What Los Angles Permitting Actually Costs in Housing Development
A new paper measures the cost of building permits in Los Angeles. Permitting adds a dollar for every three spent on construction.
Consider what happens during the years a building permit sits in regulatory review in Los Angeles.
A family of four is paying $2,400 a month for a two-bedroom apartment, roughly $800 more than the same unit would cost in a city that builds at a reasonable pace. Over two years of permitting delay, that family transfers an additional $19,200 to their landlord that they will never recover. Their older child starts school and finishes first grade. Their savings for a down payment go nowhere, because the home they might have bought is still a set of architectural drawings cycling through a planning department.
Now consider it from the builder’s side. A proposed 30-unit apartment complex enters the permitting pipeline in Los Angeles. On average, it will take 4.2 years from permit submission to the issuance of a certificate of occupancy. For the median project, roughly 40 percent of that time is consumed not by construction but by obtaining permission to construct, a period that includes pre-filing preparation and regulatory review. During those months, interest rates can spike or a community group can file an appeal under the California Environmental Quality Act. Surveys of California planners suggest that proposals are often not merely delayed but abandoned outright.
Everyone in real estate development will tell you permitting imposes costs. The question has been how large those costs are, and whether they matter for housing affordability at the scale of a city. A new paper by Evan Soltas and Jonathan Gruber (”How Costly Is Permitting in Housing Development?“) provides a rigorous answer for a major American city.
Measurement problem
Why has it been so hard to measure the cost of permitting?
First, the costs are largely unobserved. Developers’ compliance expenditures (architecture fees, legal fees, expediting costs, the opportunity cost of capital tied up during review) are proprietary.
Second, permitting costs are equilibrium objects, not fixed policy parameters. Developers design their projects with permitting in mind. A builder who anticipates a three-year review might scale down the proposal, choose a less contentious site, or forego the project entirely. The projects we observe in the data are survivors of a selection process shaped by the very costs we want to measure.
Third, building permits are never traded separately from land and structures. In pollution markets, cap-and-trade systems generate an explicit price for the right to emit. In housing, there is no analogous market for the right to build. A permit is bundled with a specific parcel, and the two change hands together.
Soltas and Gruber solve this problem by finding a setting where permits are, in effect, traded separately from land.
The ready-to-issue market
In Los Angeles County, there exists a mature submarket for “ready-to-issue” (RTI) properties. A landowner, often a specialized investor, acquires a parcel of raw land and takes a complete set of building plans fully through the local permitting process: planning review, environmental review, any necessary appeals. Once all approvals are secured, the investor lists the property for sale, bundling the land with the legal right to build a specific project. The buyer can pull permits and begin construction immediately.
The RTI market is not a curiosity. In some Los Angeles neighborhoods, it accounts for one in four land sales. Total transaction volume reached $353 million in 2024. This market creates an implicit price for development approval. When a developer pays more for a parcel with RTI permits than for a comparable parcel without them, the premium reveals the developer’s willingness to pay to skip the permitting process.
How slow is it?
The paper assembles permit microdata from 12 U.S. cities, allowing standardized comparisons of how long it takes to build the same type of project in different regulatory environments.
For a standardized 30-unit apartment building, the average time from permit submission to certificate of occupancy is 4.2 years in Los Angeles County. In Raleigh or Fort Worth, the same project takes roughly half that.
Why is Los Angeles so slow? Proposed developments face two main stages of review: a discretionary planning (”entitlement”) stage and a ministerial, technical permit stage. Roughly three quarters of projects with 20 to 49 units face discretionary planning review. Around three in four developments with five or more units face review under the California Environmental Quality Act, and one in five of those reviews are themselves appealed. Planning decisions can be further appealed to politically appointed Area Planning Commissions. Projects may also require approval from the California Coastal Commission or local utility boards.
The result is a series of sequential review stages, each with its own queue, its own decision-makers, and its own appeal pathways. Throughput is governed by the slowest stage, and any stage can kill the project outright. Within Los Angeles County, the paper finds striking variation: in dense, desirable areas like Santa Monica and Westwood, the standardized apartment building takes around five years. In other neighborhoods, time-to-build is comparable to Raleigh and Fort Worth. The variation suggests the bottleneck is not physical constraint or labor-market tightness but the regulatory apparatus itself.
The fifty-percent premium
The paper’s core empirical exercise assembles 95,724 unique properties listed on the Multiple Listing Service for Los Angeles County from 1995 to 2024. Of these, 5,092 were listed both with and without permits, the “switchers” whose changes in permit status allow identification.
To classify whether a property has preapproved permits, the authors use large language models to read MLS listing descriptions, validated against extensive human review (92 percent agreement for fully preapproved properties).
The main empirical strategy is a repeat-listing difference-in-differences design. Among properties that appear multiple times in the data, the authors compare price changes that coincide with a change in permit status to price changes on properties that remain unpermitted throughout. By examining the same parcel before and after it obtains permits, the design removes everything fixed about the property that might confound a cross-sectional comparison.
The headline result: permit approval raises the price of vacant land by 50 percent on average, with a standard error of 5 percentage points. The median implicit price of an approval is approximately $48 per square foot of land, or about $770,000 per property. Using construction-cost benchmarks from R.S. Means Company, permitting amounts to approximately 36 percent of physical construction costs. For every three dollars spent on materials, labor, equipment, and site work, permitting adds roughly another dollar.
The estimate is robust. The event study shows no pretrend through nine years before permit approval, with price capitalization beginning approximately two years before, consistent with the timing at which listings begin mentioning permitting is “in progress.” The estimate survives zipcode-by-year fixed effects, time-varying neighborhood controls, ML embeddings of listing text, and restrictions dropping distressed or very high-priced sales. An instrumental-variables approach using human-validated classifications suggests the OLS estimate, if anything, understates the true premium.
For nonvacant properties (land with existing structures), the percentage premium is smaller, around 10 percent, which is expected: the permit premium is diluted by the existing structure’s value. When the authors reweight the nonvacant sample to resemble the vacant one on observable characteristics, the dollar-value premia are statistically indistinguishable.
Who does the permitting?
The producers of preapproved land are not, in the main, long-term landowners who happen to secure permits before selling. They are specialized intermediaries who acquire raw land specifically to permit and resell.
Two pieces of evidence make this clear. First, the preapproval rate follows a hump shape with holding period: very low for properties held less than six months (too short to complete permitting), peaking around three years (consistent with permitting timelines), and declining for longer holds. Second, sellers of preapproved land preapprove 61 percent of their other sales, 49 percentage points above what property and seller characteristics would predict. Under reasonable assumptions, specialists account for roughly 80 percent of preapproved new-dwelling sales.
The RTI market is a functioning secondary market in regulatory approvals, intermediated by specialists who have built organizational capacity to navigate the process. The approval premium in transaction data reflects an equilibrium return on a productive (if socially wasteful) investment, not a statistical artifact.
What preapproval does to time-to-build
If developers pay a 50 percent premium for preapproved land, what do they get?
Using a hazard model that compares preapproved properties to observably similar ones without permits, the authors estimate what would have happened to preapproved projects if they had instead started from raw land. At four years after site acquisition, only about 35 percent would have completed construction. Preapproval raises that probability by 8 to 12 percentage points, roughly a 30 percent improvement. Even with preapproval, the four-year completion rate is under 50 percent. Without it, nearly two in three projects would fail to deliver housing within four years.
The preapproval advantage emerges between one and three years after site acquisition, exactly when you’d expect if preapproval lets development begin immediately while other buyers wait for permits. Benchmarked against the actual time-to-permit of preapproved properties (median of 2.2 years from permit submission, 3.0 years from site acquisition), the market for development approvals transfers waiting time from developers to landowners on roughly a one-for-one basis. The total time-to-build does not change. What changes is who bears the wait.
This is the key limitation of the RTI market. It does not reduce the aggregate burden of permitting. It reallocates it. The specialist absorbs the risk and delay; the developer pays a premium to avoid it.
Pure wait versus capitalized hassle
The paper proposes a useful decomposition. Why do developers pay 50 percent more for preapproved land? Is it because they’re paying to skip the wait, or because they’re paying to avoid the work of getting permitted?
The first component, “pure wait,” is straightforward. Even if permitting consumed zero resources, raw land would still trade at a discount to approved land. The developer has to wait before building, and waiting costs money. Capital is tied up. Interest accrues. Revenue is deferred. At any positive discount rate, a dollar of profit two years from now is worth less than a dollar today.
The second component, “capitalized hassle,” captures everything else: the architecture fees, legal fees, filing costs, and staff time that developers actually spend navigating the process.
At a discount rate of 10 percent per annum, the split is roughly even. But the authors are candid that these shares are imprecise. At plausible discount rates, they cannot rule out that the entire premium reflects pure wait, with hassle costs contributing little.
This matters for reform. If permitting is expensive mainly because it takes too long, the right fixes are about speed: binding deadlines, fewer sequential review stages, more permitting staff, limits on appeals. If it’s expensive mainly because the process is burdensome, the right fixes are about simplification: fewer filing requirements, less redundant multi-agency review, lighter documentation standards. In practice the two are hard to separate. Complex filings create review backlogs, backlogs extend wait times, and longer waits expose projects to shocks that trigger additional filings. The system feeds on itself.
Permitting’s share of the total regulatory burden
The paper’s final major analysis places permitting costs in context of the overall gap between housing prices and construction costs, the “housing cost wedge” central to housing regulation economics since Glaeser and Gyourko (2003).
For the median home sale in Los Angeles in 2024, prices were approximately 120 percent above physical construction costs. This wedge varies dramatically by neighborhood. In Santa Monica and Westwood, home prices exceed construction costs by a factor of four or more. In the Mojave Desert or economically distressed parts of South Los Angeles, the wedge is small or nonexistent.
On citywide average, permitting accounts for roughly one third of this wedge. In the highest-wedge neighborhoods, permitting contributes around 85 percent of construction cost. In the lowest-wedge neighborhoods, almost nothing.
One third is substantial. But two thirds is explained by other forces: zoning limits on density, the intrinsic scarcity of desirable locations, and whatever else generates the gap between sale prices and build costs. Permitting reform alone will not make Santa Monica affordable.
For an upper bound on what reform could achieve: if Los Angeles reached the permitting speed of Fort Worth or Raleigh, the gain would be equivalent to 21 percent of construction costs, potentially raising citywide-average land prices by as much as 25 percent. That is a large prize. But the city’s most recent permitting reforms, transit-oriented incentive programs intended to streamline approvals near rail stations, had little apparent effect on actual construction.
What this means in operational terms
This paper does not tell us that permitting is the sole or even the primary cause of housing unaffordability in Los Angeles. It tells us that permitting imposes costs equivalent to one third of the total regulatory tax on new housing in a city where that tax is already enormous. It tells us those costs are large enough to sustain a specialized industry devoted to their arbitrage. And it tells us the primary mechanism is time.
The system lacks binding time constraints. Without enforceable deadlines, review stages expand to absorb available capacity and then some. The appeal structure amplifies delay nonlinearly: a single CEQA appeal can restart a review process that has already consumed months, and the option to appeal at multiple stages creates compound uncertainty that developers must price into their projects.
Perhaps most importantly, the system generates no usable feedback about its own performance. The permitting bureaucracy does not track the ratio of applications to completions, the average queue time by review stage, or the rate at which projects are abandoned in process. Without such measurement, there is no mechanism by which the system can detect its own dysfunction. The RTI market, ironically, provides the performance signal the bureaucracy does not: a 50 percent price premium is the market’s verdict on the cost of navigating the regulatory apparatus.
No one is arguing for the abolition of permitting. Structural safety and environmental protection are legitimate purposes. But a process that adds a dollar of cost for every three dollars of physical construction, that kills the majority of projects before four-year completion, and that has spawned an entire intermediary industry devoted to navigating it, is a process whose costs have grown far beyond any plausible accounting of its benefits. Soltas and Gruber give us a credible measure of those costs. Whether anyone in a position to reform the system will act on it is a separate question.