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City of Dallas Residential Building Permit Process Remains in Total Disarray

Some developers are now saying they won't do business here. The suburbs are cashing in.
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state of Dallas real estate market

The city of Dallas’ system for approving residential, single-family building permits does not appear to be improving, despite months of frustration from the development community and council members. The result: hundreds of houses that could have been built weren’t. According to data provided by global real estate analyst Zonda Meyers Research, Dallas likely lost out on between 587 and 849 new houses from the onset of the pandemic, in March, through November of last year.

This appears to be a uniquely Dallas problem. City staff went home to work in mid-March, forcing the permitting process online. But data show that neighboring cities didn’t have the same operational problems Dallas did. The region as a whole issued 16 percent more permits in 2020 than it did in 2019, but the city of Dallas issued 36 percent fewer permits over the same period: 1,050 compared to 1,637. The decrease didn’t result from lack of demand. Of 18 surrounding cities, just three — McKinney, Allen, and Denton — issued fewer permits than the same period of the prior year, and the decreases in McKinney and Allen were basically negligible: just 3 percent and 6 percent.

“There is no market evidence of anything other than the city’s problems getting in the way of moving these projects through,” says Phil Crone, the head of the Dallas Builders Association. “Every month that goes by and every week these turnaround times get worse, these problems add up. And it’s not just for tax revenue, but for families that aren’t going to get a chance to call Dallas home.”

But missed tax revenue is absolutely a piece of this. Assuming the median price of these new homes is $450,000, Zonda Meyers Research estimates the city of Dallas has missed out on adding between $264 million to $382 million to its taxable base during a recession while staring down a looming budget shortfall.

“I don’t see that there is an urgency here that we should have,” says Councilman Chad West, who represents North Oak Cliff and has been the most vocal representative about resolving this issue. Until recently, West chaired the city’s Housing and Homelessness Solutions Committee. “The permitting office is our main avenue for property tax revenue in the city, which we need for all basic services: public safety, parks, libraries, everything. This is where every single housing development has to go to meet our housing needs.”

D CEO broke the news of the backlog in September, when 445 applications were waiting to be processed. The city blamed the issue on shoddy technology that couldn’t handle the processing requirements once everything went online. Staff in the department of Sustainable Development and Construction admitted that what once took two days was taking two months.

Before the pandemic, developers and builders packed into a cramped room at the Oak Cliff Municipal Center to go over documents in person. When that process went online, staff used a popular permit-process program called ProjectDox. The city has said that developers are submitting incomplete applications, which only add to how much time the permits take to process. But the development community can’t understand why Dallas is having such problems and other North Texas cities aren’t.

There are two processes by which developers secure a residential building permit: pre-screen and plan review. In a memo to the City Council, City Manager T.C. Broadnax said there were still 457 single family projects stuck in the plan review process, a decrease from the 642 that were there in October. But the status still looks pretty close to the backlog that existed in September. He anticipates that clearing it will take 12 to 15 weeks, or by the end of the first quarter.

While the backlog of permits awaiting pre-screening dropped from 464 in August to 141 at the end of last year, all they’re doing is marinating in the next review phase. The responses detailed in Broadnax’s memo only seem to echo what staff told City Council a month ago: overtime for staffers, more training, better computers. The problem remains basically the same.

“If this was any kind of privately run business, you would have the president, CEO, and all of the senior managers jumping in the middle of the pit figuring out what we need to do to get our revenue stream kicked into high gear,” West said. “It seems like a lot of lip service and excuses, and I am at my limit.”

West hoped to see a “massive shift in city resources” to address the issue. That isn’t in the memo, he said. Broadnax says relevant staff will be issued better computers with “expanded memory and faster processing speeds to assist with managing large files associated with plan review.” Alan Hoffman, a housing developer and builder who owns Hoffman Homes in East Dallas, told me ProjectDox does not allow for PDFs with multiple pages to be uploaded, so he has to separate them and upload them one by one.

“It’s like they’re working with Commodore 64s,” he said.

Crone, of the Builder’s Association, was also disappointed with the city’s response, especially after seeing the data from surrounding cities. “By March [of 2021], it will have taken the city of Dallas more than a year to do what every other city was able to do by last March,” he said.

Fort Worth actually processed almost 2,000 more permits during the pandemic last year than it did in the same eight months of 2019, an increase that was double the city of Dallas’ entire output. Fort Worth issued 5,645 permits during that period, up from 3,851 in 2019. And, sure, Fort Worth has more land and planned developments than Dallas, but Crone says this is evidence that its staff responded far better to the pandemic than Dallas’ did.

The concern here is that the builders and developers won’t come back and build here. They describe surrounding cities as more consistent and “predictable.” Hoffman says he normally aims to complete an entire house in 90 days; it’s taking about that long just get a building permit in Dallas.

Dallas is swimming against a natural current that’s pulling development to the suburbs. It can’t change that. But that means Dallas has to get the simple stuff right and make it easier for developers and builders to get moving. Across the region, builders are rushing to add housing stock to meet demand. The sprawl is following the land; even Kaufman County is cashing in. Crone is more concerned about what he’s seeing in neighboring cities like DeSoto (125 percent increase in permits issued) and Grand Prairie (96 percent increase) and Red Oak (56 percent) and Irving (10 percent).

It’s worth noting that collectively those cities issued about the same number of permits as the city of Dallas. But Crone thinks those could very well have been Dallas houses, but the backlog pushed them to other municipalities. Which means those are families that will settle elsewhere. Anecdotally, he has spoken with other builders and developers who say they won’t do business in Dallas until this problem get fixed.

“I’m generally a very optimistic person; I’ve tried to bring that into my tenure as a council member,” West said. “But I have absolutely nothing positive to say about this memo or city management performance into this particular issue.”

Both Crone and West hoped to see the city reassign a surge team of staffers to help solve the problem. Crone floated the idea of the city hiring a third party to manage the system, at least until this all gets under control. Whatever happens, we’ll have to wait until February 1 to see whether the changes have made a dent. That’s the next time the city manager and staff will brief the council’s Economic Development Committee. Until then, the builders expect to see the real work to continue outside city limits.

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