Barratt American Scales Back Eastward Expansion : Construction: British-owned builder plans to try its hand in the Washington area. It will enter affluent markets in southern Maryland and northern Virginia.

Barratt American, the British-owned home builder that once had ambitious plans to expand from Southern California across the United States, is making a more modest move in opening an East Coast operation in the Washington area.

Building houses is largely a local industry in the United States. A few other British builders in Southern California have East Coast operations and some big national companies operate on both coasts. But few builders headquartered in Southern California have expanded to out-of-state markets.

Barratt says it wants to spread its risks by expanding: While one market may be in the throes of a down cycle, another might be improving.

“The Washington market went into the tank a little sooner than Southern California,” said Mark Frazier, president of Barratt American in Irvine, the U.S. subsidiary of British-based parent Barratt Development PLC. “And it’ll probably come out sooner too.”

Barratt says it had already optioned some land in the Washington area and could be building houses by the end of the year.

The suburban Washington markets Barratt will enter in northern Virginia and southern Maryland resemble the market in parts of Southern California: They have large, affluent populations; diverse, growing economies based on high-technology industries, defense and even tourism; high home prices, and traffic and pollution problems.

As in Southern California, it’s difficult to get government permission to build housing in the Washington area after years of unrestrained growth that left local governments straining and citizens complaining. In Northern Virginia’s Fairfax County, for instance, voters several years ago elected a slow-growth majority to the county commission. And a slow-growth ordinance has been enacted in Maryland’s booming Montgomery County northwest of Washington.

But that’s one reason Barratt picked the market, Frazier said.

“If you want to build a lot of houses and make no money, go to Phoenix or Dallas or another place where there are few controls,” Frazier said. “It’s no secret that if you want to improve your profit margins, you go to a place where growth is controlled.”

The fact that the market for new homes is even more listless in Washington than in Southern California may also be an advantage, Barratt said. The main reason: Land will be cheaper to buy than during the busiest part of the cycle. And the Washington area, with its affluence and economic growth, Barratt said, is one of the five strongest housing markets in the United States.

Barratt, the largest home builder in Britain with nearly $1 billion in sales, entered the U.S. market when it opened a Southern California subsidiary in 1981. Back then the company went after the market for first-time buyers and inexpensive homes. A high-profile advertising campaign, including television spots--unusual in the building industry--added to the hoopla.

But the strategy flopped. Californians didn’t like the tiny condominiums the company built, even if they only cost $50,000. (At 400 square feet, they were about as big as the average garage.) Barratt, which once brashly said it would expand across the United States and become one of the country’s largest builders, found itself abandoning even Northern California.

This time Barratt will start small. The East Coast unit isn’t even expected to contribute substantially to Barratt’s sales and profits until at least a year from now. “This time we’re not going into the East Coast with the big guns like we did here nine years ago,” Frazier said. “That causes more problems than it solves.”

Barratt is also trying to change its product mix again, both here and on the East Coast. The builder had largely abandoned its courting of the low end of the housing market by the late 1980s, when in 1988 demand for housing grew so frenzied that builders could more or less name their prices. Now Barratt builds some very large homes, some as pricey as $1.2 million.

The housing market has grown anemic, however, and the profits of Barratt and other home builders are suffering. And Barratt’s parent firm is hurting from high interest rates and inflation rates in Britain, which are slowing sales there.

So Barratt is tinkering again with its balance of products. It will try to broaden its customer base by building more inexpensive housing. Only a little more than a third of the homes Barratt built last year were less expensive housing; the company says it wants to up that ratio considerably.

Building a thousand homes was enough to get Barratt ranked as Southern California’s 12th-largest home builder in an annual survey conducted recently by the Los Angeles Times. Barratt American had sales of $250 million on those homes and employs 210.

There’s one last reason for opening up a shop in Washington, Frazier says: It’s got good flight connections to Southern California and it’s closer to Britain. And not just closer geographically: The East Coast’s more traditional houses and use of materials such as brick, Frazier says, make it look more like Britain than Southern California’s pastel Mediterranean-style houses with tile roofs that builders have taken to putting up lately.

Frazier says Barratt won’t try to export that jazzy California style to the East Coast. “But we will use our California expertise in designing big kitchens and baths out there,” he said. “And we may bring some of that East Coast traditional look back here so people can have a change.”