Housing shortages are reshaping communities across the United States, creating ripple effects in urban and suburban markets alike. For years following the Great Recession, the pace of multifamily construction lagged behind demand, pushing rents higher and making housing increasingly unaffordable. When the COVID-19 pandemic forced millions to work from home, it magnified the issue further. While multifamily construction starts hit record highs in 2022, the industry’s slow response to market demand highlights a persistent roadblock: the complex and extended permitting process.
A recent study by the Federal Reserve Bank of Atlanta sheds light on this barrier, showing that the time needed for planning stages, particularly permitting, has increased by months. This administrative delay now outpaces the actual construction time in many cases. For developers, who operate on tight timelines and budgets, delays in planning stages can lead to costly impacts on project viability, which then trickle down to renters in the form of higher prices.
The Compounding Costs of Delay
The time it takes to secure permits and entitlements has become a significant factor in the development lifecycle. In recent years, planning has extended by three to four months beyond physical construction, creating a bottleneck that stalls housing availability when it’s most needed. For renters, this lag time translates to higher costs. Housing markets, especially rental markets, operate on supply-demand dynamics, and delays in housing supply limit options and elevate prices. So while developers are eager to meet demand, the system often slows them down, creating what economists call "inertia."
Inertia in housing construction isn’t just a problem for renters. When housing takes longer to get to market, developers face greater uncertainty and financial risk. As the Atlanta Fed report notes, developers must weigh project values at completion carefully due to unpredictable delays. The result is often a temporary glut in housing supply when projects finally come online, creating inventory mismatches with demand. While this can momentarily stabilize rent, the underlying shortage and delayed responses keep pressure on prices long-term.
Differing Estimates and the Scope of the Shortfall
The U.S. housing shortage is evident, but experts diverge on the scale of the problem. According to the Joint Center for Housing Studies at Harvard, the estimates vary widely: Freddie Mac calculated a shortfall of 3.8 million units in 2020, the National Association of Homebuilders (NAHB) estimated 1.5 million in 2021, while the National Association of Realtors (NAR) reported a staggering 5.5 million that same year. These figures reflect different measurement methods and regional needs but convey the same message—the U.S. housing supply is insufficient.
Meanwhile, the National Low Income Housing Coalition (NLIHC) highlights an even more pressing issue: affordable housing. Their research suggests a gap of 7.3 million units when looking specifically at extremely low-income households. This subset of the housing crisis illustrates the failure to address affordability, pushing policymakers to consider alternatives, such as streamlining approvals and targeting housing assistance to lower-income residents.
Streamlining Permitting and Realigning Conversions
The Atlanta Fed’s study calls for actionable changes that could directly improve housing supply efficiency. The first recommendation is to streamline the permitting and entitlements processes. The complexities and lengthy timelines required for project approvals often tie up resources and increase development costs, pushing up rents once the project is completed. If permitting were faster and more predictable, developers could respond to demand changes more effectively, and housing would reach the market sooner, alleviating some cost pressures on renters.
Another trend, commercial-to-residential conversions, is often touted as a quick fix to housing shortages, especially in office-dense regions. However, the Atlanta Fed cautions that these conversions are not the silver bullet they seem to be. In reality, these projects often take as long as or longer than ground-up construction, undermining their supposed speed advantage. Policymakers, therefore, should be wary of funneling public resources into conversion incentives unless it truly aligns with the region’s housing needs.
Geographic and Project Variations in Development Timeframes
It’s also essential to recognize the regional and project-based differences in development timelines. According to the study, project durations in the Northeast and West are significantly longer than in the Midwest and South. Additionally, mixed-use projects take longer to complete than residential-only developments, often due to requirements like ground-floor retail space in multifamily buildings. While these spaces are meant to enhance communities, they add time and cost to construction projects. Streamlining requirements for mixed-use projects could therefore allow for faster residential buildouts without sacrificing quality.
Taking Action for a More Affordable Future
Addressing housing shortages and the associated rent pressures requires an acknowledgment of the multifaceted nature of development timelines. Reducing permitting times alone will not solve the problem, but it is a critical step in enabling the market to respond to housing needs effectively. As the Atlanta Fed points out, simpler and more efficient permitting processes, coupled with a strategic approach to conversions, could help stabilize rents and make housing more affordable.
Ultimately, streamlined permitting is about more than just reducing paperwork. It’s about creating a housing market that can better serve its communities, ensuring that families, workers, and individuals have access to affordable homes. As cities grapple with growing housing needs, policymakers would be wise to take note of these insights, aligning processes with demand to build a future where housing availability is no longer outpaced by need.
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