Home Builders Seek a Cutback in Regulation : Economy: California developers say red tape is adding too much to housing costs.
California developers, facing off against environmentalists and slow-growth activists, are urging lawmakers to reduce housing regulation and fees in the wake of a controversial new Department of Housing and Urban Development report that says homes would be more affordable if federal, state and local building rules were streamlined.
Cliff Allenby, a senior vice president of the 6,800-member California Building Industry Assn., urged Gov. Pete Wilson’s Interagency Council on Growth Management last month to reduce “costly regulatory . . . barriers to the production of housing.”
He contended that red tape, zoning policies and excessive building fees can increase the cost of homes between 10% and 40%. (The council, established by Wilson in January, is preparing recommendations on how the state can better manage its growth.)
The testimony came only weeks after a Los Angeles-based builders group called the Governmental Affairs Council persuaded state Sen. Marian Bergeson (R-Newport Beach) to introduce a measure that would have freed home builders from paying local fees for roads, sewers and other infrastructure. Although the Bergeson bill, SB 462, was modified in June to exclude the provision, developers say they plan to press for reconsideration of the measure later this year.
Policy makers and developers for years have debated the impact that building regulations have on housing affordability. But the issue has taken on new urgency in California in recent months in the wake of the nationwide housing slump and increased concern about the environment.
The July 8 report by the U.S. Department of Housing and Urban Development, which contends that “unnecessary regulations at all levels of government stifle the ability of the private housing industry to meet the increasing demand for affordable housing throughout the country,” is only the latest evidence of concern.
The HUD commission report--which Rep. Henry B. Gonzalez (D-Tex.) said raised important issues but which he termed “absurd” for blaming high housing costs solely on excessive regulation--stated that “regulatory barriers add as much as 20% to 35% to the price of a house in some areas.” The report cited wetlands preservation, growth controls, the levying of fees on new construction and rent control as examples of regulation that has gone too far.
Commission member Anthony Downs, a senior fellow at the Brookings Institution think tank in Washington, said in an interview that California has been particularly culpable in creating high housing costs by aggressively imposing restrictive zoning and high fees on developers.
In Palmdale, about 50 miles northeast of Los Angeles, fees for sewer hookups, schools, parks, water, roads and other items have more than tripled over the past two years to about $13,000 for each new 1,500-square-foot, three-bedroom home. Some of the fees were imposed for the first time within the past year.
“As development occurs, there’s a lot of services that need to be provided for,” said Russell Bird, an administrator in the city’s Public Works Department. “The fees that the city of Palmdale assesses are necessary to provide public services” that can no longer be sufficiently funded by general property taxes, whose annual increases were capped at 2% under Proposition 13, the 1978 property tax limitation initiative.
The financial burden of fees, of course, is mostly passed on to new home buyers by developers. But builders say they find dealing with administrative red tape more bewildering and problematic.
A developer seeking to build a housing project near wetlands, for example, now needs the approval of agencies as disparate as the Army Corps of Engineers and the California Department of Fish and Game. And environmental impact statements, which are sometimes required to be compiled by a developer under the California Environmental Quality Act, can take up to two years to be reviewed by various government agencies.
“Today,” said Greg McWilliams, an executive at Los Angeles-based Kaufman & Broad Home Corp., “it is possible for a new housing development to come under the review of more than 30 local, state and federal agencies, each with the power to delay it, revise it to their liking or kill it altogether. . . . This is poor public policy.”
Critics say developers are seeking relaxation of rules simply to increase their profit margins at a time when the nationwide housing slump has depressed home prices.
John Ingram Gilderbloom, an associate professor at the University of Louisville, estimates that the potential cost savings from any housing regulatory reform would amount to less than 10% and that even those savings are unlikely to be passed on to new-home buyers.
“It would be foolish to assume that developers would share their cost savings,” Gilderbloom said. He noted that in California, apartment landlords didn’t pass along to tenants any of the tax savings they received as a result of the passage of Proposition 13.
“The idea that wetlands protection and other environmental legislation explains the high cost of housing is really silly,” added Tim Searchinger, an attorney for the Environmental Defense Fund. “The wetlands occupy only a small portion of the country.”
Lindell L. Marsh, an Irvine lawyer who has negotiated preservation agreements between environmentalists and developers, takes a middle road. He said some housing regulations have made new homes more expensive but that in many cases the cost is worth it.
“Clearly, environmental costs have added to the cost of housing, but that doesn’t mean we shouldn’t provide for the protection of wildlife,” Marsh said. “The problem is we’ve got Cadillac tastes when it comes to protecting the environment, but when it comes to paying for it, we don’t have Cadillac money.”
Near the Lake Hollywood Reservoir, some irate homeowners are testing what price Los Angeles-based Jefferson Development Corp. is willing to pay to proceed with a 172-acre project of 64 luxury homes.
Although Jefferson says it has spent millions of dollars scaling back its plans to deal with the concerns of bureaucrats and area residents, homeowners last month persuaded Los Angeles City Councilman Michael Woo to introduce a measure to include part of the project area in the pending Mulholland Scenic Parkway Specific Plan. That move would, in effect, bar the development of nearly half the homes, which are to be priced between $1.5 million and $2 million.
Thomas P. Sullivan, president of Jefferson, said he is generally in favor of housing rules that protect consumers and the environment. But he despairs over the myriad of homeowner associations and government agencies he must satisfy.
“I don’t mind spending $120,000 to do an environmental impact statement,” he said, “but sometimes it becomes a red flag to every dissident and his dog to pick it apart. We have made more than 15 changes in our project . . . at a cost of a couple of million dollars, and we still don’t have approval.” Meanwhile, he said, the cost of building the new homes continues to climb.
