Greetings!

8-11-15

John’s Soapbox:

Can We Build Our Way Out Of Housing Shortage Problem?

For those of us who have experienced the boom and bust cycles of housing construction in California, we are not surprised there is a current shortage of housing. We have 350,000 new residents each year and to accommodate them, one would figure we would need at least 150,000 housing starts each year to house them. In 2009, there were 36,000 housing starts in all of California. During the 2010-14 period, for example, Los Angeles County’s population grew by nearly a quarter-million, but it added fewer than 40,000 housing units. During the same period, San Francisco, despite its geographic limitations, grew by nearly 50,000, but built fewer than 10,000 housing units (from Dan Walters’ Op Ed piece found here–

Duh. The obvious solution would be to build more housing.

Problem #1: Building costs are high. Anybody think they are going to get lower?

Problem #2: Since redevelopment dollars dried up, Cities and Counties are looking to require inclusionary housing fees on houses that are sold. Recently, a court decided that those fees are legal. Given that rental housing is becoming the “newest need”, is it any wonder that Cities are considering inclusionary housing fees be imposed on rental units? Two years ago, the now Speaker of the Assembly in California, carried a bill to overturn a 2009 Supreme Court ruling that made inclusionary housing fees illegal to attach to rental units. Governor Brown vetoed that Bill. For once, I agree with Governor Brown! With the recent victory in San Jose that inclusionary housing fees are legal for units that are sold, we can probably expect another attempt to overturn the 2009 Supreme Court ruling and make rental units subject to inclusionary housing fees. If that ever happens, developers will not build as many rental units as they might otherwise build.

Problem #3: The environmentalists have lots of tools to be “NIMBYS” and fight new development due to increased traffic, reduced water supplies, and potential loss of habitat for little critters like the Tiger Salamanders.

Problem #4: Are the 350,000 new California residents coming in as qualified, highly paid, professional people who can qualify for a home purchase? Nope. The types of jobs being created in California, by and large, are more service oriented jobs that are lower paying and therefore put more demand on the low income housing and rental sector.

Problem #5: Some of our local elected officials see rent control as a partial solution to our local housing crisis. It is widely known that the City of Santa Rosa is considering a “Richmond Like” rent control ordinance that would impose new rules and regulations, as well as a hefty fee, onto current owners of rental stock. Here is a recent article on the Richmond Rent Control ordinance-

Problem #6: Housing starts already have approximately $95,000 of fees per unit in Sonoma County. Since costs and environmental mitigation costs are high already, some proposed developments cannot absorb any more fees (that are passed through to the buyer by most, if not all, developers/builders). Although they could take the cost and simply add it to their sales price, what is happening is that where the available land is for constructing these homes, the required higher prices are too high for lenders to loan the money to potential buyers (i.e. there is no “comp” that would allow the lender to qualify a buyer for a house over $600,000 in Roseland for example). The fees have priced the houses out of the lender’s capabilities.

Problem #7: Nimby’s do not want more houses built near them. That is a generalization, but It is true more than not.

So-is your answer the same as when you started reading this? Did you think you could build your way out of the housing crisis?

What the ECA is doing is attending the City Council Study Sessions on August 18th & September 22nd to listen and participate in educating the Council members as to how development feasibility is compromised if too many fees are imposed. Please read the NCBE newsletter and try to attend the City Council Study Sessions on August 18th and September 22-here

The ECA takes the position that the City of Santa Rosa cannot impose any more fees on developers as they will simply pass them through to the buyers and the buyers will not be able to qualify for the higher prices. The City needs to find alternative means to subsidize and “fast track” housing starts that have fees waived or slashed in order to get more housing units built fast!

How does this affect ECA members? Easy-our roads and infrastructure needs expanding, replacing, and updating. More housing will allow for more infrastructure work.

Long Live Development!

That’s All Folks!

John Bly