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Bureaucracy vs Real Estate

December 18, 2017

Bureaucracy: formally defined as a "system of government in which most of the important decisions are made by state officials rather than by elected representatives"(via Google definitions), but lets be honest,  when you hear the word Bureaucracy, what comes to mind?  Government inefficiency?  Red Tape? The Wonderful DMV?  Yeah, same here.

 

What Bureaucracy really means, is that the people in charge, the people making big decisions that affect YOU are NOT elected officials appointed by the people to work on your behalf.  Rather, important decisions are made by very few government employees, who were granted their positions through direct appointment and/or promotion.  Ultimately, that's just the way it has to be;  it'd be virtually impossible for the public to vote on every single government job.   

 

Now, while Bureaucracy CAN have it's moments of greatness, it for the most part, doesn't.  The system our founders created is here to stay, for better or worse, and some municipalities and jurisdictions can be great to work with, and others can be very poorly managed, creating headaches for the people affected by anything they try to regulate.  

 

Enter Real Estate.  Housing is notoriously the slowest industry there is.  Land planning can take years, re-zoning, years more.  Then, the actual land development can add more years onto the tab.  All told, to get a piece of land from vacant ground to a move-in-ready home could take up to 10 years (in some places, like California, it takes more!).  On average, here in the Denver Metro area, the process takes about 3 years if things so smoothly. Now think about that for a second.  3 years.  We've all been told that Real Estate goes in 7-year cycles, give or take.  That means its next to impossible for a developer to time the cycle right, especially since the Bureaucracy of land zoning is such a variable.  Top that off with rapidly changing consumer tastes and preferences (i.e. people flocking to Denver in droves), and you get the perfect storm (i.e. a massive shortage of housing).  The cost implications for investors and speculators is huge, mainly due to the holding costs, which is why land and lots cost so much....  for the investors to take the multi-year risk, with massive uncertainty, they're requiring a huge profit at the finish line.

 

Next up, is innovation.  Bureaucracy is notoriously terrible at allowing for construction innovation.  It seems like everyday we see an article about some new great building technology,  like the "3D printed house", or the "build this house in 9 days", or our recent Facebook post of "the home built from tomato plants".  But why don't we ever see these changes implemented, and sold to the public?  Simply put, Bureaucracy.  It's not so cut and dry.  Public Safety and Service, the ultimate goal of Bureaucrats, is at stake.  They simply can't just let a contractor fly by the seat of his pants with 3D printer here.  Products, and building methods need years of testing before real world use.  Architects and Engineers have to know that what they're designing is going to perform as advertised.... .whats the live load snow total a tomato roof can bear?  Can someone SAFELY live here? 

 

100 years ago, this wasn't an issue, not because of Bureaucracy; government inefficiency is a well documented, long standing issue (see the Boston Tea Party), but largely, because back then, everything moved slowly.  New technology didnt come out every single day like it does today.  So why I ask, can we not improve upon the Bureaucratic system itself?  It'd be great if they could speed things up a bit, streamline processes and leverage new technology to help meet the housing needs of the general public... After all, isn't serving the public the end goal?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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