It was shaping up to be a breakout year for North Bay housing construction, after a decade of doldrums forced a number of industry firms out of business. But then came the deadly October wildfires, which greatly deepened what already had been called a “housing crisis.” Yet some in the building business think the tragedy may have cleared the way for addressing the problem at a faster rate than in a number of years.
In late summer, the U.S. Department of Housing and Urban Development released a report on the Sonoma County housing market and economy stretching back to 2000. It showed a big drop in home and apartment construction from 2007 though 2016, with some pickup last year for building single-family homes. The report noted that county home prices have more than doubled since home values hit bottom in early 2009, in the wake of the Great Recession, and average apartment rents were increasing at double the national rate.
That has spurred moves by some North Bay governments to cap rent growth, including an unsuccessful June ballot measure in Santa Rosa.
At the time of the HUD report, the agency forecast a need in the county over the next three years for 1,375 more for-sale dwellings and 1,700 rentals “to achieve a balanced market.” But under construction in the county at that point were 200 rental units and another 230 for sale.
Only recently has it made sense economically to build new homes, said Rick Laws, a senior vice president in Santa Rosa for Pacific Union International real estate brokerage. But he doubted that a mere 1,375 new Sonoma County houses and condos over three years would do much to relieve the shortage in the for-sale segment of the market.
“I think the demand is much higher than they realize,” Laws told the Press Democrat. Buyers and renters “would suck it up with hardly a blip.”
And it’s a problem throughout the Bay Area. Since 2010, Bay Area employers have added 543,500 jobs, while local governments have approved 114,700 new housing units in that time, according to Bob Glover, executive officer of Building Industry Association of the Bay Area, which represents roughly 400 home constructors.
At the region’s current rate of building 18,000–20,000 units annually since 2010, the likely total built will be about 550,000 by 2040, Glover said at the Business Journal’s Construction Conference in May. And the state Legislative Analyst Office estimates about 1.2 million jobs will be created by then.
“There was a pent-up demand, which was good for the construction community,” said Keith Woods, CEO of North Coast Builders Exchange, which represents contractors and related businesses in Sonoma, Napa, Mendocino and Lake counties. “There was financing that had become available because the economy was on a positive track. But the most important factor was elected officials and the general public saw the need for significantly more housing and seemed to be supportive of it, and that wasn’t always the case a decade ago. Suddenly there is a clamor by the public and government officials for more housing, because we’re so woefully short of where we should be.”
Then starting Oct. 8, a group of wildfires raged through Sonoma, Napa, Mendocino, Lake and Solano counties, killing 44. The Tubbs firestorm alone tore through Santa Rosa’s Fountaingrove, Coffey Park and Mark West–Larkfield neighborhoods. Through early December, there were 4,785 insurance claims of totally destroyed homes in Sonoma, 447 in Napa, 190 in Mendocino, 98 in Lake and five in Solano, another nearly 18,000 claims of partial damage, and $8.4 billion in home claims for those counties overall, according to the California Department of Insurance.
“The biggest problem we’re facing is the magnitude of the disaster,” Woods said.
Local governments have acted quickly to expedite permitting for reconstruction for fire victims and getting behind housing projects of many kinds, including accessory dwelling units (“granny units”), apartments and condominiums. And as local-government planning officials and architects told affected homeowners that homes may be rebuilt faster through combined efforts, residents have been discussing options for bundling their properties together for projects, Woods said.
The shortage of skilled workers before the fires has become more of a problem afterward, potentially extending the one- to three-year timeframe for getting homes rebuilt to three to five years, Woods said. And bringing in contractors and their workers from other parts of the state and nation is bumping up against the already low vacancy rate in area’s rental housing and hotel rooms, he said.
Existing residential and commercial projects under construction likely will have about six months to race to completion before competing directly with fire-rebuild projects for materials and workers, Woods said. And the rising costs of construction materials combined with higher building-code standards for new construction are making the prospects of rebuilds an expensive proposition for fire victims, in a number of cases above what their insurers may cover.
At press time, Congress was considering $81 billion in more disaster relief for California wildfire victims, as Southern California fires have pushed the number of destroyed buildings and homes statewide to 8,800.
Jeff Quackenbush (firstname.lastname@example.org, 707-521-4256) covers the wine business and commercial construction and real estate.