What are building permits? Definition and economic importance

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Building permit data is collected from thousands of permitting centers, usually at the local and county level.

What are building permits?

Building permits are approvals for the construction of new and existing private homes. The US Census Bureau and the US Department of Housing and Urban Development (HUD) release a monthly report on new home construction permits, which investors and analysts focus on to gauge economic activity. The new residential construction report also includes data on housing starts and completions.

The Census Bureau and HUD collect data for the Monthly Building Permit Survey from 20,000 permitting locations across the country, typically at the local and county levels and based on the nine Census geographic regions. Desk. Of this number, the bureaus say there are approximately 8,400 permitting locations across the country that each issue an average of at least 6 permits per year and account for approximately 99% of the annual total of new licensed residential dwellings.

Building permits, like housing starts, are among the oldest types of data collected on new housing construction, dating back to 1959. The data collection period extends from the first day following the reporting month to the seventh working day of the following month. month. For example, for January housing starts, survey collection would begin on February 1st.

Once permits are approved and issued, contractors begin building homes, and these are counted as starts by the Census Bureau and HUD. Completed dwellings are counted as completed dwellings. Building permits are somewhat of a gross figure for new residential construction – not all approved building permits translate to newly built homes, and not all homes under construction are completed.

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Why is building permit data important?

Building permit data is used to assess whether there is a demand for building new homes, and this information is used to analyze the growth of the economy. Interest rates and inflationary pressures are among the factors that can affect building permits, and economists view building permits as a measure of whether the economy is contracting or expanding. The Federal Reserve adopting a tighter monetary policy to curb inflation, for example, could force real estate developers to delay their new construction projects and would therefore reduce applications for building permits.

While building permits demonstrate a developer’s willingness to build homes, housing starts are the most important data in the new residential construction report because they show completed construction.

Below is a graph of building permits from 1959 to mid-2022. The data is roughly proportional to housing starts. Data shows that after periods of recession, building permits generally increase.

Chart showing building permits issued from 1959 to mid-2022.

Data shows that after periods of recession, building permits generally increase.

The Conference Board, a think tank supported by more than a thousand member companies worldwide, incorporates the data into its index of leading economic indicators. The data is also useful for the Fed to analyze national and regional economic conditions.

When are building permits issued?

Building permits are issued around the middle of each month, on the 12th business day, at 8:30 a.m. ET by the Census Bureau and HUD. The official press release title is Monthly New Residential Construction, followed by the reporting month. Both agencies also release data on a quarterly and annual basis, and previously released data is occasionally revised and updated.

Next dates for issuing building permits

Reporting month Release date

July

August 16

August

September 20

September

October 19

October

November 17

November

December 20


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