Building Permits: Types, Effect on Economy, Example

What Are Building Permits?

Building permits are a type of authorization that must be granted by a government or other regulatory body before the construction of a new or existing building can legally occur. The U.S. Census Bureau reports the finalized number of the total monthly building permits on the 18th working day of every month.

Key Takeaways

You may not need a building permit for remodeling, but you need to check with your city's building department to make sure.
Building without a permit when one is required is unwise and can result in significant penalties.
Building permits take into account weather-related concerns, such as earthquakes, flooding, or heavy snow.
All electrical wiring requires a permit.
In rare instances or when a market is especially busy, the process of receiving a permit may take longer than the valid time allowed to work on your project once the permit is issued.

Understanding Building Permits

The monthly building permit report is closely watched by economists and investors alike. Since all related factors associated with the construction of a building are important economic activities (for example, financing and employment), the building permit report can give a major hint as to the state of the economy in the near future.

The type of build permits issued can be indicators of growth or stagnation in particular segments of the economy. For example, an upsurge of commercial building permits often indicates businesses are expanding, or new companies are being established. If there is a rise in building permits for more warehouses, it can be a sign that commerce will increase in the coming years.

Types of Building Permits

The building permits that are required will vary based on geographical location, but there are some permits that are fairly common, such as pool permits, foundation repair permits, fuel storage permits, fire sprinkler system permits, and of course the permit for the structure itself.

There are some permits that you might not immediately think you would need, such as a permit for a solar heating unit, a termite repair permit, or a permit for a skylight or water heater. Depending on where you live, you may need a permit for a window replacement or even lawn sprinklers.

There are ancillary permits that might apply, such as a permit to park a trailer on the property that is under construction. You will generally need a permit to remodel, though that will depend on the scope of the remodel and if there are any safety or structural concerns. You may not need one if, for example, replacing cabinets or changing your kitchen flooring.

1.8 million

March 2022 new privately-owned housing units authorized.

Building Permits and the Economy

The issuance of residential building permits can be a barometer for consumer confidence and solvency. The U.S. Census Bureau conducts surveys of building permits for new housing units with data available for monthly, annual, and year-to-date intervals. The surveys cover the nation and are divided by region, state, metropolitan area, and county.

Building permits for new housing can run the gamut from multifamily units to single-family construction. A general increase in building permits might indicate a need for more homes. A rise in building permits specifically for single-family homes can indicate that more citizens have accumulated enough finances to afford their residences.

The process of procuring a building permit is a way for governments to enforce standards in construction. When a developer or property owner wants to build a new structure or modify an existing one, they retain the services of a licensed professional to file plans with the appropriate regulators and architects, and engineers typically draft and submit these plans for approval. The design for the proposed construction along with the expected building materials will be reviewed by authorities to ensure they adhere to building codes.

The expected durability and stability of the proposed building are assessed when plans are reviewed. Municipalities may have stringent building codes due to external factors that can affect the resulting construction. Areas that are prone to earthquakes might require all construction to be able to withstand a certain amount of tectonic activity. Buildings in areas known to experience tornadoes likewise could mandate that only materials tested against high winds can be used in construction. Once regulators are satisfied with the plans, building permits may be issued to allow construction to commence.

Example of a Building Permit

Let's say Jim and Mary have a house. It isn't large and recently Jim found out that his mother will need a place to stay as she sold her house. They don't have an extra bedroom, but they have a garage they never use that they decide to convert into an additional living space.

They will need to run electrical to the room and construct some more insulation and, if they decide to, they could run some plumbing into the garage. This is an addition to an existing structure and will require a permit for that, plus the electrical, plumbing, and insulation.

How Do You Get a Building Permit?

To get a building permit, you would need to apply for one first. Depending on the scope of the project and what it requires, you may or may not need to submit drawings or mock-ups of what the permit is requesting. Sometimes, someone will be required to file the permit for you. These are usually licensed professionals. Typically, you would submit the permit to the building authority in your city. This is usually at City Hall.

How Much Do Building Permits Cost?

The cost of a permit is not only for the permit itself. While the national average for permits for new house builds is between $1,200 and $2,000, that does not take into account the time required to draw up those plans. New housing permits are the most expensive, followed by garage conversions, general construction, basements, and bathrooms.

How Do You Find Out If a Building Permit Was Obtained?

If you are needing to know if a permit was issued, simply contact the building authority where the permit is relevant and ask. If you are wondering if the permit has been issued once submitted, this can happen in a number of ways. The city could simply sign off on it, which is the fastest and cheapest. They may decide to inspect the property or require that you provide an independent inspection. As long as everything is to code, there shouldn't be any issues.

How Do You Know If You Need a Building Permit?

The only way to know if you need a building permit is to contact the government building agency where you are planning on performing the work and asking. The good news is that most permits have fairly easy-to-follow guidelines for what needs to be done. You shouldn't worry if the requirements are outside of the scope of what you are comfortable assessing, which is why many building agencies require licensed professionals to file on your behalf.

How Long Does It Take to Get a Building Permit?

The time it takes to get a permit differs greatly based on the type of permit and where you are submitting it. For example, you may be issued a permit on the spot if it is something fairly simple. On the other hand, if you submit an intricate permit in a city that is backlogged with permits, it can take much longer, sometimes even months. However, most non-complex permits are issued within a manner of weeks.

How Long Do Building Permits Last?

The expiration date for a permit depends on the type of permit and where it is filed. In Seattle, a building permit is valid for 18 months while in New York City, a building permit has an expiration that is the earliest of the insurances expiration, license expiration, or one year from the date of issuance.

What Happens If You Don’t Get a Building Permit?

Building without a permit when a permit is required is not a good idea. You will face extreme penalties from the city as well as usually a loss of insurance, time, any loan you took out for the project, and you may have to pay extra to undo all the work. The city can fine you per day that you are working until you revert the non-permitted structure to the state it was in before alterations.

The Bottom Line

Building permits are complex and because they are dependent on so many factors, you really need to check with both your city and probably a construction professional to make sure everything adheres to that area's requirements. You may not need a permit at all, or one could be issued on the spot, but check first because building without a permit will cause a significant headache and will cost a good deal of money.