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The Costs of Regulatory Delay in Austin

October 8, 2015

Since the release of the Zucker Report in 2014, there has been much debate around the causes of and solutions to some of Austin’s most pressing planning and development review challenges. Many of these challenges will likely be addressed in the code rewrite process over the next two years when the rewrite is expected to be completed. However, in the interim, there is a specific action the city can take without amending the code that will greatly impact the cost and quality of development in Austin: enforcing existing development review timelines.

Regulatory delay during site plan review of multifamily housing projects in Austin has three primary impacts on the community: 1) it generates unexpected development costs which will likely increase housing prices over time; 2) it stifles innovation and decreases quality of development; and, 3) it promotes exurban growth. Combined, these impacts reduce affordability and quality of life for all Austinites and thwart the goals of the Imagine Austin plan.

Regulatory delay is the difference between the mandated 120-day timeline for approval of site plan applications and the average site plan review, which calculated from city records is approximately 223 days. Together, with rapid growth in housing demand, delays during the regulatory process have produced strong rent growth throughout the Austin market.

If regulatory delays are eliminated and developers receive approvals for multifamily site plans within 120 days, renters could see relief of up to 4-5 percent on their rent, or an average of $65 per month or $780 annually in Central Austin. These declines would be the result of both lower project costs and increased supply. These findings are based on modeling typical project costs and returns, informed by extensive interviews with 14 Austin-area residential developers regarding the impact of delays on their projects (read my full paper here).

Developers will continue to push rents in a hot market such as Austin. However, if the city were to eliminate administrative delays, the result would lift the artificial constraint on Austin’s housing supply and increase competition. Over time, as more housing becomes available at a quicker and more predictable pace, developers will lower or stabilize their rents in order to remain competitive. In this way, all renters will see relief.

Additional interviews with urban designers and civil engineers reveal that regulatory delay stifles private sector innovation in the built environment. Interviews indicate that developers seeking approvals on projects that contain innovative methods, in these cases green infrastructure and clustered development patterns, sustain even longer review timelines. These developers indicate that they must either “pay to wait, or pay to redesign,” often resulting in the abandonment of innovation in favor of standard development types that will receive speedier approvals.

Combined, interviews and case studies suggest that regulatory delay promotes exurban growth instead of urban infill in the Austin metropolitan area. Regulatory delays in effect incentivize residential developers to work in surrounding jurisdictions with more certain approval processes, while employment centers remain in Austin. Developers say that their projects get approved in half the time or less in Round Rock and San Marcos than in Austin. Combined with jobs concentrated in the urban core of Austin, these development patterns exacerbate the city’s already stressed transportation infrastructure, and perpetuate the construction of lower priced housing developments in the periphery while their residents continue to endure long commutes into Austin.

Enforcing existing permitting timeframes is the most straightforward, cheapest, and least politically sensitive action a city can take to reduce or maintain the cost of development and housing prices.

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