If there’s one thing developers love to complain about, it’s that’s government bureaucracies are slow.
Time is money, they say, and the governments’ Kafkaesque lack of urgency costs everyone by increasing the cost of development.
As it turns out, developers have at least some control over the process.
Data from Civic San Diego, the nonprofit group that issues permits downtown, shows the permit process moves more quickly when developers are charged to get their plans reviewed.
When it’s free for developers to get their plans reviewed, they don’t have much motivation to make sure their plans comply with all relevant regulations ahead of time. But when they’re motivated—through the financial incentive of permitting fees—their plans require less review and get approved much faster.
Civic San Diego used to be the city’s redevelopment agency. It’s also a bit of a quasi-government for downtown, empowered to make land-use decisions like approving development permits.
Most cities charge developers for permits. Civic San Diego didn’t. For years, that meant you had to pay certain fees to build in San Diego, unless you were building downtown. The idea was that free permits would make downtown development more likely.
But when the state ended redevelopment and Civic San Diego lost its biggest pot of money, it decided to start charging developers to issue permits.
At the time, Mayor Jerry Sanders said the group was quick and efficient at reviewing permits and had the trust of developers, so allowing it to continue operating would keep downtown development going.
Civic San Diego’s internal data, obtained by Voice of San Diego through a public records request, shows the average time it took to approve a project fell dramatically once those fees were implemented.
“A primary factor in approval time anywhere is the motivation of the applicant,” said Brad Richter, assistant vice president for planning at Civic San Diego. “When that goes up, that’s when you see processing times across the board anywhere go down.”
Permitting fees seemed to be that motivational push.
Civic San Diego had permitting records back to 2004. In that 10-year period, the average time it took to approve a project was over five months, or 163 days.
The average time plummeted to 115 days after July 1, 2012, when the fees began.
“It shows that in some part, developers factor into the process,” Richter said. “If the city is responsive, it comes down to whether the developer is responsive to what the city says.”
As a rule, there’s a lot of back-and-forth between the city and a developer before any projects are approved. The extent to which developers respond to direction from reviewers, or submit plans that conform to existing regulations, is going to play into how long it takes to get to yes.
When the process is free, there’s not much reason to make sure your plans are ready to go before submitting, Richter said.
For instance, a 286-unit apartment complex called Monaco took over two years to permit due to an unresponsive developer. Even after getting approval in 2007, the project was never built.
The data shows the pre-fee averages are largely the fault of a few outlying projects that took a very long time to get approved.
Richter and Gary London, a local real estate consultant, both said that’s likely because fees weeded out speculators who never intended to build anything in the first place.
A piece of downtown property is worth a certain amount of money. That same piece of property is worth even more if it has a project application in the formal review process.
It’s likely that property owners with no real intention to develop used the free permit review process to drive up the value of their property, because they could market it as being “in review.”
London said it’s relatively common behavior.
“Coming from a guy who works with developers and brokers and other players, I see a lot of that speculative development in markets all the time,” he said.
“Frankly, there are promoters downtown. That’s what I’d call them,” London said. “They make a living tying up properties. They do it with little money at risk. They’ll put together a picture that makes it seem they have something going on, but they don’t unless they can sell it.”
That’s consistent with Richter’s experience working with some developers, too.
“Now, they’re only coming in with real projects,” he said. “Before, they’d come in more as speculators than developers.”
But speculators don’t explain the entire discrepancy between approval times before and after the fees.
That’s because the most speculative of the speculators — the ones who never did anything at all — simply withdrew their projects before getting anything approved, so they aren’t included in the averages.