The Importance of Building Permitting to a Thriving Economy

June 17, 2021

The Importance of Building Permitting to a Thriving Economy

On the road to recovery coming out of the pandemic, governments are focused on getting people back to work, supporting businesses, and investing in building and infrastructure to support economic recovery and growth. The construction industry especially, will prove vital to reviving economies. In the U.S., the industry makes up around 4.3% of GDP, while in Canada, it accounts for over 7% -- values that could significantly increase with regulatory reform and industry-wide technology adoption to reduce the time it takes to acquire a building permit.

At present, siloed processes and a lack of digitization across both the private and public sector (though digitization within the private sector is rapidly increasing) present challenges to unlocking the full economic potential of the construction industry. And though nationwide housing starts and building permit demand is growing, for many jurisdictions, their current permitting processes and systems simply can’t scale to meet demand. For building and development to move forward without delay, barriers to starting a project need to be knocked down, and efficient processes put in place. At the root of the problem is government development approval delays and unpredictable timelines and processes that deter investors, stifle housing and project starts, and hold up government revenues from taxes and fees; as explained by the Canadian Centre for Economic Analysis (CANCEA), “the inability to manage approvals efficiently dissuades investment and hampers economic recovery and growth.” To reduce these delays and realize the full economic potential of community development, governments need to ditch manual, outdated processes, and look to adopt building permit software to speed up the process.

How Building and Construction Helps Local Economies

Given construction’s huge contributions to the economy, it’s vital that permissions - in the form of building permits - move forward quickly. Almost all construction projects, whether they be minor home renovations or large-scale housing developments, require a government permit, therefore making the building permit approvals process one of the first and most important steps to getting shovels in the ground. Faster building permit approvals decrease construction project timelines and costs, and can ultimately increase the rate of development within a community, providing broad economic benefits that include: 

  • An Increase in Economic Activity and Government Revenues: Accelerating permit approvals can increase construction spending and property tax revenue. By reducing permit approval times by 3 months in a 22-month project cycle, a U.S. study found jurisdictions could increase construction spending by 5.7% and property tax revenue by 16%.

  • Job Creation: Development and construction projects create jobs - the World Bank estimates that for every 10 jobs directly related to a construction project, another 8 jobs may be created in the local economy. In Ontario, Canada, for example, a study by CANCEA found that if a more streamlined permit approval process reduced delays by 3 months and led to a 5% increase in investment in housing construction, an additional 56,000 jobs would be created in the short term, growing to over 70,000 by 2040.
  • Growth in Affordable Housing Development: Faster and more efficient building permitting processes reduce the project carrying costs developers face during lengthy approval delays (staff, insurance, equipment rentals, financing costs), making investments in affordable housing a more viable option. A Canadian study found that long project approvals and a 6 month increase in the time it takes for a builder to obtain a building permit reduces the growth of new housing by 56% - driving up rents, and worsening the housing affordability crisis.
    • Attracting Outside Investment: Simple and efficient building permitting approvals processes encourage outside investment: up against a jurisdiction with complex, lengthy, paper-based processes, a jurisdiction with a straightforward and quick online application process will win due to money and time savings. A recent U.S. study found that construction costs and the permitting process were among the top 12 deciding factors in determining the location of a start-up in the U.S..
  • Support for Businesses: For businesses that provide related goods or services for the construction industry, an increase in development can provide more income. 

In summary, speeding up the building approvals process has a positive ripple effect on local economies: new units of housing can be brought to market sooner to address the housing affordability crisis; construction projects can be completed faster, increasing the rate of community development; more steady jobs can be created to reduce unemployment rates; and local businesses that heavily rely on the health of the construction industry can prosper. To realize these benefits, governments need to adopt technology that can not only support staff in meeting current demands quickly and efficiently, but can scale to support housing and building demands as they continue to grow.

How Building Permitting Technology Can Support Demand and Community Development

The demand for new homes and building permits in both the U.S. and Canada is high, leaving many cities, counties, and municipalities that rely on paper-based or manual processes with mounting permit backlogs and a shortage in housing supply. Exacerbated by the demand for more spacious accommodation while working from home due to COVID-19, the current housing market boom saw permits for future homes grow by 60.9% from April 2020 to April 2021 in the U.S. Construction of new homes also surged to the highest level since 2006 in March 2021 (Figure 1). While similarly, in Canada, housing starts rose 21.6% in March 2021 compared to February (Figure 2).

Figure 1: 

Building Permit Demand and Housing Starts in the U.S.
Housing Starts in U.S. Soar After Winter-Related Setback, Bloomberg, 2021

Figure 2: 

Building Permit Demand and Housing Starts in Canada
Source: Housing Starts in Canada - All Areas (CNW Group/Canada Mortgage and Housing Corporation)

To mitigate current backlogs and prepare for future population growth and demand for housing and infrastructure, governments will need technology to ensure timely permit approvals. With building permit software, governments can mend the gap between increasing construction applications and overwhelmed department resources, and make sure that community development demands are met. Comprehensive digital tools such as a 24/7 self-serve online community portal that allows for online payments and 100% digital permit applications done with minimal staff interaction vastly reduce the time and effort required to obtain a permit. These time and effort savings mean staff can process permits quicker and more easily, with the same or fewer resources -- permit approvals can happen in a matter of days, rather than weeks, months, or more. Plus, all involved stakeholders gain full transparency into the permitting process, reducing instances of duplicated effort or errors; all those involved can access all documents, and clearly see what steps have been completed. The public also benefits from more equitable access to services, with the ability to apply remotely at any time online, rarely, if ever, having to take time to visit a government office. 

Building permit software also offers full integration with GIS spatial data and e-plan review tools so all information is centralized and easily accessible, and provides automation to significantly reduce redundant and time consuming administrative tasks. Overall, these tools support staff in approving permits faster, which in turn can contribute to an increase in construction and community development. Efficient and straightforward building permitting processes will not only ensure projects move ahead quicker, but can attract more outside investors drawn to an easy process and fast project approval. In addition to supporting community development, a digital building permitting solution offers broad benefits for staff, stakeholders, and the public, including:

  • Improved record keeping and data management;
  • Less calls, emails, and error-filled applications;
  • Enhanced communication between applicants and staff, and increased transparency into the permitting process;
  • Better use of staff time and less duplication of effort;
  • Comprehensive digital reports and dashboards to inform decisions and resource allocation based on real-time data;
  • And more

Ultimately, a fully digital permit application process, coupled with comprehensive tools to make the process more straightforward and efficient, can make a significant positive impact on community development and economic growth. Building permit software ensures the process of acquiring a building permit is smooth, simple, and hassle-free, so that projects aren’t unnecessarily delayed, staff aren’t overwhelmed, and communities can grow and thrive.

To learn more about building permit software, how you can secure American Rescue Plan stimulus funds to leverage it in your department, or more about how it can support your community, get in touch!

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