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How to predict rising home prices, neighborhood change and gentrification

Look at building permit data.

A building in mid-development, courtesy of Flickr user <a href="">SounderBruce</a> under a Creative Commons license.

There is a mystery rising around the corner from my home in Northeast D.C. Its reveal has been slow: one floor at a time, the metal skeleton taking shape over months. The work seems to sputter on and off, and several times I've wondered if something went wrong. The money ran out. Or the inspectors caught wind.

The neighborhood is scattered with projects that were begun and abandoned. My favorite suspended remodel still has a poster in the window in the future-is-already-past verb tense unique to real estate: "Coming in summer of 2012."

In neighborhoods like this undergoing rapid change, there's a deep gulf between what we can see — someone is trying to build something — and what we know about what's really happening. How big will that apartment be? When is it supposed to be finished? And, because I know you're wondering: What are they planning to do about parking?

This information, which can be gleaned from the magnificent treasure that is government building permits, often publicly exists. But it's never really been democratized. A group of tech companies and pilot cities is trying to do that now in ways that could have some fascinating implications. Imagine if you had a location-aware app that could call up the details of a construction site as easily as Redfin can show you the nearest for-sale home.

Imagine if Zillow could tell you that cute add-on to the row home you like was never inspected by the city. Or if economists could use remodeling permits to forecasts gentrification while it was still possible to help long-time residents stay in their homes.

"I think there’s potential here to start getting a picture of what’s going on in cities, of economic indicators," says Mark Headd, a "developer evangelist" with the civic-tech company Accela that has been working with this data. "Can this give us insight into gentrification and where that’s happening? What kinds of permits are being issued, and how long do they take?"

App developers and national platforms dread dealing with city data when it means individually extracting information in different forms from hundreds of local governments. "There’s a logistical nightmare trying to get this data," says Svenja Gudell, the senior director of economic research at Zillow.

So Zillow, Accela and several other partners and local governments including Tampa, San Diego and Chattanooga have developed a common standard all cities can use to publish data about building and construction permits. The concept has important precedent: Google helped coax cities to standardize their transit data so you can track bus and train routes on Google Maps. Yelp has tried to do the same with municipal restaurant inspection data so you can see health scores when you're scouting dinner.

Building permit data similarly has the potential to change how consumers, researchers and cities themselves understand the built world around us. Imagine, to give another example, if an app revealed that the loud construction site in your neighbor's back yard had no permits attached to it. What if you could click one link and tell the city that, speeding up the bureaucracy around illegal construction?

Gudell has all kinds of other ideas: Once housing economists have more data about renovations to go with home prices, it'll be easier to gauge the value of adding a bathroom or new kitchen to a home. It'll be easier to study consumer behavior: How likely are families to expand their current home than move to a new one? If you think you're buying into a changing neighborhood, this data could tell you more accurately what that change will look like.

Zoom out, Gudell says, and these permits in the aggregate can indicate when the economy is starting to pick up, or precisely where in the city things are improving. Conversely, we can learn a lot about the state of a neighborhood — or the need for city investment — when no one there has been able to afford modest upgrades in a generation.

It won't make sense for Zillow or other national companies like it to start building this data into their sites until more cities come on board. Seattle, though, has already built a platform tracking new real-estate projects that hints at what could be possible. Projects that have to go through a design review are all mapped by the city here, with each one linked to a timeline, images and public documents.

There is one foreseeable complication to all this newly accessible information. It could further empower groups opposed to development in cities with fierce fights over it, or it could create the sudden impression that development is accelerating (when, in reality, it's just the flow of information that is). Eddie Tejeda, the CEO of Civic Insight, another company that has worked on the project, argues that the most ardent NIMBYs already know where to find this data.

"If you’re really, really dedicated and devoted to finding out about new development, you already know about the ugly spreadsheet Web sites where you can download it," he says. "What we’re trying to do is bring more people into the conversation — to not just allow the most fringe and the most loud who can get access to this information and be ever louder, but allow other voices to come into the conversation as well."