The Tax Base You're Losing to the Next City Over

The Tax Base You're Losing to the Next City Over

Here's a conversation that happens more often than cities realize:

A developer is evaluating sites for a 200-unit multifamily project. Two parcels make the shortlist—one in your city, one in the neighboring jurisdiction. Land costs are similar. Market demand is comparable. Zoning works for both.

The difference? Your city's site plan review takes 14 weeks on average. The city next door? Six weeks, with clearer feedback and fewer revision cycles.

The developer chooses the faster city. Not because your staff did anything wrong. Not because your codes are unreasonable. Simply because time is money, and six weeks of carrying costs on a $40 million project adds up fast.

That project—and the property tax revenue, the permit fees, the residents who'll shop locally and send kids to local schools—goes to someone else's tax base.

Cities are in competition whether they acknowledge it or not.

The Math That Matters

According to the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC), government regulations account for an average of 40.6% of multifamily development costs (NAHB/NMHC, 2022). That's not a typo—regulatory compliance adds nearly half to the cost of building apartments.

A significant piece of that cost comes from delay. The same study found that neighborhood opposition alone—just one source of project friction—adds an average of 7.4 months to development timelines. Every month of delay means carrying costs: interest on construction loans, insurance premiums, land holding costs, and staff overhead with no revenue to offset them.

A 2025 Rand Corporation comparison of California and Texas found that construction timelines in California are 22 months longer than in Texas. That delay alone reduces project IRR from 31% to 14.5%—often below the threshold needed to attract investment (Precon, 2025).

When a project's returns drop below viability, it doesn't get built in your jurisdiction. It gets built somewhere else—or not at all.

The Permitting Bottleneck Is Real

This isn't anecdotal. According to NMHC's September 2025 Construction Quarterly Survey, 46% of multifamily developers reported project delays, with 75% of those delays attributed to permitting issues. In the March 2025 survey, approval timelines in many markets stretched beyond five or six months (NMHC, 2025).

The pattern is consistent: economic feasibility is the top reason developers cite for delayed starts—83% in the September survey, up from 57% the previous quarter. When permitting timelines are unpredictable, projects that pencil on paper become unbuildable in practice.

And here's the compounding problem: the United States is already short somewhere between 3.7 and 4.9 million housing units, depending on the methodology (Freddie Mac, 2024; Brookings, 2025; Zillow, 2025). The National Low Income Housing Coalition's 2025 Gap report found a shortage of 7.1 million units affordable to extremely low-income renters (NLIHC, 2025). Every project that stalls or relocates makes that gap worse.

What Developers Actually Care About

Talk to developers and you'll hear the same themes:

Predictability matters more than speed. A 12-week review that's consistent and transparent beats an 8-week review that might take 20 weeks depending on which reviewer you get. Developers can plan around timelines they trust. They can't plan around chaos.

Early feedback prevents costly redesigns. Catching a setback violation or parking deficiency on day three costs almost nothing to fix. Catching it on week ten—after engineering is complete and financing is locked—can blow budgets and timelines.

Staff responsiveness signals city priorities. Developers talk to each other. Word gets around about which cities are "easy to work with" and which ones are "a nightmare." That reputation affects which projects even get proposed in your jurisdiction.

Carrying costs are real. Interest on construction loans, predevelopment expenses, opportunity costs—every week a project sits in review has a dollar figure attached. As one industry analysis noted, delays cost the North American construction industry $280 billion annually in lost productivity alone (Bridgit, 2025).

None of this means developers want cities to rubber-stamp bad projects. They want clear standards, consistent application, and timely communication. They want to know the rules and trust that following them leads to approval.

The Hidden Cost of "We've Always Done It This Way"

Most cities don't track the projects they never saw—the developers who looked at their jurisdiction, talked to someone who'd been through the process, and quietly chose to build elsewhere.

There's no line item in the budget for "tax revenue lost to slow approvals." But the cost is real:

• •Neighboring cities grow while yours stagnates
• •Commercial vacancies persist while retail develops in the next town
• •Housing shortages worsen while units get built across the border
• •Your city gets a reputation as "difficult," which becomes self-reinforcing

Meanwhile, the cities that invest in streamlined, predictable approval processes attract more development, generate more revenue, and can afford to invest further in services and infrastructure. The gap widens.

What Competitive Cities Do Differently

The cities winning the competition for development aren't cutting corners on safety or code compliance. They're investing in process:

Clear, accessible standards. Applicants know what's required before they submit. Zoning codes are navigable. Checklists are comprehensive. Pre-application meetings are available and useful.

Consistent review. The same project gets the same feedback regardless of which staff member reviews it. Standards are applied uniformly, not based on individual interpretation.

Fast, specific feedback. Comments come back in days or weeks, not months. Issues are identified with specific code citations, not vague concerns. Applicants know exactly what to fix.

Technology that supports staff. Modern permitting software, digital plan review, and increasingly, AI-assisted compliance checking. Not to replace staff judgment, but to handle routine verification so staff can focus on complex issues.

Metrics and accountability. Review timelines are tracked and reported. Bottlenecks are identified and addressed. Continuous improvement is expected.

These aren't radical changes. They're operational investments that pay for themselves in retained and attracted development.

Where AI Fits In

One reason reviews take so long: the sheer volume of compliance items that need checking. Setbacks, height limits, parking ratios, landscaping percentages, ADA requirements, fire access, stormwater, utilities—a typical site plan review touches dozens of code sections.

Staff work through these methodically, but it takes time. And when departments are understaffed (most are), backlogs grow.

AI-assisted review can compress that timeline dramatically. Automated compliance checking flags potential issues in hours instead of weeks. Staff review the flagged items, apply judgment where needed, and move to decision faster.

The result: reviews that take days instead of months. Consistent standards applied to every project. Detailed documentation that protects staff decisions. And a jurisdiction that developers actually want to work with.

At AutoSitu, we're building exactly this—AI-powered compliance review that helps cities compete for development without sacrificing quality or accountability. We're currently piloting with municipalities and design consultancies in California and Michigan.

The Question for City Leaders

Every city says they want economic development. Every city says they want a strong tax base. Every city says they support housing production.

But when a developer compares your approval process to the city next door, what do they find?

If the answer is "longer timelines, less predictability, more frustration"—you're losing projects you'll never know about. And the tax revenue that goes with them.

The cities that thrive in the next decade will be the ones that treat their approval process as a competitive asset, not an administrative afterthought.

The question isn't whether you can afford to invest in faster, better reviews.

It's whether you can afford not to.

Bridgit. (2025, July 28). How to deal with construction delays in 2025. https://gobridgit.com/blog/overcoming-construction-delays/

Brookings Institution. (2025, July 21). Make it count: Measuring our housing supply shortage. https://www.brookings.edu/articles/make-it-count-measuring-our-housing-supply-shortage/

Freddie Mac. (2024). Housing supply: A growing deficit. https://www.freddiemac.com/research/insight/housing-supply

National Association of Home Builders & National Multifamily Housing Council. (2022). Regulation: 40.6 percent of the cost of multifamily development. https://www.nmhc.org/research-insight/research-reports/cost-of-regulations/

National Low Income Housing Coalition. (2025). The Gap: A shortage of affordable homes. https://nlihc.org/gap

National Multifamily Housing Council. (2025, September). Quarterly Survey of Apartment Construction & Development Activity. https://www.nmhc.org/research-insight/nmhc-construction-survey/

Precon. (2025, October 25). Evaluating the impact of fees, property taxes, and construction delays in California and Texas. https://precon.substack.com/p/evaluating-the-impact-of-fees-property

Zillow. (2025, July 9). US housing deficit grew to 4.7 million despite construction surge. https://investors.zillowgroup.com/