This is one of those discussions that is perfectly reasonable, but wildly disconnected from reality.
The first disconnect is no connection to the width and breadth of types of construction that must be permitted.
Back in the day, I oversaw the construction of One American Center in ATX. It was the first high rise office building built in downtown ATX in 30 years.
We employed architects, engineers, and consultants from outside ATX simply because there was nobody with that expertise in ATX at that time.
Equally, there was nobody in the Planning and Building Inspection Department who had experience in the elements of a high rise office building. Good people all, just not their experience.
As a result I went out of my way to retain top flight design pros who came to ATX to meet the inspectors and the entire Planning and Building Inspection Department. It was easy to gain access because nobody else in the city was building a CBD high rise office building.
We did several unnovative things on that project -- fast elevators, largest concrete pump in the US from Germany, and, before NAFTA, bought granite in Oklahoma, shipped it to Puebla, Mexico for fabrication, and shipped it back to the US.
We used a big, experienced general contractor whose project manager had an undergraduate degree in CE and an MBA from Harvard.
I had learned the complexities of such projects in the Corps of Engineers and for a major oil company.
Everybody -- including the city -- was on the same page. We got timely plan review, building permit issuance, and inspections because we managed the process. The biggest challenge for tall buildings at that time was he Fire Department figuring out how to fight a fire at the top of the building.
The day we broke ground we had already scheduled the entire project and delivered on time and right on the money. We built that project in 12 months, a project most contractors said would take 18-24 months.
The reason that project got built so fast was scheduling, supply chain management, constant project reviews, and dogged adherence to the scuedule.
I belabor this point to suggest that there has to be a subdivision between large, complex projects and smaller projects as well as the type of projects.
High rise office buildings require constant regulatory contact whilst a single family house does not. Hospitals, airports, water treatment plants, schools, apartments, and big infrastructure projects are wildly different from simple single family projects.
There is plenty of opportunity for contracting out plan review and construction inspection, but not at the same level dependent upon project size/complexity and type. One size does not fit all.
The first step is to standardize what plans are required for every type of porject -- site plan, utility plan, foundation plan, architecture, MEP/HVAC/FP, windows, roof, and the inspection plan. Single family has the inspection schedule down fairly well.
Before you do that, you have to ensure th design professionals certify their work being to the ATX or other location's build code. This certification is implied when a design pro stamps the drawings.
The review professionals have to be real pros with professional degrees. If AI is to be employed it has to be standardized.
The AI app has to be standardized and used by the designers, the contractors, the owners, and the reviewers/inspectors.
When One American Center was built, the designers were top flight, the owner's rep had a CE degree and an MBA, the project manager had a master's in CE/years of engineering consulting/design experience and was a Captain in the CBs, the contractor's project manager had a CE degree and an MBA. That was a lot of talent.
The AI app has to tie all those persons togeher. Those plans today would all be digitized so the AI plan review and inspection is a logical extension.
Most building departments are digitized just like local government.
What will be very difficult is to inspect things like density at the bottom of an excavated footing, concrete slump, re-bar tying, quality of welds, pipe instulation, and a myriad of qualitative conditions.
Crawl, walk, run -- digitize the easy stuff, standardize the AI app, and begin to use it on the really easy things.
Almost all of the time gains will be the productive of administrative efficiency.
Closing word -- there is a lot of shitty plans and construction out there. This is not just a "check gth box" exercise. Do not believe that regulation is just a pain in the ass.
I was in the construction racket for almost half a century and did not encounter much raw incompetene. Remember we are talking about getting building permits.
My experience is that incompetent and apthetic people do not put up much fight.Tthey are often the type of person who gives you what you want because that is the path of least resistance for them.
AI could be useful in negotiating disagreements when there is a genuine difference of opinion.
Thank you for posting this. Construction does not only have a technology problem, it has a scale, structure, incentive, and cultural problem. Permitting is one issue, and yes, tech can help.
I have identified a solution to the RE housing crisis that would unfreeze the market, increase transaction, create millions of homes available on the market. This solution will have a direct impact on GDP, won't cost taxpayers a dime, and have a direct positive impact on midterms.
Can anyone get me in touch with Joe Lonsdale so I can explain this to him?
Single family housing should be the focus, as cost, permitting, and regulation have reduced housing stock. The median house cost has gone from 1.7x per capita income in the 1970’s to 6x per capita income today. It destroys family mobility, workforce mobility, family formation, fertility, and lifetime wealth accumulation. This also trickles into politics and voting preferences. Part of this is permitting and part of this is building codes. Both need to move from public to private, and both need to move from a prescriptive political process based on permission to a market driven process.
For example, I should be able to build my house as I please, to no standard at all or to a range of ‘bronze’, ‘silver’, ‘gold’, or ‘platinum’ standards. House insurance, property value, home appreciation, resale value , mortgage cost and availability would all adjust to the documented quality of the home. If I build a shanty it gets priced as a shanty, insured as a shanty, appreciates as a shanty, gets a mortgage as a shanty, and is resold at the value of the shanty. No government required.
Under this scenario, any third party could validate the quality of the build, and private sector standards (such as LEED) would quickly fill the space. Competing private standards would quickly gain market dominance.
But what about public risk? What about shoddy wiring that leads to a fire, a poorly built deck that falls onto a neighboring house, a roof that flies off in high winds and damages a car, or mold from poor building practices? Again, insurance products and personal legal liability for unsafe practices (negligence, etc) would cover 99.9% of cases.
The truth is that building codes were more than good enough to ensure safe, solid houses since the 1960’s, private inspectors can find 99% of any problem during a house sale, and the government process is mostly about extracting rents.
It is absurd to pretend we have private property rights when it is illegal to provide oneself and one’s family with shelter without paying fees and asking government for permission.
Errr, maybe I am missing something obvious, but permitting is meant to ensure compliance with a set of rules, and when it is outsourced to a third party, what is there to prevent the third party provider from being too lax and signing off projects they should not have? Their incentive is to always allow construction, to get more business. What am I missing?
Here in Florida building plan review and inspections are allowed for commercial building construction by a third-party, but for the building only not site construction plan review and inspections. We have been using third-party private inspectors for several years and have found them to be extremely well-qualified and responsive to our needs. While it is fairly expensive, plan reviews that took 2 - 3 months to get through the local building dept. can now be done in a week (yes I said a week) and inspections are guaranteed within 24 hours. So, buildings are going fine, but there is still a huge log jam with site construction plan review and inspections. Those reviews are 90 - 120 days and close-out of the permit is inordinately long and tedious which holds up the C.O. for the building as well. Just completed construction of a 137' roadway, with utilities, that serve 3 outparcels and it took almost 8-months post-construction to get the final sign-off from the county. Insanity prevails!
Homebuilders wont suddenly build more houses if they get permits faster. Many major builders are allowed to build without their permits complete anyways (here in San Diego, Lennar can build once they submit for a permit for example). Builders will always build at a trickle pace "sales pace" because they want to keep the price as high as possible (as they should, theyre a business) and they dont want to carry inventory of finished goods.
Is failure in process intent or poor information? Why can't AI do Lint?
Instead of AI replacing a government function, what if I send in a permit or building plan and an independent AI watchdog reviews in parallel? It sees the emails. It informs both the applicant and the city what is right or wrong.
Submit the plans, AI says this, and that are good or bad, then the City person knows they are being monitored. The AI could help argue on your behalf.
I had a similar thought on crime/courts. Prosecutors overcharge and then use their position of better information to convince a defendant to take a plea. If police gather evidence, it is fed into AI tools that can look at all past court cases and similar evidence, and say 5% of the time people are convicted based on similar evidence, then it provides that viewpoint to the prosecutor, defense attorney, and the judge. Do all three behave better? Does sharing better information with everyone lead to better answers?
Materials and labor are the big ticket items on new builds and renovations for housing (commercial is a whole other beast). There's a wide range of permit costs, depending on the town/city and what specifically needs to get permitted, including permit variances. It's not just the permit cost, but the work stoppages for the permit inspections. Time is money.
Permits are not the problem in construction. Its a broken marketplace. The best solution is govt(s) should only auction land direct to individual consumers/families. Kinda like land rushes back in the 1800s. Bar all corporations, partnerships, LLCs from participating. Cut-out the middle-men and give land to low and middle income people.
As I mentioned above, a homebuilder has little incentive to build fast. An individual who owns their own land and wants to live in their house does.
Land rushes are one of the stdongest factors why America had such a robust middle class from the 1800s to mid 1900s. With the middle class disappearing, this is a way to bring it back.
If that was true, when they built tracts theyd release dozens of homes at a time. They release a handful a week, at most. They dont amass inventory. This isnt theory, its fact. They build at sales pace. Most big builders do not build "on spec" as its called, speculatively. There are some mid and regional players who do that occassionally. For the most part, builders build when they know the sale is there. This simple fact + the lack of detailed, coordinated building instructions and poor communication between trades = slow build times. Permitting times should be improved but they are not some magic unlock. They wont move the needle to bringing more inventory online which is the only thing that will cause downward pressure on price. But to get more inventory you would need more supply of labor force + more supply of materials, otherwise increased demand to build more houses will just send prices up, not down.
If builders build fast and sit on inventory, that puts downward pressure on the home price(s) and hurts their unit margin. Their incentive is to build at sales pace, not as fast as possible.
Permits are Power. Cities ain’t giving up any Power.
This is one of those discussions that is perfectly reasonable, but wildly disconnected from reality.
The first disconnect is no connection to the width and breadth of types of construction that must be permitted.
Back in the day, I oversaw the construction of One American Center in ATX. It was the first high rise office building built in downtown ATX in 30 years.
We employed architects, engineers, and consultants from outside ATX simply because there was nobody with that expertise in ATX at that time.
Equally, there was nobody in the Planning and Building Inspection Department who had experience in the elements of a high rise office building. Good people all, just not their experience.
As a result I went out of my way to retain top flight design pros who came to ATX to meet the inspectors and the entire Planning and Building Inspection Department. It was easy to gain access because nobody else in the city was building a CBD high rise office building.
We did several unnovative things on that project -- fast elevators, largest concrete pump in the US from Germany, and, before NAFTA, bought granite in Oklahoma, shipped it to Puebla, Mexico for fabrication, and shipped it back to the US.
We used a big, experienced general contractor whose project manager had an undergraduate degree in CE and an MBA from Harvard.
I had learned the complexities of such projects in the Corps of Engineers and for a major oil company.
Everybody -- including the city -- was on the same page. We got timely plan review, building permit issuance, and inspections because we managed the process. The biggest challenge for tall buildings at that time was he Fire Department figuring out how to fight a fire at the top of the building.
The day we broke ground we had already scheduled the entire project and delivered on time and right on the money. We built that project in 12 months, a project most contractors said would take 18-24 months.
The reason that project got built so fast was scheduling, supply chain management, constant project reviews, and dogged adherence to the scuedule.
I belabor this point to suggest that there has to be a subdivision between large, complex projects and smaller projects as well as the type of projects.
High rise office buildings require constant regulatory contact whilst a single family house does not. Hospitals, airports, water treatment plants, schools, apartments, and big infrastructure projects are wildly different from simple single family projects.
There is plenty of opportunity for contracting out plan review and construction inspection, but not at the same level dependent upon project size/complexity and type. One size does not fit all.
The first step is to standardize what plans are required for every type of porject -- site plan, utility plan, foundation plan, architecture, MEP/HVAC/FP, windows, roof, and the inspection plan. Single family has the inspection schedule down fairly well.
Before you do that, you have to ensure th design professionals certify their work being to the ATX or other location's build code. This certification is implied when a design pro stamps the drawings.
The review professionals have to be real pros with professional degrees. If AI is to be employed it has to be standardized.
The AI app has to be standardized and used by the designers, the contractors, the owners, and the reviewers/inspectors.
When One American Center was built, the designers were top flight, the owner's rep had a CE degree and an MBA, the project manager had a master's in CE/years of engineering consulting/design experience and was a Captain in the CBs, the contractor's project manager had a CE degree and an MBA. That was a lot of talent.
The AI app has to tie all those persons togeher. Those plans today would all be digitized so the AI plan review and inspection is a logical extension.
Most building departments are digitized just like local government.
What will be very difficult is to inspect things like density at the bottom of an excavated footing, concrete slump, re-bar tying, quality of welds, pipe instulation, and a myriad of qualitative conditions.
Crawl, walk, run -- digitize the easy stuff, standardize the AI app, and begin to use it on the really easy things.
Almost all of the time gains will be the productive of administrative efficiency.
Closing word -- there is a lot of shitty plans and construction out there. This is not just a "check gth box" exercise. Do not believe that regulation is just a pain in the ass.
Cheers.
This doesn’t address incompetence and apathy or government employees.
I was in the construction racket for almost half a century and did not encounter much raw incompetene. Remember we are talking about getting building permits.
My experience is that incompetent and apthetic people do not put up much fight.Tthey are often the type of person who gives you what you want because that is the path of least resistance for them.
AI could be useful in negotiating disagreements when there is a genuine difference of opinion.
Corruption, OTOH, is harder working.
Thank you for posting this. Construction does not only have a technology problem, it has a scale, structure, incentive, and cultural problem. Permitting is one issue, and yes, tech can help.
Construction labor productivity has fallen more than 30% since 1970, the only major sector that has done this. Economists have called this "strange and awful." There's lot of room to modernize and get costs down. I write about this space at @levelsetbrief and the post on construction productivity is at https://levelsetbrief.substack.com/p/why-construction-productivity-has?r=1puo2m&utm_campaign=post-expanded-share&utm_medium=post%20viewer
I have identified a solution to the RE housing crisis that would unfreeze the market, increase transaction, create millions of homes available on the market. This solution will have a direct impact on GDP, won't cost taxpayers a dime, and have a direct positive impact on midterms.
Can anyone get me in touch with Joe Lonsdale so I can explain this to him?
JT
Single family housing should be the focus, as cost, permitting, and regulation have reduced housing stock. The median house cost has gone from 1.7x per capita income in the 1970’s to 6x per capita income today. It destroys family mobility, workforce mobility, family formation, fertility, and lifetime wealth accumulation. This also trickles into politics and voting preferences. Part of this is permitting and part of this is building codes. Both need to move from public to private, and both need to move from a prescriptive political process based on permission to a market driven process.
For example, I should be able to build my house as I please, to no standard at all or to a range of ‘bronze’, ‘silver’, ‘gold’, or ‘platinum’ standards. House insurance, property value, home appreciation, resale value , mortgage cost and availability would all adjust to the documented quality of the home. If I build a shanty it gets priced as a shanty, insured as a shanty, appreciates as a shanty, gets a mortgage as a shanty, and is resold at the value of the shanty. No government required.
Under this scenario, any third party could validate the quality of the build, and private sector standards (such as LEED) would quickly fill the space. Competing private standards would quickly gain market dominance.
But what about public risk? What about shoddy wiring that leads to a fire, a poorly built deck that falls onto a neighboring house, a roof that flies off in high winds and damages a car, or mold from poor building practices? Again, insurance products and personal legal liability for unsafe practices (negligence, etc) would cover 99.9% of cases.
The truth is that building codes were more than good enough to ensure safe, solid houses since the 1960’s, private inspectors can find 99% of any problem during a house sale, and the government process is mostly about extracting rents.
It is absurd to pretend we have private property rights when it is illegal to provide oneself and one’s family with shelter without paying fees and asking government for permission.
Errr, maybe I am missing something obvious, but permitting is meant to ensure compliance with a set of rules, and when it is outsourced to a third party, what is there to prevent the third party provider from being too lax and signing off projects they should not have? Their incentive is to always allow construction, to get more business. What am I missing?
Here in Florida building plan review and inspections are allowed for commercial building construction by a third-party, but for the building only not site construction plan review and inspections. We have been using third-party private inspectors for several years and have found them to be extremely well-qualified and responsive to our needs. While it is fairly expensive, plan reviews that took 2 - 3 months to get through the local building dept. can now be done in a week (yes I said a week) and inspections are guaranteed within 24 hours. So, buildings are going fine, but there is still a huge log jam with site construction plan review and inspections. Those reviews are 90 - 120 days and close-out of the permit is inordinately long and tedious which holds up the C.O. for the building as well. Just completed construction of a 137' roadway, with utilities, that serve 3 outparcels and it took almost 8-months post-construction to get the final sign-off from the county. Insanity prevails!
Homebuilders wont suddenly build more houses if they get permits faster. Many major builders are allowed to build without their permits complete anyways (here in San Diego, Lennar can build once they submit for a permit for example). Builders will always build at a trickle pace "sales pace" because they want to keep the price as high as possible (as they should, theyre a business) and they dont want to carry inventory of finished goods.
Is failure in process intent or poor information? Why can't AI do Lint?
Instead of AI replacing a government function, what if I send in a permit or building plan and an independent AI watchdog reviews in parallel? It sees the emails. It informs both the applicant and the city what is right or wrong.
Submit the plans, AI says this, and that are good or bad, then the City person knows they are being monitored. The AI could help argue on your behalf.
I had a similar thought on crime/courts. Prosecutors overcharge and then use their position of better information to convince a defendant to take a plea. If police gather evidence, it is fed into AI tools that can look at all past court cases and similar evidence, and say 5% of the time people are convicted based on similar evidence, then it provides that viewpoint to the prosecutor, defense attorney, and the judge. Do all three behave better? Does sharing better information with everyone lead to better answers?
Don't know about other states, but in Kalifornia, permits are all about the money. Permit fees are a large percentage of the selling price of a home.
That is completely untrue. Show a source to back that claim up. The vast majority of selling price is materials & labor of each trade.
Materials and labor are the big ticket items on new builds and renovations for housing (commercial is a whole other beast). There's a wide range of permit costs, depending on the town/city and what specifically needs to get permitted, including permit variances. It's not just the permit cost, but the work stoppages for the permit inspections. Time is money.
Permits are not the problem in construction. Its a broken marketplace. The best solution is govt(s) should only auction land direct to individual consumers/families. Kinda like land rushes back in the 1800s. Bar all corporations, partnerships, LLCs from participating. Cut-out the middle-men and give land to low and middle income people.
No
As I mentioned above, a homebuilder has little incentive to build fast. An individual who owns their own land and wants to live in their house does.
Land rushes are one of the stdongest factors why America had such a robust middle class from the 1800s to mid 1900s. With the middle class disappearing, this is a way to bring it back.
> a homebuilder has little incentive to build fast.
Yes, he does. He gets paid sooner.
If that was true, when they built tracts theyd release dozens of homes at a time. They release a handful a week, at most. They dont amass inventory. This isnt theory, its fact. They build at sales pace. Most big builders do not build "on spec" as its called, speculatively. There are some mid and regional players who do that occassionally. For the most part, builders build when they know the sale is there. This simple fact + the lack of detailed, coordinated building instructions and poor communication between trades = slow build times. Permitting times should be improved but they are not some magic unlock. They wont move the needle to bringing more inventory online which is the only thing that will cause downward pressure on price. But to get more inventory you would need more supply of labor force + more supply of materials, otherwise increased demand to build more houses will just send prices up, not down.
If builders build fast and sit on inventory, that puts downward pressure on the home price(s) and hurts their unit margin. Their incentive is to build at sales pace, not as fast as possible.