LA/Ventura KB Home Endeavors To Keep Up With Region's Explosive Housing Demand

The map of KB's current projects in the L.A. area shows that KB is continually pushing into the exurbs away from the more urbanized areas and into open land, far from what has traditionally been considered the region's core. Explain the opportunity and the rationale for why you have moved to greenfields to develop the housing that is in such great demand in this region.

We in real estate know that the one constant in our business is: location, location, location. Buyers are very focused on that. When you look at, for example, our move into attached and urban infill, we know that these locations are king and that such neighborhoods are where many people want to live. They work there now, but, unfortunately, there are not a lot of opportunities for people to buy, especially new housing, and we know that by going into these markets, we can provide what our customers ultimately want- a location where they can work and live in the same area.

Yes, KB is also building in other areas, some of the areas where land is more available and, consequently, more affordable. At the end of the day, both are important – those that are willing to pay a little more to have the benefit of not having to commute a couple hours to jobs are interested in that urban infill lifestyle, and those that still want that American dream of having a home in the suburbs with a yard. So that is why we are still building both in the exurbs and in urban neighborhoods; we build housing for both. While we know location is important, there is also the dynamic of affordability. If you can't afford it, you can't afford it. Some people are willing to drive farther and do more to own the American dream.

Let's continue addessing these issues because they are the heart of the housing opportunities equation in Southern California. You know that urbanists and many environmentalists for some time have been decrying urban sprawl and talking about smart growth and urban infill. Compare the opportunities of urban infill with the opportunities you have just described.

I think that we live in a world where those that have theirs are very comfortable, but not comfortable at anybody else having theirs. Probably one of my biggest fears is, especially as a parent with children getting ready to go to college and go out on their own, that my children may not have the opportunity to enjoy the American dream of homeownership. I fear the day when we have to wait for someone to die in order to get off a list to buy a home. Subsequently, we can't let ourselves fail in California to meet the needs of growth by not being able to provide enough homes. CEQA and other programs aren't bad programs; they are great programs. We should be sensitive about the environment. We care about the environment. We care about building quality communities and making sure that there is a balance of jobs, housing and the environment. But those programs are abused to stop the natural growth of populations, and that is probably one of my biggest fears.

Let's focus KB's Cascades project in Sylmar, which ranks among the largest developments in the city of L.A. Describe the developmental opportunity? How did KB get this project entitled; give our readers an overview of the project as it stands now.

It is probably not the largest, but it is one of the more significant projects in the City of Los Angeles. One of the things that we said at the groundbreaking, and it stands true today, is that when you have leadership like Councilman Alex Padilla has provided us, it is possible to create a new community.

The first phase of this project focussed on the jobs involved. The next stage was building the golf course, and the final stage coming in now is improved infrastructure. We are going to mitigate traffic to a higher level than what was originally required for a larger industrial complex. We are going to be bringing in housing opportunities for not just the general public that wants to enjoy golf course style living, but also workforce housing for our firefighters, police officers, nurses, and teachers that often work in a community but don't have the opportunity to live in a community. That is what makes the project so exciting to us.

We have housing that has been designed to provide many of the things that homeowners desire. You started the conversation with smart growth. To me, this is as smart as it gets. You have jobs, homes, and recreation all in one community.

Let's focus on opportunities in the Antelope Valley, where KB Home is probably the number-one builder. What is the marketplace there? How much growth can we expect?

We have seen a lot of builders push into the Antelope Valley and have acquired property, but we still have a substantial land holding and feel comfortable. While a lot of developers left when the Antelope Valley had its downturn in the early '90s, we never left. We have never been an absentee landlord. We have supported many of the community organizations and we have built strong, working relationships with local leaders which makes us a partner in the Antelope Valley's future.

Now we have the opportunity to start looking at infill opportunities in a market that still has plenty of land. We are excited about the opportunity in the Antelope Valley. With the homes that have come in over the last few years, now we are starting to see jobs opening up. We are starting to see a lot of retail and light industrial, and really, the story in the Antelope Valley, when it comes to jobs, is that many companies are looking to relocate there. All of the name brand companies are coming. They just opened their Super Wal-Mart. Interestingly enough, it was the first place that Super Wal-Mart opened, and instead of having protests, it was welcomed by the community and people are excited. It has provided a couple thousand new jobs.

Let me jump in for a second and tie some themes together. How does one on a Super Wal-Mart salary, afford a home in the $300,000, $400,000, or $500,000 price range?

I think one of the dynamics in California is that we definitely have changed where we are from a family-income standpoint, not just in the Antelope Valley, but everywhere. I could ask the same question back. How does someone afford a $900,000 home in Ventura? They are the same jobs there, and it is the same level. Not everybody is a doctor or a lawyer in Ventura. They are affording that in part because we have record-low interest rates, which continue to keep homes more affordable at the higher prices. But when you look at the Antelope Valley, else can you buy a $300,000 home in California today? It is one of the last areas where that price point is still available. But more important is that we see a lot of families where we have two professionals working in a family. The mother is a teacher, the father is a firefighter, so we are seeing more of two professional income families, and subsequently we are getting a lot of young families moving to the Antelope Valley, and that is how they are affording it. So, they are not just the checker at the Wal-Mart, but they are the manager, or the head of distribution.

You are involved in the first attached housing at Playa Vista, and you are also involved in one of the first master plan communities in Palmdale. What does this tell us about KB's strategy going forward?

I think it shows the diversity of our housing products. Our focus and approach at KB has really been on navigating the land development process, a savvy financial structure, and growth strategy, and part of that is clearly related to product. Our project in Valencia at Creekside was a patio home, alley-loaded product, phenomenal street scene, and probably one of the most well-perceived and fastest-selling communities we ever opened. In regards to Playa Vista, we are very proud of the opportunity to work with Playa Vista. It is probably one of the best demonstrations of urban infill done right, and we have one of the most exciting products at Playa Vista. Our Park Houses have private garages and private elevators. They are all three bedrooms, and truly an entry into luxury housing. But what is exciting is that when you go into these urban infill communities, you are choosing a type of lifestyle where you want to be closer to home and to work.

Lastly, you serve as president of the Golden State Coalition, which is working on solutions to the gridlock along I-5. What are the challenges there, and what are the solutions you are advancing?

I think one of the best opportunities that we have with the Golden State Coalition is to fix that bottleneck at the I-5/14 Freeway interchange. The other thing that is exciting about our project is that in many highway projects where you are trying to do a widening, the biggest challenge is right-of-way. Well, we have right-of-way to do this project. Our biggest constraint is getting the funds to do it, and we can no longer wait for government. That is why we have a huge team of private sector people, businesses, educators, elected officials that are involved in our organization giving us focus in order to get the revenue we need to get these freeways widened. We need to fix these highways to get goods movement, to produce more jobs, to improve safety, and to improve the quality of life for our homeowners who are traveling further to jobs until we can get more infill housing.

I think the one thing that I am always asked as a builder is that ultimately fees get passed even if they are traffic impact fees that are supposed to improve our roads and you will see comments that no builders were there to protest. Well, builders, when we protest, are not protesting because we are against building roads or schools. We are concerned with fees that are supposed to improve local roadways that don't get spent in the district where the fee was created. If we build 30,000 homes in the next three to four years like we anticipate, and we were to enact fees, I don't think there would be a homeowner who would object to a fee if they knew it would go to improve roads, or to improve the quality of life in their community.