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Permit Activity Under Broadnax Hits New Low

Permit Activity
New home under construction | Image by Alison Hancock/Shutterstock

Dallas issued a record-low number of single-family building permits in 2022, a problem amplified by decelerating housing activity and an already-congested permitting system.

Dallas County issued 258 single-family dwelling permits in December 2022, the lowest number since 2018 and a year-over-year decrease of 52.1%, according to building permit data provided by Texas A&M University’s Texas Real Estate Research Center (TRERC).

Overall, TRERC data shows that Dallas County issued about 7,500 single-family building permits in 2021, roughly 1,850 more than the 5,650 issued in 2022. This breaks down to an average of 620 single-family permits each month in 2021 and 470 in 2022, a YOY decline of nearly 25%.

The last time Dallas’ permit activity slumped this low was in December 2018, when the City’s Development Services Department (DSD) issued only 256 new single-family permits.

During that time, a 30-year fixed mortgage and a 15-year fixed mortgage averaged 4.55% and 4.01%, respectively, according to historical mortgage data from Freddie Mac. By December 2022, the average mortgage rate had risen to 6.42% and 5.68% for each type of home loan.

Considering mortgage rates crested in November at a little over 7%, Ted Wilson, founder and principal of Dallas-based Residential Strategies, suggests some promising signs lie beyond the horizon of 2023.

“Obviously, the markets changed considerably this past year,” Wilson told The Dallas Express. “With the pandemic and so forth, there was a new surge of demand, and it really pushed home starts to a new record high.” However, “as the mortgage rates climbed higher during 2022, the affordability challenges were pronounced, causing traffic and sales to slow considerably for builders.”

Despite the slowdown in new home construction, Wilson suggests the sector’s growth is primed for upward momentum once the economic dust storm settles and consumer confidence returns to normal.

“I think the good news is that after topping out just above 7% on the 30-year mortgage rate back in November, we’ve seen the 30-year rate come down in December and into the first part of the year,” he said.

Even though higher interest rates have helped facilitate the decline in home sales and permit activity, Wilson claims that several of his firm’s clients are seeing consumers shake off the economic challenges and purchase homes.

Still, some would-be homebuyers remain unsure about pulling the trigger. This buyer and builder hesitancy, mixed with the backlog of unsold inventory, has furthered the chances of a prolonged slowdown.

This slowdown isn’t just impacting Dallas’ housing market. Multiple North Texas cities are being hit by the pullback in new single-family homes and a decrease in permit activity, according to Addison-based real estate investment and brokerage firm Tomlin Investments.

According to Tomlin Investments, permit activity across North Texas has fallen by 20% or more in certain areas. In Celina, for instance, single-family building permits were down 34% YOY, while cities like Frisco, McKinney, and Prosper fell as much as 15% or more.

This is supported by TRERC’s permit data, which show that the Dallas-Fort Worth-Arlington metroplex in December 2022 slipped 37.9% YOY after falling 34.2% YOY the previous month.

Amid the drop in activity across the board in North Texas, Dallas in particular is wrestling with permit problems, including its 43-day average turnaround time for new single-family permits, its ongoing staffing shortage, and its flawed permit software, among other issues The Dallas Express has previously covered.

The building permit process in Dallas is headed by the City’s chief building official and DSD director, Andrew Espinoza, and ultimately the responsibility of Dallas City Manager T.C. Broadnax.

Espinoza became director of DSD midway through last year and oversees the issuance of construction permits and land development in Dallas.

Since he was hired, Espinoza has explored several avenues to improve the City’s permit cycle time, the department’s internal culture, and the community’s perception, though none have meaningfully reduced the backlog thus far.

As Espinoza himself admitted during a November 2022 city council meeting, Dallas is still years off from a permanent fix, evidence of Broadnax’s failed promise to solve the problem.

With a recession forecast and an economic backdrop shrouded in uncertainty for 2023, slowed development activity would hurt Dallas in the long term. Still, if a slowdown is inevitable, the diminished burden could give Broadnax and DSD an easy opportunity to deliver a long-delayed solution to the backlogged permit process.

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