“Builders in Southern California are subject to the most stringent land use requirements in the nation,” said Matthew Adams of the San Diego County Building Industry Association.
Adams, director of government affairs for the BIA, said residential real estate developers here are hobbled by a mass of red tape and government regulation.
He describes the stages a builder must go through to gain a final subdivision map and then complete construction as a “very lengthy and time-consuming and costly process.”
Adams says procedures in a residential subdivision which typically take three to five years in San Diego , possibly quite a lot longer depending on the nature of the development , might be completed in less than a year in Texas, Arizona or Nevada.
The BIA is an association of around 1,500 member companies in San Diego County and acts as an advocate in matters of public policy which affect the residential, commercial and industrial building sectors.
– Two Reasons For Costs, Delays
According to Adams, there are two main components contributing to the time and cost involved in the land use approval and permit process: environmental issues and bureaucracy.
He said the presence of numerous sensitive habitats and endangered species in the San Diego area adds a layer of complexity , and usually a great deal more time , because applications then have to go through a federal government process.
Adams said Southern California is home to hundreds of threatened, endangered or protected species, and most significant residential developments are affected in some way by environmental aspects.
This is especially true, he said, in areas such as South Bay, Otay Mesa and North County where developers might find themselves having to make allowances for any number of specific types of wildlife, from frogs and toads to rats and birds.
Completion of San Diego County’s Multiple Species Conservation Plan, a federally mandated inventory of endangered species habitat, should help streamline the permiting process for future projects.
– Builders Exchange Land For Approvals
Adams says this lists 85 different species of wildlife along with various habitats and allows local jurisdictions to sign off on projects affecting these in exchange for builders giving up more land for habitat and reserves.
This quid pro quo is intended to expedite the process and has been in effect for about three years. Adams talks of some growing pains, but says for the most part it’s a move in the right direction.
Another major stumbling block identified by Adams is what he refers to as the “colossal bureaucracy” in Southern California which, he said, has far more regulations than most other areas.
“Years of regulatory piling-on and failure to do a comprehensive audit of regulations” are at the root of the trouble, Adams said.
As evidence, he points to an audit of the time and fees for certain services which were conducted in San Diego and which resulted in certain fees being reduced by up to 50 percent in the case of some single-family homes.
Exactly what this might mean in dollar terms would vary from case to case, but again, Adams refers to an independent 1999 survey which showed the cost of government regulations added $96,000 to the price of a house in Carlsbad.
– Fees Should Cover Expenses
Adams said under state law, local governments can only charge fees which reflect the actual costs incurred , in other words, it has to be just a cost-recovery exercise, not a profit-making one.
According to the popular saying, time is money. The Building Industry Association certainly believes that the lengthy time taken on land use approvals, permits and inspections is costing its members big money.
One problem, according to Adams, is that the process proceeds in a series of steps, each of which has to be completed before the next can begin. “We’ve always advocated concurrent processing,” he said.
Under the present system, filing the subdivision application and an environmental impact report , which Adams says is required in about half the cases , can take about 18 months, according to the association.
The tentative map approval stage, when all requirements are satisfied and fees are paid, any extension or revision to the subdivision improvement plans , covering such things as grading and drainage , and the issue of a final map may take between another three and six years.
The BIA says it may then be up to three more years before all the building permits are issued, construction takes place, inspections are done and the properties are ready for occupation.
The largest single cost factor in most developments is the land. And since developers are usually paying interest on money borrowed to buy land, the longer the approval and permit process, the higher their interest bills.
That extra expense inevitably gets added to the cost of each house, said Adams, who argues that a more efficient process and a reduction in government paperwork would go a long way towards providing more reasonably-priced housing for San Diegans.
Adams sees some signs of improvement since the city of San Diego launched “Process 2000,” which aims to streamline the processing system by bringing various components under project managers.
– Project Managers May Speed Process
Jack Brandais, public information officer with the city development services department, said the introduction of project managers three or four years ago is one of several changes intended to improve the system.
Today, there are 32 project managers who facilitate the process by bringing all the parties together, resolving conflicts, arranging public meetings and hearings, and setting timetables for both applicants and city staff.
“One of the big problems over the years was that the process has not been predictable or timely, with too many isolated reviews,” Brandais said.
This meant it was up to customers to figure out who they should be going to see and what they should be doing, and it left them to work out compromise solutions among themselves.
Brandais said the introduction of project managers has helped avoid some of the delays and frustrations of the past and has sparked “a lot of very good comments.”
Another significant change, introduced in January, is expected to trim two months off the overall approval and permit process. Brandais said previously everything had to go to the City Council for final approval, whereas now the state allows the city engineer to sign off on subdivision maps.
Brandais acknowledges the overall system is complicated with developers having to navigate their way through the city’s general plan, 43 community plans, zoning matters, possible geological hazards and environmental issues.
In addition, there are a host of permit and inspection criteria to be satisfied while numerous miscellaneous issues range from soil reports and traffic flows to the visual impact of skyline structures on the canyon ridges of San Diego.
– Convenient Services Offered
However, Brandais said the development services department is doing its best to help builders, developers and the general public come to grips with all this. For example, the department has zoning, environmental and geological maps available at its offices on First Street.
People can call (619) 446-5300 to make an appointment for a free consultation with department staff; alternatively they can access the information they need on the Internet or the department will fax it to them.
Right now the department is attempting to tie many of these issues together in a half-hour video seeking to explain the whole land-use approval and permit process.
Brandais said this would prove an extremely helpful tool for developers, though he admits the biggest problem at the moment is trying to condense everything into just 30 minutes.
According to Brandais, the time needed to complete the final map and conclude subdivision approval is a lot shorter than suggested by the Building Industry Association.
He believes the process can be finished in six to nine months “if there are no hitches.” However, if the development encounters opposition, requires zoning changes or raises environmental issues, he said the time period can extend significantly.
Brandais said planning and permit fees are intended to reflect the impact of a new house and its occupants, and cover a whole host of public services and facilities, ranging from water and sewer, to libraries, police and schools.
– Complicated Fee Structure
He said the fee structure is very complicated, varying between areas and sometimes even within the same area. Also complicated is the allocation of fees which must be returned to the specific neighborhoods where they were collected and then can only be used for equally specific services, projects or amenities.
Adams is optimistic the new San Diego City Council is going to tackle the time-consuming regulatory and environmental issues surrounding the building industry. “We have some good people there,” he said. “Some fine minds.”
He also applauded the county where, he said, the Board of Supervisors is making the greatest strides in bringing efficiency to the whole planning and land use process. Barratt American, an offshoot of one of the United Kingdom’s best-known home builders, has been in Southern California since 1980 and at its peak was putting up around 1,000 homes each year.
Mick Pattinson, president of Barratt American, said the recession of the early ’90s forced the company to consolidate, but it’s now expanding again and is building between 400 and 500 homes per year for annual revenue of about $170 million.
Pattinson said it’s significant that in recent years Barratt has tended to specialize in high-end homes for those with plenty of disposable income rather than the more affordable housing.
He said three things steered the company in that direction: the high cost of fees, the amount of red tape, and the construction defect litigation which forced many builders to give up on condominiums and townhome developments.
Pattinson welcomed a California Supreme Court decision in December making it harder for homeowners to sue builders over alleged defects, and said as a result, Barratt is now re-entering the multi-family home building business.
While that may go some way toward increasing the supply of affordable housing in San Diego, Pattinson sees no end in sight to the negative impact of government which manifests itself in fees, over-regulation and the burden of inadequate infrastructure.
Pattinson said government is a huge problem at all levels. Federal laws and regulations delay projects and take huge amounts of land out of circulation; the state “robs local jurisdictions” of property tax, returning only about 13 cents on the dollar for roads, schools and other infrastructure; and at the local level the approval and inspections process is expensive and time-consuming.
The impact of the “Sacramento grab” has led to a massive under-funding of infrastructure, which Pattinson said is having to be made good through the pockets of builders and homebuyers.
Then there’s what Pattinson calls “rampant NIMBY-ism”, or the “Not In My Back Yard” syndrome, in this region, where people try to derail or stall planning approvals.
“Things which should take months take years, and things which should take years take decades,” he said.
He said the end result of all this is an average new house price of $425,000, home-ownership levels way below the national average, and a San Diego economy being put at risk by housing costs which are persuading some people they would be better off elsewhere.
Pattinson said builders are not making a large profit out of $425,000 homes. Instead, money is being wasted in lengthy regulatory processes and, apart from some “nibbling away at the edges,” he sees little attempt to tackle this serious situation.
“If these issues and problems are not dealt with it is our sons and daughters and grandchildren who are going to pay the price,” he warns.
Pearson is a freelance writer for the San Diego Business Journal.
