Building Industry Association
of San Diego

“The fundamental purpose of public policy is to protect the public’s health, safety, and welfare. Sometimes, that public policy comes at significant cost.” – an excerpt from The Smith Family House study.

Cities throughout the San Diego region, and across California, have a myriad of complex policies, ordinances, and regulations governing how, when and where homes are built, if any at all. These are the regulatory environments, inclusive of state and federal laws, in which builders must operate, and there is a price to pay to comply with these regulations. Ultimately, they determine product type and pricing, and who can afford to live in a community.

A variety of “specialists” spend several years responding to all these regulations, of which many are subject to constant change. Collectively the regulations have a major impact on the planning, design and building of today’s new homes. In this era of climate change hysteria that permeates Sacramento, it seems that regulations governing development are changing by the day. And compliance with Green House Gas reduction mandates called for in AB32 will only add to the complexity.

To comply with government regulation, homebuilders must engage real estate market analysts, design professionals (planners, architects, civil engineers, landscape architects, utility consultants), lawyers, environmental experts (geologists, biologists, traffic consultants, noise analysts), school financial consultants, and countless others.

It is a gross understatement to note that the housing industry is highly regulated. Some would argue that only the nuclear energy industry tops housing in regulatory requirements. We all get that the nuclear industry is highly regulated to prevent a catastrophe with serious consequences for the public’s health and safety. But what warrants housing to be a close second? The answer is simple. Housing is the sugar daddy of government when other revenue sources are politically, legally and economically not viable. New homes often fund new infrastructure (roads, parks, schools, natural habitat, bridges, art in public places etc.), affordable housing, libraries, courts, police and fire stations and a myriad of public facilities. New homeowners can’t vote on these exactions and the builder / developer faces the denial of the project if they refuse to pay. While this is an over simplification of the matter at hand, it doesn’t take an insider to see the underlying truth about the true cost of City Halls’ red tape. Unfortunately, these costs only go up.

A 1998 study conducted by the University of San Diego’s Real Estate Department found that the cost of government regulation in a local city (direct and indirect) totaled $96,301! That was 26% of the cost of the entire home at the time of the study. Imagine what that cost is today, 13 years later. You would be hard pressed to find a builder who thought government costs were less now.
Statewide, the story is no different. A 2009 study released by the Governor’s office described CA as “one of the worst places in the country to do business.” While not surprising to many builders/developers, the information was quantified in the first study to measure the aggregate quantitative impact of regulations in a particular state.
The study found that the total cost of regulation on the real estate sector was $63,141,397,472 (Direct: $12,490,080,128 and Induced: $50,651,317,344). Read the full study.
BIA San Diego exists in large part to defend and improve the business environment for today’s builders, commercial and residential. Its legislative staff, led by Matthew Adams, concentrates on regulations and fees that affect the building industry. Below is a summary of the core areas that BIA currently tracks and engages in on behalf of its membership:

• Water allocations and landscape ordinances
• Impact fee deferrals and reductions
• Fee levels of all kinds
• Extensions of tentative maps
• Homebuyer tax credit legislation
• Land use compatibility plans
• General Plan updates
• Building code changes
• Green building initiatives
• Environmental mitigation and species habitat planning

To learn more about the specific actions BIA takes on these issues, please contact Matthew Adams.

The San Diego City Council voted to approve funding to build an Indirect Potable Water Reuse(IPR) facility at the North City Water Reclamation plant.  The IPR facility would  convert wastewater into drinking water for the city’s 1.3 million residents. On a 6-2 vote with Councilmembers Sherri Lightner and Carl DeMaio dissenting, the council agreed to the demonstration project as a means to determine if recycled water should be a viable part of San Diego’s long-term water strategy.  Several councilmembers stressed that while they voted for the project, it should not be construed as a vote for IPR but rather support for a fact finding process.

The pilot facility will process approximately 1 million gallons of purified water a day .  No purified water will be sent to San Vincente Reservoir during the demonstration phase. Ultimately the purified water will be mixed into the city’s existing water supply.

The BIA joined a broad coalition of business and environmental groups to support the project that is expected to be completed in early 2013.

From Tuesday’s Union Tribune…

By Jennifer Davies, Union Tribune Staff Writer

The number of housing permits in San Diego County last month rose to their highest level in two years.
There were 558 residential permits issued in June, a jump of almost 63 percent from the previous year when 343 permits were pulled. It’s also a 27 percent increase from May, which had 440 housing permits. For the first six months of the year, the total number of residential building permits was 2148, a 28 percent increase from the first half of 2009.
While the increase is heartening, the numbers are far off their peak, said Alan Gin, an economist at University of San Diego.
“This will probably be the second worst year for building permits in San Diego County — second only to last year,” he said.
He estimated that some 4,000 building permits will be issued in the county by the end of the year. In 2009, just 2,990 permits were issued. By way of comparison, around 7,445 residential permits were issued in 2007.
On a statewide level, 4,238 housing permits were pulled, a 19 percent increase from June 2009 and up 34 percent from May. For the first half of the year, 21,149 permits were pulled, a 17 percent increase compared to the first six months of 2009 when 18,083 permits were issued.
Liz Snow, chief executive officer of the California Building Industry Association, said she continues to worry about the sluggish pace of the recovery.
“The fact remains that we’re still hovering around the record-low production levels of the past two years, and the industry is still facing an uphill battle,” she said.
For nonresidential activity, the numbers were especially bleak, Gin said. The valuations in June for nonresidential buildings in San Diego County was $46.4 million, an almost 16 percent drop from the $55.1 million valuations in June 2009.
“We are way off in the commercial area,” Gin said.

The San Diego City Council voted against placing a 1/2 cent sales tax increase measure on the November ballot.  Six votes were needed to get it on the November ballot but -  in a surprise move – Councilmember Donna Frye opted out which left the measure one vote short of approval.  Frye said she wanted to see additional budget reforms in place before supporting a tax increase.

While the Mayor put the kibosh on a tax increase plan two weeks ago, the issue was resurrected by Council President Ben Hueso at the behest of organized labor.  Hueso now says the plan is ‘dead’ but with two weeks left before the deadline for placing items on the November ballot anything is possible.

On Saturday, October 2, from 8 a.m. to 2 p.m.,  BIA San Diego will hold its Funiture Fantasy Sale where the public will have an opportunity to purchase model home furnishings, office furniture, accessories and appliances at deep discounts in a large warehouse at Liberty Station. This year’s event is the third annual and sponsored by BIA Cares, the homebuilders’ charitable foundation.

This year the 20,000 square foot warehouse will have thousands of items including couches, bedspreads, framed pieces of art, accessories, appliances filing cabinets, desks and many more items which are supplied from area decorated model homes, offices and supply companies. All items will be offered at a fraction of the original retail price.  Co-chairing the event are Robin Skaggs, sales and marketing manager for Heritage Building & Development and Pacific Coast Communities and Lora Heramb, vice president of sales and marketing for Brookfield Homes.

“Last year’s ‘Fantasy’ sale was wildly successful and this year we anticipate the same. We sold out in three hours,” says Skaggs, who is on the board of directors for BIA Cares. “Attendees walked away with incredible deals ranging from $2,000 sofas for $250 to a $30.00 vase for $5.00.”

The Corky McMillin Companies is donating the nearly 20,000-square-footwarehouse in Liberty Station.  BIA Cares is celebrating its’ 20th anniversary and has raised more than $2.9 million for local charities. The foundation helps to build better communities by offering San Diego County scholarships, sponsoring such projects as restoring Little League fields, building a golf facility for inner city youth and donating to organizations that assist
the underprivileged throughout the County. For more information on BIA Cares please visit www.biacares.org.

The San Diego City Council will consider a union backed ordinance that will subject hotel developments to additional regulatory and economic review.  The hotel union, ‘Unite Here,’ wants all major hotel projects to be appealable to the San Diego City Council where they believe they have a better chance at Project Labor Agreements and a union only hiring requirement because a majority of the council were backed by unions in their elections.

The regulation would apply to hotels built in the redevelopment area  managed by the city’s Center City Development Corporation.  CCDC is one of the most successful redevelopment operation in the state that generates millions of dollars annually in property and sales tax that the city uses for infrastructure, parks and a host of city services.

An independent analysis done by ‘The London Group’ reveals that the city could lose up to $207 million in Transient Occupancy Tax revenue over ten years and lose over 10,000 construction jobs if the council adopts the pro-union ordinance.

The requirement would essentially negate the benefits that come from CCDC by eliminating the regulatory certainty that has led to downtown San Diego’s impressive transformation over the last 35 years. It will also stymie future hotel plans costing the city millions in lost economic activity and jobs.

The BIA has joined with the business community in strongly opposing the union move and have urged council members to reject the ordinance.

The hearing is scheduled for Tuesday, July 27th at San Diego City Hall.

Bill Horn

The San Diego County Board of Supervisors voted 4 – 1 today to place an initiative on the November ballot that would prohibit mandatory Project Labor Agreements on county projects.

Introduced by Supervisor Bill Horn, the ‘Ensuring Fair and Open Competition in County Contracting’ initiative mirrors  an existing county ordinance, but the current ordinance can be changed by a simple board action.  If the initiative is approved by the voters, it would take another public vote to change it.

Supervisors’ Horn, Roberts, Jacob and Slater voted in favor of the initiative. The lone dissenting vote was Supervisor Greg Cox who said the current ordinance was adequate. Ironically, Cox’s wife is the Mayor of Chula Vista where a similar anti-PLA ballot measure won in a landslide in the June Primary election.

Along with Chula Vista, voters in Oceanside overwhelmingly approved a city charter that includes a prohibition on mandatory PLAs. Opponents to PLAs argue that such agreements, sought by unions, increase costs up to 30% and limits competition from non-union companies.

The initiative heads to a second reading on August 4th and then on to the November ballot.

County Supervisor Bill Horn will ask his colleagues on the Board of Supervisors to place an initiative on the November ballot that would prohibit mandatory Project Labor Agreements for county construction projects.

The move comes on the heels of a successful ballot measure in Chula Vista and the Oceanside City Charter that also prohibits PLAs.  Both were were overwhelming approved by voters in June.  A similar measure in the city of San Diego failed to get the necessary signatures to qualify for the November election.

In a board letter that will be considered on Tuesday, July 13th, the  North County supervisor states that PLAs result in ‘artificial increases in project costs’ [that] ‘reduce the value of taxpayer dollars by limiting the number of public works projects that can be performed.’

If approved by the full board on the 13th, the measure would go to a second reading in early August and then placed on the November ballot.

The San Diego County Planning Commission gave the green light to an equity mechanism program intended to compensate landowners who will be severely downzoned as a result of the General Plan Update.  The ‘Transfer of Development Rights’ program will allow property owners to sell the units they would otherwise lose under the new general plan to home builders  seeking to increase densities in designated ‘receiving sites’  in the county. The county will develop a process for property owners to use in order to determine the number of actual units that could have been built on their property.  Typically, the number of available units is less than the land designation after multiple environmental constraints are considered.

While identifying areas where units will be taken from – the trick will be to identify areas where the units can actually be placed.  County staff will focus their attention on Campo and Borrego as ‘receiving sites’ but only after the General Plan Update is adopted by the Board of Supervisors.

Project applicants seeking to increase densities would have to go through a General Plan Amendment process and purchase the additional units through the TDR program.

The TDR program and General Plan Update now moves to the Board of Supervisors for consideration.  A late November or early December hearing is anticipated.