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Builders Make Urgent Plea for Housing Reform

San Diego homebuilders , feeling hamstrung by policies they say are stalling more affordable housing , have joined a statewide campaign promoting homeownership.

They’re pushing for a reform package that calls for an adequate supply of land to build a variety of homes, including high-density condos and single-family homes, particularly around job centers; elimination of regulatory and legal hurdles that delay construction and increase the cost of new housing; and streamlining the permit process for new housing, complaining that “an average California subdivision takes a decade to be approved.”

A handful of bills are pending in the state Legislature that would address some of these issues, and measures might be a possibility, according to John Frith, the public affairs director for the California Building Industry Association, which has been championing reform.

Late last month, representatives of the state Building Industry Association, the Building Industry Association of San Diego, and Mitch Mitchell, the vice president of public policy and communications for the San Diego Regional Chamber of Commerce, rallied at the Boardwalk Housing Community at Spectrum Center Boulevard and Paramount Drive. They called on local residents to add their names to a declaration calling for a solution to the housing crisis. The signatures will be presented to the Legislature and Gov. Arnold Schwarzenegger’s office.

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Frustration has been the general theme when local builders discuss affordable housing. They complain that little has changed since the San Diego City Council declared a state of emergency Aug. 6, 2002, regarding the lack of affordable housing here. A task force was subsequently created, resulting in 60 recommendations, but they say, little action.

“We dedicated several hundred hours putting a good-faith effort into the task force, along with others,” said Scot Sandstrom, who heads the San Diego BIA and is president of the San Diego division of Trimark Pacific Homes, a statewide homebuilder. “It was a serious effort, and we had a really good list of suggestions, but less than a handful even got discussed. It’s frustrating. You want to be part of the solution. As an industry, we get blamed for the problem. We’re giving our time, and it doesn’t seem to be taken seriously.”

Accountability is a key issue, said Sandstrom.

“In San Diego, there is no accountability, on any level, that the city has to meet its housing demands,” he said. “Most cities do not have any accountability to provide necessary housing for a growing population, and assume someone else is going to do it or they won’t live in the region.

“It’s not fair to builders to expect them to say where it should go,” he added. “It should be a requirement to have clear plans that provide and measure housing necessary for a growing population.

“We don’t want to decide it. We don’t have a choice of where housing goes. We respond to city and county plans. It’s the government’s responsibility to measure the growing need for housing and put it in place. We as builders don’t have a clear path, how to get to the endgame of providing housing.”

Builders have long complained about the arduous process of permitting.

“It takes longer to buy a piece of land and get through the bureaucracy than building the homes themselves,” said Sandstrom.

Another problem is a lack of direction, he said.

“There is nothing on the state level that says, ‘We the state of California are going to measure growth and have a plan in place with incentives and penalties,” said Sandstrom. “We need this at the state level, but also the county and city level. Someone needs to have the wherewithal and direction to hold them accountable. We just can’t keep saying, ‘They will come because we have sunny weather.’ That is not acceptable. We’re not meeting our natural population expansion, let alone migration.”

The issue of affordable housing has been discussed so long, that “people are disenchanted,” said the chamber’s Mitchell. “We have to try as many things as possible. There is no guarantee that will change anything. It’s about local politics. There has to be local will and an effort to increase productivity. We need an extensive review of where land is available. Land is always going to be the issue. We also have to look at the older neighborhoods and figure out how to improve the infrastructure. Realistically, there is no one-size-fits-all on this issue.”

Controversy continues to brew over how much employment land , such as Otay Mesa’s industrial acreage , should be tapped for residential use.

“It’s a problem and we’re looking into it,” said Mitchell. “Creating campuses is what you want , businesses and employees living close by.”


Mom And Apple Pie

Peter Dennehy, senior vice president of the Sullivan Group Real Estate Advisors in San Diego, said that the reforms are “all good things.”

“But I’m not sure what it really means in terms of producing housing for people or changing the situation. It’s mom and apple pie,” he added.

Dennehy said that increasing density has to go hand in hand with improving the infrastructure of the older neighborhoods.

“There is no more land,” he said. “We’re going to need higher density of housing.”

The problem, he said, is the piecemeal approach to redevelopment that exists outside Downtown San Diego.

“I was on the North Park Planning Group, and we had to go building by building, parcel by parcel, owner by owner,” he said. “You have to fight it out for what you can get.”

Money is another issue.

“So much of our county is the city of San Diego, which has severe cash-flow problems,” said Dennehy. “It can’t do much to help developers. There is always going to be high demand for housing. We need more attached housing, smaller units, to bring the price down, and funding for infrastructure.”

The older communities don’t want higher density, he added, since there are not enough parks, and schools are overcrowded.

“Higher density isn’t palpable for those who live in communities already impacted. It’s a huge problem. You have to be able to show the community you are not going to overburden what is already burdened.”

Bobbie Christensen, a spokeswoman for the San Diego Housing Commission, said her agency agrees that “there is a housing crisis when fewer than 10 percent of San Diegans could afford to buy a home here including those who have their own homes, but who could not afford to buy them at today’s prices.”

As for the proposed reforms, she takes issue with the statement that an average California subdivision takes a decade to be approved.

“San Diego now has a housing expedite program for affordable housing,” she pointed out, “and it has gotten rave reviews.”

It’s all about the market, said Christensen.

“Publicly traded developers’ Web sites show record profits,” she said. “No one here is against a free market, but it must be noted that housing prices have gone up primarily because they could. Smaller, less expensive homes on smaller lots could have been built, but as long as the ‘mini-mansions’ would sell, they were built. That resulted in increases in values of previously owned homes.

“Prices for both new and pre-owned homes kept going up and up and will continue to do so as long as there is a market for homes in those price ranges,” she said. “In that sense, it is a supply issue, which means if the supply is low, the producer of whatever that product is can charge more. Look at today’s gas prices. To make recommendations without acknowledging this fact is disingenuous.”


Out Of Whack

Tom Carter, general partner of Carter Reese & Associates, a prominent San Diego-based developer, also served on the housing task force, and isn’t feeling very hopeful that relief will be coming anytime soon.

“The problem we have today is that the current cost of building has taken affordability off the table,” he said. “We’re looking at hard construction costs, site work, insurance, architecture, fees with the city, interest it adds up, and the land is not even in there.”

Building a townhome these days, said Carter, can cost $250 a square foot, compared with $80 or $90 a few years ago. He said that a 10-year insurance policy for townhomes he built in North Park was “$27,000 per door, and five, six years ago, it would have been about $1,000. It adds up.”

Lawsuits are another factor in rising costs, he said.

“Because of lawsuits, structural engineers and architects and others are putting in everything possible to ensure there are no issues,” said Carter. “I was out with the framers of some townhomes we’re building. I said, ‘I’ve never seen this kind of lumber, and all this metal,’ and the foreman said, ‘You can land an airplane on this.’ It’s big-time overkill.

“The structural engineers and architects will do everything they can to protect themselves, even if it means overdoing things,” he added. “Things have gotten so far out of whack.”

While the median income for a family of four in San Diego is still about $64,000, according to the San Diego Housing Commission, Carter pointed out that the price of housing has risen 20 percent to 25 percent in the past year.

“I built a lot of houses in the ’80s, and there were earthquakes and all of the homes are standing and are fine,” said Carter. “In fact, if you put in too much, you can make things too rigid. In an earthquake, you need to move a little bit.”

Not that Carter is opposed to safety measures.

“It will make things structurally better,” he said. “The question is, how much do you do? If you keep adding things on, all of a sudden you have costs that are out of sight. Look at what’s happened to the price of concrete, drywall and lumber , basic materials , up over 50 percent in the last few years.”

Relief might be coming in the long term, he said.

“I think things are going to slow down, and escalating prices will slow down, and eventually sales prices will soften,” said Carter. “That’s what happened in the ’90s. We’ve got to get this thing back in whack. How can our kids afford to live here?

“I think if the city wanted to be serious, they would require builders to build a certain percentage of affordable housing,” he said. “Now, they can just pay a fee.”

Since July 2003, the city has allowed builders in some areas of the county to pay an “in-lieu” fee, rather than build affordable housing. The money raised goes into a housing fund, designed to help first-time buyers, among other efforts to provide the housing.

About $4.5 million has been collected from the fees that have been rising steadily. In July 2003, that fee was $1 a square foot; it rose to $1.75 in 2004 and is now at $2.50, according to Christensen.

“We expect it will go up, and as the cost goes up, it might encourage developers to build more affordable housing,” she said.

With nearly 1,900 affordable units now in the pipeline, she sees promising signs ahead.

“Early on, I’d say that all the developers opted for the in-lieu fee,” said Christensen. “Now, because the fee is going up , or because they want to provide affordable housing , there are quite a number of affordable units in the works.”

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