That said, the time component of the zoning, permitting etc is very costly due to how real estate projects are funded and evaluated.

pj_mukh 1y ago
I don't think a construction companies bank account cares about whether money is going to the time component or the physical act of going to city hall to apply. Also remember there are frivolous lawsuits, CEQA type laws (which was recently overhauled atleast in California), NEPA on the federal level which most people roll into the cost of permitting/zoning. This is no meme, this component is huge.
- sorcerer-mar 1y ago
  The time component isn’t draining bank accounts…
  - JumpCrisscross 1y ago
    > time component isn’t draining bank accounts Of course it is, why would you think the land and other capital can be held for free?
    - sorcerer-mar 1y ago
      The carrying cost of land is very low compared to any overall project. The issue is that extended timelines drive down the IRR and add risk which is not the same as being expensive to carry. > All of the local large projects around me are expensive because of massive amounts of red tape This just isn’t true. There are projects that could be happening but aren’t because of red tape, but no, a project that’s happening is spending a tiny portion of its capital on red tape.
      - pj_mukh 1y ago
        It's not just carrying cost, it could be the full A&D cost, so you're paying the loan on the mortgage without being able to build anything. That's huge and has sunk major projects around me. This happens, literally all the time [1][2][3], all around the country. What's more, the fear of doing this has basically staved off all but the most brave companies, or giant conglomerates that can buy land cash, which is the most predictable byproduct of excessive regulation at a local level like this. [1]: https://jerseydigs.com/american-dream-owners-default-on-1-2-billion-construction-loan/ https://jerseydigs.com/american-dream-owners-default-on-1-2-... [2]: https://www.axios.com/local/phoenix/2023/11/08/one-camelback-office-apartment-loan-default https://www.axios.com/local/phoenix/2023/11/08/one-camelback... [3]: https://www.reddit.com/r/sanfrancisco/comments/y2ein5 https://www.reddit.com/r/sanfrancisco/comments/y2ein5 "The issue is that extended timelines drive down the IRR and add risk which is not the same as being expensive to carry." Confusing statement, the IRR is low and the risk is high because the carrying cost is unknown (and unbounded).
      - JumpCrisscross 1y ago
        > carrying cost of land is very low compared to any overall project In New York and San Francisco? And it's not just land, it's keeping all the environmental reviews and neighbourhood associations on board. It's delays in pre-selling, or, if you're pre-sold, customer service to impatient buyers. It's constantly redrawing plans because a community member wants an offset 3/8ths of an inch further so their petunias don't catch shade. Again, these costs add hundreds of thousands of dollars to each and every apartment built in San Francisco. > This just isn’t true What are you responding to? The quoted text isn't mine.
        sorcerer-mar 1y ago
        Is there a reason you're pointing out San Francisco and New York in particular? Is it because we both know they're by far the most absurd instances of this problem and quite obviously unique in how absurd they are?
        pj_mukh 1y ago
  - toast0 1y ago
    When permitting (etc) delays your project for N years, and materials and labor now cost that much more, that drains your bank account. Sure, maybe you got some return on your money, but many times that won't be enough to cover the increase in cost. That's not to say some amount of review isn't appropriate, but excess review (wherever the line is) seems to be just a way to discourage building by process nightmare, when there's no other way to do it. I've also seen a lot of things where variances go to those who have the patience to play politics, which often ends up being pretty inequitable. And then there's the times where permit issuers aren't consistent; request X get told to do Y, update your permit to request Y, get told to do X, etc. Or my favorite, ask to do A, get told to do expensive thing B to prep, do B, then get told A will not be permitted anyway. Typically, there's no recourse for these things either.
    - sorcerer-mar 1y ago
      You're referring to the delta in material and labor between project start and project permission? That's also a fraction of overall costs.
- cycomanic 1y ago
  So it should be easy to find sources to show this "huge" component.
  - JumpCrisscross 1y ago
    Yes, it is [1][2]. [1] https://libertylensecon.substack.com/p/unlocking-americas-infrastructure-dab https://libertylensecon.substack.com/p/unlocking-americas-in... [2] https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=c00e82970156439121b244c8409cf0c0f34f589e https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&d...
bongodongobob 1y ago
This is correct.
JumpCrisscross 1y ago
> the time component of the zoning, permitting etc is very costly due to how real estate projects are funded and evaluated How is this not part of the cost of permitting and zoning! If you took those processes out, those financing costs wouldn’t exist. Last time I did the math, San Francisco’s permitting process financed at going rates meant a price floor of over half a million dollars for an apartment. That’s before we’ve even built anything.
- sorcerer-mar 1y ago
  I am not saying costly in direct “money being spent” terms. I mean costly in “adversely affecting project investment profile.” This is not the same as costing a bunch of money.
  - nullc 1y ago
    No, it's worse because the costs are diffuse and so harder to predict and manage. The delay induced costs are not the only negative impact. During permitting the muni will often make varrious cost adding demands that they have no basis in law or good engineering to make, but unless you're willing and able to take on more years of delay (and potential litigation costs) you have to go along with them to appease them. And, of course, every opportunity for a subjective call allowing a disruption is a opportunity for corruption.
    - sorcerer-mar 1y ago
      Maybe! But it still does not comport with the original post that I replied to which said that permitting etc are the major driver of cost of any construction project. It is not.
      - nullc 1y ago
        The point being made is that if you consider permitting holistically by attributing to it all costs that wouldn't exist if permitting didn't exist-- the cost is much greater. When people complain about the costs of permitting they mean the these total costs, not e.g. some 1% of total project costs filing fee or whatnot.
deleted 1y ago
[deleted]
9cb14c1ec0 1y ago
I don't know where you live, but I'm familiar with multiple construction projects in the northeast US where permitting was between 10 and 20 percent.
sidibe 1y ago
Yeah if it was legal instead of technical hoops buildings would be flying up in unincorporated parts of Mississippi or Alabama. There's a huge difference between states when it comes to codes and enforcement
ZhiqiangWang 1y ago
Actually 70% labor and 30% materials, on average. You will never believe that some times contractors propose to do curtain wall as alternative to masonry because pre-fab stuff actually a lot cheaper.

pj_mukh 1y ago

I don't think a construction companies bank account cares about whether money is going to the time component or the physical act of going to city hall to apply. Also remember there are frivolous lawsuits, CEQA type laws (which was recently overhauled atleast in California), NEPA on the federal level which most people roll into the cost of permitting/zoning. This is no meme, this component is huge.

sorcerer-mar 1y ago
The time component isn’t draining bank accounts…
- JumpCrisscross 1y ago
  > time component isn’t draining bank accounts Of course it is, why would you think the land and other capital can be held for free?
  - sorcerer-mar 1y ago
    The carrying cost of land is very low compared to any overall project. The issue is that extended timelines drive down the IRR and add risk which is not the same as being expensive to carry. > All of the local large projects around me are expensive because of massive amounts of red tape This just isn’t true. There are projects that could be happening but aren’t because of red tape, but no, a project that’s happening is spending a tiny portion of its capital on red tape.
    - pj_mukh 1y ago
      It's not just carrying cost, it could be the full A&D cost, so you're paying the loan on the mortgage without being able to build anything. That's huge and has sunk major projects around me. This happens, literally all the time [1][2][3], all around the country. What's more, the fear of doing this has basically staved off all but the most brave companies, or giant conglomerates that can buy land cash, which is the most predictable byproduct of excessive regulation at a local level like this. [1]: https://jerseydigs.com/american-dream-owners-default-on-1-2-billion-construction-loan/ https://jerseydigs.com/american-dream-owners-default-on-1-2-... [2]: https://www.axios.com/local/phoenix/2023/11/08/one-camelback-office-apartment-loan-default https://www.axios.com/local/phoenix/2023/11/08/one-camelback... [3]: https://www.reddit.com/r/sanfrancisco/comments/y2ein5 https://www.reddit.com/r/sanfrancisco/comments/y2ein5 "The issue is that extended timelines drive down the IRR and add risk which is not the same as being expensive to carry." Confusing statement, the IRR is low and the risk is high because the carrying cost is unknown (and unbounded).
    - JumpCrisscross 1y ago
      > carrying cost of land is very low compared to any overall project In New York and San Francisco? And it's not just land, it's keeping all the environmental reviews and neighbourhood associations on board. It's delays in pre-selling, or, if you're pre-sold, customer service to impatient buyers. It's constantly redrawing plans because a community member wants an offset 3/8ths of an inch further so their petunias don't catch shade. Again, these costs add hundreds of thousands of dollars to each and every apartment built in San Francisco. > This just isn’t true What are you responding to? The quoted text isn't mine.
      - sorcerer-mar 1y ago
        Is there a reason you're pointing out San Francisco and New York in particular? Is it because we both know they're by far the most absurd instances of this problem and quite obviously unique in how absurd they are?
        pj_mukh 1y ago
- toast0 1y ago
  When permitting (etc) delays your project for N years, and materials and labor now cost that much more, that drains your bank account. Sure, maybe you got some return on your money, but many times that won't be enough to cover the increase in cost. That's not to say some amount of review isn't appropriate, but excess review (wherever the line is) seems to be just a way to discourage building by process nightmare, when there's no other way to do it. I've also seen a lot of things where variances go to those who have the patience to play politics, which often ends up being pretty inequitable. And then there's the times where permit issuers aren't consistent; request X get told to do Y, update your permit to request Y, get told to do X, etc. Or my favorite, ask to do A, get told to do expensive thing B to prep, do B, then get told A will not be permitted anyway. Typically, there's no recourse for these things either.
  - sorcerer-mar 1y ago
    You're referring to the delta in material and labor between project start and project permission? That's also a fraction of overall costs.
cycomanic 1y ago
So it should be easy to find sources to show this "huge" component.
- JumpCrisscross 1y ago
  Yes, it is [1][2]. [1] https://libertylensecon.substack.com/p/unlocking-americas-infrastructure-dab https://libertylensecon.substack.com/p/unlocking-americas-in... [2] https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=c00e82970156439121b244c8409cf0c0f34f589e https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&d...

bongodongobob 1y ago

This is correct.

JumpCrisscross 1y ago

> the time component of the zoning, permitting etc is very costly due to how real estate projects are funded and evaluated How is this not part of the cost of permitting and zoning! If you took those processes out, those financing costs wouldn’t exist. Last time I did the math, San Francisco’s permitting process financed at going rates meant a price floor of over half a million dollars for an apartment. That’s before we’ve even built anything.

sorcerer-mar 1y ago
I am not saying costly in direct “money being spent” terms. I mean costly in “adversely affecting project investment profile.” This is not the same as costing a bunch of money.
- nullc 1y ago
  No, it's worse because the costs are diffuse and so harder to predict and manage. The delay induced costs are not the only negative impact. During permitting the muni will often make varrious cost adding demands that they have no basis in law or good engineering to make, but unless you're willing and able to take on more years of delay (and potential litigation costs) you have to go along with them to appease them. And, of course, every opportunity for a subjective call allowing a disruption is a opportunity for corruption.
  - sorcerer-mar 1y ago
    Maybe! But it still does not comport with the original post that I replied to which said that permitting etc are the major driver of cost of any construction project. It is not.
    - nullc 1y ago
      The point being made is that if you consider permitting holistically by attributing to it all costs that wouldn't exist if permitting didn't exist-- the cost is much greater. When people complain about the costs of permitting they mean the these total costs, not e.g. some 1% of total project costs filing fee or whatnot.

deleted 1y ago

[deleted]

9cb14c1ec0 1y ago

I don't know where you live, but I'm familiar with multiple construction projects in the northeast US where permitting was between 10 and 20 percent.

sidibe 1y ago

Yeah if it was legal instead of technical hoops buildings would be flying up in unincorporated parts of Mississippi or Alabama. There's a huge difference between states when it comes to codes and enforcement

ZhiqiangWang 1y ago

Actually 70% labor and 30% materials, on average. You will never believe that some times contractors propose to do curtain wall as alternative to masonry because pre-fab stuff actually a lot cheaper.