Building Permit Increase Tied to Water Shortage

Building industry executives are attributing a huge jump in San Diego County housing construction permits to uncertainty and nervousness by builders over the county’s still-evolving water policy and its effect on business, rather than any dramatic improvement in the sluggish housing market.

In March, the county’s builders took out a combined total of 2,727 permits for multi- and single-family units, a 73% increase over the 1,579 permits taken out countywide in March, 1990, according to the Construction Industry Research Board of Burbank.

Housing permits, which cost developers up to $20,000 per unit depending on the city, are typically issued six months or less before the start of construction.

The large volume of new permits was seen by several industry observers as a defensive measure by builders in the face of increasing building restrictions caused by the drought.

Jim Hansen, a division manager with Fieldstone Co., home builders in San Diego, said he and many others in his industry are concerned that the water shortage could limit their “ability to pull permits in the future.”

Until the statewide drought was alleviated somewhat by heavy rain and snowfall in late March and April, the San Diego County Water Authority was threatening to call for a moratorium on new housing permits after April 1, on top of a mandatory 50% water rationing measure. That was a frightening prospect indeed for construction companies “with employees to pay and obligations to meet,” Hansen said.

The water authority, which provides water to the 23 municipal water agencies in the county, ended up imposing a 20% cut in water use last month after the rain and snow helped replenish reservoirs. Vista so far is the only city to impose a moratorium on new construction, said Frank Panarisi, president of the Construction Industry Federation, a local trade group.

But serious talk of a countywide moratorium earlier this year sent builders scurrying to local planning departments to nail down permits ahead of the April 1 cutoff date for the moratorium and rationing measure. Builders say they are still unclear as to whether the 20% rationing figure means future permits could be cut by a similar percentage.

Robert Rivinius of the Sacramento-based California Building Industry Assn. defended the actions of San Diego builders in pulling their permits before a tide of drought regulations.

“Someone might say, ‘Gosh, it doesn’t seem right. Why would they do that?’ Well, housing is so expensive, particularly in San Diego. It’s a high-cost area. You do what you can to provide the most affordable housing you can. And if you see something coming that’s going to add costs, and you can pull a few permits in advance of that, you do it.”

Another reason cited for the jump was the fact that the countywide inventory of completed and unsold housing units had dipped to unusually low levels. That, combined with increased buying activity at county subdivisions after the end of the Persian Gulf War, encouraged developers to step up activity.

The increase in March buying, after two abysmal sales months in January and February that were dampened by the specter of war, proved disappointingly short-lived and not that powerful, several developers said Monday.

Total countywide sales of single- and multi-family units during the first three months of 1991 was 2,013 units, down from 2,409 units sold in the same period a year ago, said Russ Valone, president of Market Profiles of San Diego, a housing market research firm.

Thus, sales of new units in the county are lagging behind last year, when only 7,000 new units were sold, he said. That’s a sharp contrast from 1986 to 1988, when an average of 15,000 new houses and condominiums were sold annually in the county.

The average price of detached or single-family houses sold so far this year is $264,300, down from the $268,700 average over the same three months last year. The slight decline is an illustration of how housing prices have been “basically stable” over the past 18 months, Valone said.

Times staff writer Ralph Frammolino in Sacramento contributed to this story.