Downstate areas lag Chicago, Midwest in house building permits

Out of 90 Midwestern metropolitan areas, Illinois has four in the bottom 10 for new housing per capita in 2023. Housing affordability is directly linked to getting units built.

The housing affordability formula is pretty simple: if you want more affordable housing, you need to build more housing.

But Illinois is not doing a great job at that. The state produced 113,000 fewer housing units than it needed, according to a 2021 report by Up For Growth.

Too little housing increases demand and drives up prices. That situation is at a crisis level in Illinois: over 32% of households pay at least 30% of their income for shelter, which is the level at which the federal government considers it a burden.

Local governments in Illinois can solve the problem by:

• Increasing the number of families allowed to live in existing residential zones.

• Legalizing accessory dwelling units, such as granny flats and garage apartments.

• Reducing barriers to converting non-residential zoned areas into residential zones.

They also must fix the burdensome process for obtaining building permits. Local governments create hurdles that delay or even prevents developers from building new housing.

Illinois approved the third-fewest permits per capita in the country in 2023. The situation is worse downstate.

There are seven downstate metro areas that reported population and new housing unit numbers for 2023. All but one of those metro areas – Champaign-Urbana – lagged the Chicago area in new housing units approved per capita.

In 2023, 373 metro areas reported population and new housing data across the nation. The Decatur area ranked fifth-worst in the U.S. Four Illinois areas were in the bottom 20 of the country. No Illinois metro area broke into the top half.

Of the 90 metro areas located just in the Midwest, Illinois downstate metros made up three of the bottom five, and all but one of the downstate metros was in the bottom 20.

The state’s poor housing growth is not just about population loss. Other comparable metros lost population and managed to approve more permits than downstate Illinois metros, including:

• The Decatur, Illinois, metropolitan area lost 742 people in 2023, or 0.7% of its population. But the St. Joseph, Missouri, area lost over 1,200 people – over 1% of its population – and managed to approve more than twice the number of permits per capita as Decatur.

• The Niles, Michigan, area lost about the same percentage of its population that Springfield, Illinois, did in 2023, but Niles approve 233 new units of housing per 100,000 people while Springfield approved 120.

• The Ann Arbor, Michigan, area lost more than double the people Bloomington, Illinois, did, but approved over three times the number of new housing units per capita.

Despite their struggle with population loss, downstate municipalities need to increase the supply of housing to stop people from leaving and to replace housing in bad condition. The time it takes to obtain a building permit is increasingly becoming an issue in the ongoing housing crisis and contributes to the lack of new permit approvals in Illinois.

Permit process and fees: a comparison of two Illinois cities

One clear way to increase the number of permits approved is to make the process of obtaining a permit cheaper and easier. Illinoisans do not necessarily have to go far to find a better way to handle building permits. An example is Champaign, Illinois.

Champaign

The Champaign-Urbana area saw the most new housing permits approved per capita in Illinois for 2023. It was in the top one-third for metro areas in the Midwest. One of its municipalities’ permitting processes may show some indication as to why. According to the City of Champaign website, “Building permits are processed simultaneously by three City departments in order to make the process more efficient. When a building permit application is submitted to Building Safety at the Champaign Fire Department, it is separated into its component parts and routed to whichever individual inspectors need to review a particular application.”

The Planning Department does the zoning review, the parking review and the landscape review. The Building Safety Division does the building review, the plumbing review, the HVAC review and the electrical review. And the Engineering Division handles the engineering review, the right-of-way review, the grading and erosion review and the sump pump review. The city estimates a plan review time of 10 days after receipt of all necessary material for commercial and multi-family permits and five days for single and two-family permits.

Champaign uses a formula based on the square footage, zoning group and category to calculate the building permit fee. The minimum fee for a median-sized home in Champaign County at its year-long peak in May 2024 of 1,953 square feet and zoned for a one or two-family unit would be around $518.

Decatur

The Decatur is located in the metro area with the lowest number of new permits approved per capita. It is difficult to determine the exact reason for the lack of permits from the permit process alone, but Decatur has not implemented a self-certification program like Chicago, nor has it adopted a parallel permit review process like Champaign. The city has, on the other hand, “added the ability for residents and/or owners of property located within the city limits to apply for building permits on-line,” which is a step in the right direction.

Decatur permits include residential/commercial building permits, electrical, mechanical plumbing and other trade permits and demolition permits, among others. These permits are all handled by the Building Inspections Division.

The city does not list a time estimate for plan review or permit approval. While it is not a pure apples to apples comparison, Decatur’s minimum fee for residential projects is 0.5% of the project value. The fee for a project valued at 80% of the price of a median priced home in Illinois ($265,824) would be around $1,063, twice as much as Champaign’s minimum fee based on square footage.

Recommendations

Downstate municipalities can reduce the burden of obtaining a building permit by:

• Consolidating building the building permit application process and establishing parallel tracks for permit review.

• Adopting the early stages of a self-certification program.

• Reducing building permit fees by adjusting for the size and location of a project.

Downstate municipalities should work to reduce their permit fees by adjusting them based on the size of the home and where it is located. Cities should simplify the process of obtaining a building permit where they can. Struggling cities should investigate Champaign’s concurrent evaluation of permit applications and adopt a similar scheme if feasible.

While Chicago lags the nation in approving permits, it does better than almost any other metro area in Illinois. Municipalities in downstate metro areas should look to Chicago to find what policies they might be able to copy given their resources.

If they can, municipalities should try to consolidate their services online and allow for online building permit applications like Chicago, Champaign and Decatur have. Chicago has also established a self-certification program that allows architects and structural engineers to vouch and take responsibility for the project’s compliance with the city’s building codes, allowing projects to go forward without having to await approval by city officials. Illinois municipalities outside of Chicago could move incrementally toward something similar to reduce the burden of transitioning toward such a program, beginning to allow self-certification for a limited category of projects before expanding the scope.

They could recognize Chicago’s existing training programs and qualifications for self-certification so they do not need to adopt a new program from scratch. This option could be especially attractive to cities just outside of Chicago, where many nearby architects and structural engineers will already be qualified under Chicago’s current system. Allowing self-certification will decrease wait times as well as free up staff time.

Inspired by Chicago, Phoenix established a similar limited pilot program and expanded it to cover most structures in the city. Local officials credit the program with helping them deal with the city’s recent housing boom.

These recommendations will reduce home costs and maybe encourage more people to build and move to Illinois. They could help stop the population loss Illinois has seen for 10 years in a row. With cumulative and consistent reforms to housing policy alongside other structural issues that make it difficult to live and work in the state, Illinois could become a beacon of prosperity in the Midwest and the rest of the country.