How permitting process length influences development costs and real estate prices

Abstract

The study presents a methodology which can be employed by a wide array of stakeholders in the urban real estate market: policymakers, developers, investors as well as individuals. The methodology is widely applicable globally, and various economic variables can be appropriately linked to its results in order to make the economic implications of the length of permitting processes more transparent and promote affordable housing development and sustainable urban development. Across a unique primary dataset of 189 development projects in Prague, we find significant differences in the time required to obtain permits and to undertake construction work for buildings of different functional types. We attribute these differences primarily to public resistance to certain types of development. Our research also quantifies the percentage increase in construction prices that results from delays in the pre-construction process. We find that residential and mixed-use developments face significantly longer permitting processes than industrial development. This is a surprising finding, as these functions generally don’t give rise to as many externalities, necessitating stricter regulation. In addition, we also find that central locations face longer delays and greater price increases.