Back to Basics : Housing: Affordability is making a comeback as builders court entry-level buyers after the excesses of the past decade.

The California State Museum in Sacramento is featuring an exhibit this month on “California Bungalows.” The timing couldn’t be better for celebrating the qualities of modesty, efficiency and affordability that characterize this populist housing style.

Today, California may be on the cusp of a shelter revolution that could parallel the 1920s, when the California bungalow burst onto the scene. After overlooking entry-level home buyers for most of two decades, the building industry is now scrambling to produce affordable single-family houses that meet the needs of a new generation of prospective homeowners.

“An industrywide introspection is under way that could change the state’s housing landscape for decades to come,” said Gary Hambly, president of the Building Industry Assn. of Northern California. “The conclusion is unmistakable: The first-time home buyer is king and everyone is struggling to offer . . . an affordable house.”

Some of the cost-cutting ideas being tested include downsizing the home, building at higher densities and offering smaller side yards and less garage space.

Expensive amenities that were common in the 1980s, such as imported tile foyers and indoor columns, are being stripped away. Even builder profits and subcontractor fees are being cut.

Seventy years ago, the bungalow was the affordable solution. The livable but austere house plan offered inexpensive shelter for tens of thousands of new arrivals who flooded the state from other parts of the country.

“Most Californians are people of modest means and informal tastes who want an attractive but inexpensive residence,” wrote architecture critic David Arthur at the time.

In the 1990s, the challenge is much the same. But today, to produce an affordable house, developers must change the way they do business. Their challenge is to overcome the mismatch between home sizes, housing costs and consumers’ incomes.

In 1949, the average home was only 800 square feet; today, it’s nearly 2,000. Yet 40 years ago, the average single-family household size was 4.2 persons, and now it’s only 2.3.

“We are coming off a long period of conspicuous consumption where we all got carried away with the excesses,” said Santa Barbara architect Barry Berkus. “It was a contest for who had the most bells and whistles, until finally we crashed into the price barrier.”

Experts agree that the bigger-the-better formula has contributed to the downturn in the California housing market. There are plenty of expensive big homes available, but fewer than 25% of families can afford the median-priced house.

“This trend left a lot of people on the sidelines, and now we are coming back to them,” said Berkus, who is working on house designs for several first-time home buyers.

“We haven’t completely eliminated the amenities, and we still offer a livable open plan, but the houses are smaller, with cost savings throughout.”

For years, such architects as San Francisco’s Donald McDonald and Toronto’s Witold Rybczynski have been offering innovative housing schemes that meet the needs of people earning modest incomes. But it wasn’t until the last six months that large home builders who construct most of California’s housing began to take the entry-level market seriously.

“We suddenly woke up and realized that we were building houses that our buyers couldn’t afford to buy,” said David Coombs, assistant vice president of the William Lyon Co. The Newport Beach-based home builder is now experimenting with an entry-level house that the company has dubbed the “California Classic.”

Along with design innovations and an industry awakening, softer land prices should help make the affordable house a market reality. From 1986 to 1989, speculators and developers were bidding up the price of residential land all over the state.

“That sort of behavior has disappeared from the market today,” said Cree Partridge, senior vice president of Norris, Beggs & Simpson, a San Francisco-based real estate broker.

Lower land costs have helped Upland builder Ira Norris, president of INCO Homes, deliver an affordable product. Norris sells $79,990 single-family homes to people who earn $30,000 a year, which is below the state’s average family income.

The 1,047-square-foot homes on 7,200-square-foot lots are located 75 miles northeast of Los Angeles in the high-desert city of Adelanto.

Boasting tile roofs and air conditioning, they are 25% to 50% less expensive than most new homes in the area. The least-expensive subdivision in this part of San Bernardino County starts at $99,000.

Cheap land, thinner profit margins, tougher bargaining with subcontractors and flexible city codes account for the affordable prices, according to Norris.

Also, his marketing costs and construction loan fees were reduced because the homes were planned and sold in less than seven months. The units will all be completed by spring.

Called “American Traditions,” the first phase of the 124-home development was sold out in one weekend. More than 3,000 people flocked to see them when they opened Oct. 13. One week later, the last of the homes were sold before they were even built.

At $26.63 per foot, construction costs on the homes are 20% lower than similar houses Norris built a few years ago.

Although he would not disclose how much he shaved his profits, Norris claimed they are “substantially less than what I made per house four years ago.”

In negotiating better deals with subcontractors, “we promised to cut our costs, our prices and our profits,” Norris said. “We told the subcontractors there’s going to be pain for everybody, and we weren’t afraid to tell them to cut their overhead.”

As an example, the framing contractor reduced his tab by an estimated 15% to 18%, and one subcontractor consolidated two offices and sold a building to reduce his overhead to meet INCO’s budget.

Norris also went to the manufacturers and persuaded them to reduce their prices on such items as air conditioners and furnaces. “We even saved $200 per house on paint,” Norris said.

Local government also helped. The city of Adelanto agreed to remove a requirement that the paved streets and sidewalks have a gravel base before concrete is poured. The purpose of the rule is to ensure proper drainage, but engineering reports showed that the soil on the INCO site was adequate for that purpose.