Bureaucracy in NYC

September 26, 2012

One of the themes of the Global Economy course is that you need balance on regulation:  enough to keep things honest, but not so much that you get in the way of legitimate business. The latter — red tape or bureaucracy — is a good source of stories. Like the Indian restaurant owner who needs approval from three different police stations.  Or who must post a sign asking neighbors if they would like to complain.

One of my students pointed out that New York is a strong competitor in the red tape department.  She works for a large nonprofit, and notes that even small building projects undergo tight scrutiny by the city.  Here’s my summary:

  • All projects must get the approval of three city agencies:  the Department of Buildings, the Bureau of Electrical Control, and the Fire Department.
  • The rules change constantly and without notice.
  • Almost everyone hires an expediter, typically someone who used to work for one of these departments and now shows you how to navigate the system.
  • You schedule two inspections by the Fire Department, because they’re paid by the visit and always find a violation on the first visit.
  • The Buildings Department, in particular, has a long history of corruption.

All of this adds an estimated 5-10% to construction costs from the permitting process alone, more if you count the extra time and effort to go through all this.

My first thought is that we’re raising the cost of doing business in New York.  The next is that the location must be really valuable if you’re willing to put up with all this.

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