BIA Guides Builders Through Fragile Market, Changing Regulations

TPR last interviewed you in March of this year, after the BIA and the LAEDC had released a report claiming a housing shortage of 300,000 units in L.A. and Ventura counties. Since then, the housing and lending markets have changed dramatically. What is the housing need in Southern California presently, especially given the credit crunch and early signs of recession?

The need actually looks very much the same. That 300,000-unit number is an actual demand number-a shortage that has come from underproduction over the past decade-and-a-half or more – and that underlying need doesn't change with the market. Frankly, we're looking at an even greater shortage in the future due to the projected population increase-6 million more people over the next couple of decades. That's equal to twice the population of Chicago or the populations of Phoenix, Tucson, and Las Vegas combined. Those people are coming into the region, and we need to provide housing for them.

Elaborate on how that changing market has affected the less densely populated growth areas in the region, such as the San Gabriel Valley, Ventura, or the Santa Clarita Valley. What's the market condition for housing and housing demand in those areas?

Those are cities that have been committed to providing housing for their residents, and many of these areas have done a better job of keeping up with their population increases. One thing that's interesting about Los Angeles-when you listen to economic experts like Jack Kyser from the LAEDC-is that the region has multiple urban centers and isn't huddled around a single downtown. We are seeing interest in housing and job development in the first-ring suburbs and also in some of the younger cities and areas that you just talked about, like the city of Santa Clarita. They are aggressively pursuing job/housing balance and mixed-use development proposals.

The BIA is focused on responding to this development and in reaching out to these cities to help craft policies that will continue to facilitate housing production. If we're going to make up for our ongoing shortage and address our housing needs, we need to provide opportunities across the entire region of Los Angeles and Ventura, not just to the isolated pockets that have historically produced housing.

How has this housing credit crunch affected the builders, developers, and professionals involved in the BIA? What is the BIA doing to support them as they face the challenges of the current market?

Like any responsible business, BIA member companies are responding to the current market and preparing for the future. Right now, we find ourselves in a bit of a ‘perfect storm,' with the credit crunch changing the market dramatically. Many builders are tightening their belts, and there have been cost-cutting activities and layoffs throughout the region. That should really be a concern for our elected officials, because housing is a major economic force in this state. Millions of dollars per year come directly and indirectly from the housing industry. They should be concerned about these market constraints, not just because of how they will affect the availability of housing and homeownership, but how they will also affect the overall economy and the fiscal health of the city.

As members of the home building industry, we continue to actively work with elected officials to find ways for them to improve the process of producing housing so we can stimulate the market.

Let's turn to some of the public policies that set the regulatory climate for the development of housing and affordable units. Two of the region's most controversial planning proposals included the city of L.A.'s implementation of SB 1818 and the mayor's recent inclusionary zoning proposal. What is the BIA position on these two proposals, and what proposals for amendments might be offered?

SB 1818 is a state law that's designed to provide incentives for the production of affordable housing. As the city writes its implementing ordinance, it needs to avoid restricting the ability of that ordinance to work. The proposal that has been discussed very passionately over the past few months involves years of discussion and compromise, and we need to get that ordinance in place in order to provide incentives for developers to build affordable housing.

The inclusionary zoning proposal is a concept that has only recently been announced. The BIA believes that any discussion of a mandatory inclusionary zoning policy should be tabled until we can assess what SB 1818 is going to bring through voluntary and incentive-based approaches. Certainly, given the current conditions, we shouldn't artificially constrain one segment of the market. Inclusionary zoning is fundamentally flawed because it's actually a constraint on the very thing it's trying to produce. The BIA thinks that this is a fundamentally backward policy to take toward housing and that the city of Los Angeles should try to come up with a more creative and effective strategy.

Metro is exploring a congestion mitigation fee on new development in the basin in L.A. County. What is the BIA's position on that proposal?

One thing we see when we look at all of these different government actions is that they are happening in isolation, but they add up and have a tremendous cumulative impact on the market. There are multiple fees already in effect and this would be one more fee that is going to further increase the cost of providing housing.

We've been at the table, actively discussing how we can provide traffic solutions in the county. What we want to see out of Metro is a program that makes sense to the average person on the street. If it's a fee program, it should use those dollars effectively and wisely, leveraging other dollars to address existing problems that sorely need attention. Ultimately, we're looking for funds to be used in an efficient and effective manner.

The BIA was a co-sponsor of the GreenXchange Global Marketplace conference December 10-11 in Los Angeles. How involved has the BIA been with the crafting of the city of L.A.'s green building ordinance? How is the BIA encouraging its members to implement sustainability practices in ongoing and future building projects?

Our sponsorship and other supporting activities show that BIA, as an organization, has long been committed to green building. In fact, new homes built in California are the most environmentally-protective homes built anywhere. They are very energy efficient-energy consumption in homes has decreased by 30 percent since 1990. That's going to reduce the carbon footprint of the home and have less impact on the environment. Our members have absolutely been committed to making homes more environmentally-protective and energy-efficient for years. In the future, we will continue to see this effort grow and expand as new technologies, policies, and practices are developed.

As the city works on its green building ordinance, decision-makers need to recognize that new housing construction is less than one percent of the overall housing stock of the city. If we truly want to reduce the environmental footprint of the buildings in our cities, we need to start looking at the remodeling and rehabilitation of existing homes that don't currently meet the high standards set for new homes constructed today.

In contrast, the county of Los Angeles has a proposal that is looking at a green building ordinance, but it is looking at one with a much longer lead time; more flexibility based on matching the building standards to the type of development that is occurring; and the economic analysis of cost benefit.

That will be a major issue as those types of proposals move through their respective jurisdictions.

Recently, another fire burnt in Malibu, destroying houses and private property. What is the BIA's role in recovery efforts after fires? What questions regarding where and how we build are worth reconsidering?

BIA members provide homes and foster homeownership, so we understand how personal and significant that sort of loss is. Our industry is constantly looking for ways to make improvements in construction materials and technologies in order to protect homes and the people that live in those homes. Over the years, there has been tremendous improvement in building materials and in the planning of communities in order to better protect them from fires. As you look back to the fires of last month, many of the homes in newer communities were built with improved roof coverings that are much more fire-retardant, and with roof-venting protections that make it harder for embers to get into homes and start fires.

We are constantly looking for new technologies; working with local fire departments after these wildfire incidents; and working with building officials to introduce new technologies to ensure they are allowable under building standards and codes. We know that safety is of vital importance to homebuyers.

If TPR interviews you again in six months, what will we discuss? What will be the significant issues on the development and building agenda in the summer of 2008?

I think many of the issues we're talking about now are going to continue to influence the market. Environmental issues will continue to dominate urban planning. We will still have a housing shortage. We will still have problems and extremely long timelines for getting projects approved. We will continue to talk about how long the entitlement process takes until we see some radical recognition of the fact that we are in a very different market than we were in 6-12 months ago. We need some recognition of that change and some commitment by our elected officials to improve housing production so that we can house the residents that are already here and take care of those that are coming in the future.