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Incentives Work Even for Bureaucracies

By:

  David Henderson

 

More important, the reforms also created a system that strongly incentivizes cities and counties to approve new home permits in a timely way. When a builder or property owner submits an application to build a new home, cities and counties have 30 business days to process it or request corrections.

If the government offices fail to respond in that time frame, the locality must refund 10 percent of the application fee for every additional business day of silence. Application fees can vary widely by locality, but the average cost in Florida is nearly $1,000, according to HomeAdvisor.com. If officials request corrections to the application, they have 10 business days to approve or disapprove of the resubmitted application. Blowing past that deadline leads to an automatic 20 percent refund, with a further 10 percent added for each additional missed day, up to a five-day cap.

This is from Hayden Dublois, “Florida started penalizing bureaucratic delay. Housing permits spiked,” Washington Post, July 25, 2022.

The results:

In the years leading up to the new law, the rate of increase for new home construction in Florida was about the same as the national average. Though many factors can influence home building, and the law was in effect for only a portion of the year, Florida’s home building rate in 2021 was two-thirds higher than the national average. More than 30 percent more permits were issued in Florida last year compared with 2020. Reducing red tape surely aided the boom.

READER COMMENTS

Richard W Fulmer
Aug 2 2022 at 9:06am

Regulations that regulate government is government regulation I can support.

Jon Murphy
Aug 2 2022 at 9:58am

If the government offices fail to respond in that time frame, the locality must refund 10 percent of the application fee for every additional business day of silence.

Walk me through the incentive process here, because I think I am not getting it.

The locality has to refund.  But the bureaucrats themselves do not face the direct incentive.  What cost(s) are they paying?  The threat of a tongue lashing?  A potentially reduced budget?  What’s the mechanism here?

David Henderson
Aug 2 2022 at 10:43am

Good questions.

I think the main two are the threat of a tongue lashing and a potentially reduced budget. Governments don’t like to give up revenues.

Henri Hein
Aug 2 2022 at 1:47pm

What cost(s) are they paying?

This is pure speculation on my part, based on experience I have interacting with middle managers in big corporations. Managers tend to be concerned with how they look to their peers and their own bosses. For instance, I have seen them fight personnel transfers, even when everyone else thought the transfer made sense. Budget and head-count leads to status which leads to more budget and head-count, and eventually to perks and personal advancement. I can see managers in the permit departments responding to these changes by streamlining the processes, giving their employees new criteria, etc.

JFA
Aug 2 2022 at 11:09am

I wonder if there was any impact on the application fee that is initially charged, i.e. are permit fees now more expensive.

vince
Aug 2 2022 at 1:15pm

 

Beware unintended consequences, if it’s not carefully implemented and with real consequences for mismanagement.

Consider the view from the bureaucrat.  Let’s see, if I don’t approve this application in time, our budget gets cut.  Approved!!!  Another useful alternative:  Rejected!! The T wasn’t crossed!  Not our fault.

Garrett
Aug 2 2022 at 4:46pm

What happens if a locality doesn’t like a particular builder and completely ignore the permit? The home never gets built and they’re only out $1000?

Jon Murphy
Aug 3 2022 at 7:05am

They’d probably open themselves up to lawsuits.

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