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Costs Hindering Local Construction

Costs Hindering Local Construction

Builders Blame Drop in New Home Permits on Red Tape

BY MANDY JACKSON

Staff Writer





Builders are blaming a long, complicated project approval process for the decrease in the number of residential construction permits issued in 2001.

According to data from San Diego-based MarketPoint Realty Advisors, 15,468 residential construction permits were issued in 2001, compared to 15,592 in 2000. The numbers include single-family homes, townhomes, apartments and condominiums.

Mick Pattinson, president of San Diego-based homebuilder Barratt American Inc. and 2002 president of the California Building Industry Association, said the decrease in residential construction has nothing to do with the demand for housing.

Pattinson said he was not surprised that fewer homebuilding permits were issued in 2001. The difficult planning process, allows builders to construct new homes on a given piece of land, contributed to the decrease, he said.

“We need to know if there’s courageous people in government who support housing,” Pattinson said. Cities have an “ironclad grip” on entitlements, and the process of getting permission to build is long and difficult, he said.

“There’s no push from the (local government) leadership to make things go faster and get the product in place,” said Mike Neal, president of H.G. Fenton Co., a San Diego-based real estate owner and developer.

The same push from city leaders, such as Mayor Dick Murphy, to get the Downtown San Diego ballpark back under construction after lengthy legal delays has not been happening with approvals for new housing projects, said Neal, the 2002 president of the Building Industry Association of San Diego County.

Getting a residential construction project approved takes years and even decades in San Diego County, said Russ Valone, president of MarketPoint. Builders sometimes have to go through four agencies , city, county, state and federal , to get approval on one requirement.

Downtown Boom

Downtown San Diego is an exception, Valone said. The Centre City Development Corp. helps get projects through the approval and permitting process more quickly. The CCDC is the city’s development and planning agency for Downtown.

Delays in the approval process and additional development fees add significantly to the cost of new-home construction.

“It can cost $15,000 a door in San Diego County because of the development fees,” Valone said.

He has been consulting on a housing development in the county where an endangered plant was found. While a plan to work around the plant is being devised, the project has been pushed back a year, he said. The cost will be passed on to the homebuyers in that new neighborhood.

“Everyone cares about the environment. We live here, too. But, there has got to be an economic process that goes with it,” Valone said. “We have to find ways of dealing with it in a rational sense, not an emotional sense.”

Planning groups and local government give more credence to environmental groups and others that want to limit land use, according to Pattinson.

“Consumers are being left to drive to Temecula and Murrieta (in Riverside County). Property owners have land they can’t sell,” he said.

Neal said it’s getting harder to find places to build, and large plots of land are especially difficult to find.

Buyers Pay Premium

Builders want to bring moderately priced housing products to the market, but the approval process drives up the price of homes they are building, he said.

“Because we’re a supply-constrained market, the buyer ends up paying for it,” Neal said.

The San Diego Association of Governments projects San Diego County will grow by almost 800,000 people by 2020. More than 300,000 new housing units, or about 18,000 new homes per year, are needed to accommodate the region’s growth, according to Sandag.

Valone estimated there will be an increase in the number of building permits issued in 2002 due to apartment projects that are expected to begin this year and housing developments planned along state Route 56. However, the region will still see fewer homes produced than are needed, he said.

However, Valone noted there was a difference of only 124 permits issued from 2000 to 2001. While the number of residential permits issued in 2001 decreased slightly, he said, there was quite a bit of construction under way during the year. There may have been permits issued for apartment projects at the end of 2000 that were actually under construction in 2001.

Over the past 10 years, the number of permits issued peaked in 1999 at 16,574. That still makes 2001 the third best year of the last 10 years.

However, Valone said, “Even with the high that we had at 16,000, we’re way under-producing.”

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