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Time-to plan lags for commercial construction projects

  • Jonathan N. Millar
  • Stephen D. Oliner
  • Daniel E. Sichel

We use a large project-level dataset to estimate the length of the planning period for commercial construction projects in the United States. We find that these time-to-plan lags are long, averaging about 17 months when we aggregate the projects without regard to size and more than 28 months when we weight the projects by their construction cost. The full distribution of time-to-plan lags is very wide, and we relate this variation to the characteristics of the project and its location. In addition, we show that time-to-plan lags lengthened by 3 to 4 months, on average, over our sample period (1999 to 2010). Regulatory factors help explain the variation in planning lags across locations, and we present anecdotal evidence that links at least some of the lengthening over time to heightened regulatory scrutiny.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-34.

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Date of creation: 2012
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Handle: RePEc:fip:fedgfe:2012-34
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  1. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
  2. Joseph Gyourko, 2009. "Housing Supply," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 295-318, 05.
  3. Altug, Sumru, 1989. "Time-to-Build and Aggregate Fluctuations: Some New Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November.
  4. Quigley, John M. & Rosenthal, Larry A., 2005. "The Effects of Land-Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt90m9g90w, Berkeley Program on Housing and Urban Policy.
  5. Gregory Burge & Keith Ihlanfeldt, 2006. "The Effects Of Impact Fees On Multifamily Housing Construction," Journal of Regional Science, Wiley Blackwell, vol. 46(1), pages 5-23.
  6. Oliner, Stephen & Rudebusch, Glenn & Sichel, Daniel, 1995. "New and Old Models of Business Investment: A Comparison of Forecasting Performance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 806-26, August.
  7. Huang, Haifang & Tang, Yao, 2012. "Residential land use regulation and the US housing price cycle between 2000 and 2009," Journal of Urban Economics, Elsevier, vol. 71(1), pages 93-99.
  8. Christiano, Lawrence J. & Vigfusson, Robert J., 2003. "Maximum likelihood in the frequency domain: the importance of time-to-plan," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 789-815, May.
  9. Palm, Franz C & Peeters, H M M & Pfann, G A, 1993. "Adjustment Costs and Time-to-Build in Factor Demand in the U.S. Manufacturing Industry," Empirical Economics, Springer, vol. 18(4), pages 639-71.
  10. Mayer, Christopher J. & Somerville, C. Tsuriel, 2000. "Land use regulation and new construction," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 639-662, December.
  11. Peeters, Marga, 1998. "Persistence, asymmetries and interrelation in factor demand," MPRA Paper 23864, University Library of Munich, Germany.
  12. Rochelle M. Edge, 2000. "Time-to-build, time-to-plan, habit-persistence, and the liquidity effect," International Finance Discussion Papers 673, Board of Governors of the Federal Reserve System (U.S.).
  13. Burge, Gregory & Ihlanfeldt, Keith, 2006. "Impact fees and single-family home construction," Journal of Urban Economics, Elsevier, vol. 60(2), pages 284-306, September.
  14. Alessandra Del Boca & Marzio Galeotti & Charles P. Himmelberg & Paola Rota, 2008. "Investment and Time to Plan and Build: A Comparison of Structures vs. Equipment in A Panel of Italian Firms," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 864-889, 06.
  15. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  16. Thomas Mayer, 1959. "Plant and Equiptment Lead Times," The Journal of Business, University of Chicago Press, vol. 33, pages 127.
  17. Saks, Raven E., 2008. "Job creation and housing construction: Constraints on metropolitan area employment growth," Journal of Urban Economics, Elsevier, vol. 64(1), pages 178-195, July.
  18. Ihlanfeldt, Keith R., 2007. "The effect of land use regulation on housing and land prices," Journal of Urban Economics, Elsevier, vol. 61(3), pages 420-435, May.
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