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Zoning Out: The Pros & Cons of Outsourcing Aspects of Commercial Permitting Review

By Sarah Cullen
SCPR January blog graphic

First, we’ll state the obvious: the commercial permitting process in Denver continues to be painfully slow (233 days for some commercial projects according to CPD data). In fact, Denver’s auditor team released a detailed review of how the city handles these permits, revealing issues with construction reviews, confusing instructions, and a lack of supervision, leading to inconsistent performance.

As a communications firm that specializes in CRE and sees firsthand some of the challenges the permitting process creates across the real estate ecosystem, we’ve had a number of conversations recently about what levers can be pulled – from expediting certain kinds of permits to simplifying requirements and hiring more people to today’s topic: outsourcing. Could we do it? What would that process look like? What are the pros and cons?

While the potential benefits of cost savings, increased efficiency, and access to specialized expertise may be worth it, as many other cities have found, there’s also often pushback – concerns about transparency, accountability, and public trust must be addressed. But in some cases, communities have seen some significant benefit. 

Here’s what we learned:

Pros:

  • Cost Savings: Streamlining the permitting process can potentially deliver the service at a lower cost and a fraction of the time.
    • Example: Denver’s flawed permitting process has caused excessive costs to build in the city. (source)
  • Scalability: Outsourcing allows cities to adjust staffing levels based on workload, avoiding the rigidity of public employee contracts.
    • Example: Sending support where it’s needed can help improve the permitting wait times, provide flexibility and maintain an efficient workflow of plan reviews. New Orleans experienced significant challenges last year and brought in a third-party firm to support with volume. (source) Jacksonville similarly brought on contract team members from a third-party company to handle additional volume this year.
  • Increased Efficiency: Private companies can invest in advanced technology and software, leading to faster processing times and reduced red tape for applicants.
    • Example: Seeking a reduction in permit processing times, cities like San Diego, which has struggled to keep up with volume, have partnered with one or more private companies to create efficiencies.

 

Cons:

  • Pushback: In 2017, San Francisco proposed considering outsourcing some aspects of the permitting process to address concerns about slow processing times and backlogs. However, the proposal faced strong opposition from public employee unions and community groups, and it was ultimately not pursued. (source)
  • Transparency and Accountability: Anytime you talk about privatizing a city function, concerns are bound to pop up regarding transparency and accountability.
    • Example: In Honolulu, when a measure went before Honolulu City Council that would allow the Department of Planning and Permitting (DPP) to outsource consultants to review building permit applications initially drew criticism from the head of the largest union representing government workers, per Island News.
  • Loss of Public Control: Outsourcing can create a distance between residents and the decision-making process for crucial issues like land use and development.
    • Example: Residents may express concerns about losing control over local zoning regulations after considering outsourcing permitting.
  • Potential Conflicts of Interest: There’s a feeling that private companies may prioritize profit over public safety and environmental regulations, leading to potential ethical conflicts.
    • Example: A California city faced legal challenges after its private permitting firm was accused of approving unsafe construction projects. (source)

 

Throughout his campaign, Mayor Mike Johnston acknowledged the issue. Since taking office,  he’s said work is underway to handpick a new director for the city’s Community Planning and Development Department in addition to using money from the 2024 budget to hire three full-time employees who will help review permits, especially for affordable housing projects.

Will those efforts make a meaningful difference? What are the other levers you think the City should consider? We’d love to hear from you!

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