New home prices, already spiraling at record levels, are about to receive an unexpected bump.
Residential builders in Orange County are saying that a little-publicized revision of the Uniform Building Code will push costs up another $2 to $3 a square foot on new home construction in the coming year. With median prices running around $155 a square foot, the hike translates into a 2% jump in new home costs.
To put it in more concrete terms, the median home in Orange County will cost $7,344 more in the coming year if prices shoot up $3 a square foot due to the UBC changes.
“That will be a cost most homebuilders will pass along 100% to the consumer,” said Les Thomas, president of Shea Homes in Brea. “There’s just not enough margin in this business for builders to absorb more added expenses.”
The changes in code come as planners and housing experts try to standardize and update previous regulations.
Supporters believe that building sturdier homes is a sound practice that will lift the bar for construction and save money as well as lives in the long run.
Critics describe the most recent revisions as overzealous, saying that applying stricter requirements will leave many homes over-engineered and, as a result, over-priced.
“It’s well and good to strengthen code standards,” said George Dale, chairman of the California Building Industry Association’s construction task force. “But these changes need to be put into the overall context of how they benefit both consumers and the building community.”
At the root of the controversy is a move to unify three regional codes into a single set of national rules and procedures.
The results of that process won’t be known for several months. But revisions designed to smooth that transition have already been made for the Western U.S. by the International Conference of Building Officials.
“These changes are the most sweeping I’ve seen in 35 years in this business,” said Dan VanDorpe, president of VCA Engineers in Orange. “The people who made the new guidelines just didn’t do their homework. The code revisions are going to create an absolute heyday for attorneys.”
The latest revised Universal Building Code, which was adopted by California in 1998, began to be implemented locally last summer.
“Those new standards are just starting to show up in residential home plans,” said Jeffrey Prostor, president of Brookfield Homes show up in residential home plans,” said Jeff Proster, president Brookfield Homes Southland Inc. and the Orange County chapter of the Building Industry Association of Southern California. “From this point forward, we’re going to see added costs from these changes to every new home permitted.”
Although he believes demand will remain strong for new homes in Orange County, Prostor is concerned that any additional boosts in pricing will keep more consumers from investing in new units.
He pointed to a recent study by Northwestern University real estate researcher Dr. Louis Masotti of the Carlsbad market. It showed that for every $1,000 in additional new-home costs, about 20,000 families were excluded from ownership.
“I suspect because that statistic is based on population bases, the Orange County number would be even larger,” said Prostor.
Builders aren’t optimistic about seeing any improvements in the situation for an area now mired with the nation’s second-lowest percentage of home ownership.
“There is talk among engineers about presenting amendments in order to get some relief from the new code provisions,” said George Richards, a partner of Irvine-based structural engineers Borm Associates. “But I don’t think it’s going to happen for at least several years.”
Radical Revisions
In the meantime, he and others are bracing for publication in the next several months of an International Building Code.
The new superstructure of building regulations has taken five years to develop. City planners, various state and federal government agency officials as well as private-sector builders and engineers have been involved in planning the revisions,all organized through a specially-created nonprofit private trade group.
“The complaints coming from builders and developers are a result of having more detailed construction codes in place,” said Irvine-based architect Scott Fazekas. “But I agree it was the most radical code revision ever undertaken.”
As president of SFA, a municipal code consulting company, Fazekas was chairman of the International Conference of Building Officials’ structural review committee that formed policies for the latest published UBC revisions.
“The goal was to make the current codes consistent with those in other regions,” said Fazekas. “But developers and builders are upset because they see the review process becoming more cumbersome.”
The major revisions, as explained by Fazekas, in the newest code revisions affecting residential construction include:
n The walls on wood-frame designs will have to be about twice as wide as the current standard.
n Fewer homes can be built without direct involvement of engineers.
n New geology reports created by government geologists are incorporated, and will mean more testing requirements for developers.
n More reinforcement is required for houses going up from one to 15 miles from a known earthquake fault zone.
“I take great exception to structural engineers who are telling the code enforcement officials that by making many of these changes, the public will be protected as best as possible,” said Bob Raymer, technical director of the California Building Industry Association in Sacramento.
“It’s all pure theory,” he added. “What we’re seeing taking place in much of this new code is a matter of trial and error.”
But many local building inspectors disagree, saying the codes are necessary to keep up with the latest in design improvements. Supporters of the new codes also maintain that the changes reflect many lessons learned from earthquakes and other natural disasters over the years.
“Nobody’s arguing about keeping current,the problem is that a small, single-family house doesn’t easily lend itself to the type of structural stress analysis the new codes are putting into place,” said VanDorpe of VCA Engineers, who works on structural designs of commercial and residential properties. “A lot of new homes are going to be over-engineered for all practical purposes, which is needlessly driving up home prices.”
Other Costs Climbing
The code changes come at a time when homebuilders are also trying to deal with rising labor and material costs. John Burns, senior managing director for Irvine-based The Meyers Group, estimated that those expenses alone have gone up an average of $3 a square foot in the past two years.
Combined with the new expense of conforming to new codes, he figures homebuilders are going to feel even more pressure to control costs in coming months.
“Costs are going up to a level where if there wasn’t appreciation they’d be losing money,” said Burns.
The next round of code changes is expected to take a year to 18 months to implement at the state level. Planners are targeting July 2001 for state adoption of an International Building Code, which would give municipalities until January 2002 to make the switch at the local level.
“It’s all about to come down like a sledgehammer on builders,” said VanDorpe. “And consumers are going to have to pick up the cost.” n
