We are entering a new millennium filled with unequalled opportunity and potential. However, deep-seated economic and social differences threaten positive change.
How do we, as housing industry professionals, develop a vision for a renaissance in homebuilding? First, we have to fully understand where we are today:
California is creating jobs at historic rates but we have under-produced housing by 50% for the past eight years. In Orange County, it’s worse. We produced a record 61,000 jobs last year , and only 10,000 new homes.
The rate of home ownership in California is lower than in any other state except New York. Only 55% of households can afford a home. Nationwide, the average is about 67%. If we pledge to bring ownership up to 67% in California, it will mean that 1.2 million additional households could afford a home. What happens to the long-term stability of our communities if nearly half the families rent?
So what can we as an industry do to stop rising home costs and exclusion from ownership?
A recent BIA study commissioned from Dr. Louis Masotti, at Northwestern University, looked at the regulatory impact on a new home in Carlsbad. The study concludes that nationally, every $1,000 of added costs to a home excludes an additional 21,000 families from ownership. In the case of Carlsbad, $97,000, 26% of the sales price, is directly attributable to Carlsbad’s regulations, policies and fees. The study concludes that as a result of public policy, 985,000 households are excluded from home ownership.
To make housing more affordable, our industry promoted higher-density neighborhoods with attached homes. Then trial lawyers pushed construction defect issues. Now, we don’t produce attached homes because we can’t afford to defend ourselves. We must help the California Building Industry Association and National Association of Home Builders fight for and win meaningful construction defect and tort reform to bring sanity back to our business.
We also need to push an agenda that forces regulators and governments to look at the human toll of their actions. We can’t build in most areas without a complete environmental impact report, but no new regulation on housing is scrutinized in terms of its cost to housing and its impact on the populace. It’s high time that escalating costs on housing were subject to a Homeowner Impact Report before implementation. We need to push such measures locally and across the state.
We all believe in and want to see our free-market economy flourish, but when nearly one-third of the cost of the typical new home has nothing to do with land, materials or labor, neither we nor our buyers are able to do business in the traditions of a true free-market economy. We must bring these policies to light and make governments more accountable , not to us, but to our buyers, the people who elect them.
We can bring other changes, as well. Cities approve developments on the basis of what will bring in more tax dollars while using the least amount of public services. That means commercial development ends up on a subsidized fast track while housing construction is left behind. We can employ people. We just can’t give them a place to live. We must meet these challenges.
We must educate communities on the true impact of allowing governments to set land-use and land-control policies. People who think they are being protected need to know they are being shut out.
We must lead by example. We must work with cities to build innovative products which address the city’s issues. We need to make this commitment in our business plans so that no-growth irrationality can be replaced with win/win partnerships which will make regulators and politicians more responsive to new ideas and solutions.
For this modern renaissance to flourish, we must open our minds to new ideas and technologies. We must rethink the materials and technology that we use and welcome innovation. Most of us followed the consumer’s lead in electronics and offer winning upgrades and smart-home technology, but how effective are we at changing our basic product?
As an industry, we seem to have forgotten the vital and important role our trade contractors play in our social and economic successes. Ultimately, much of buyer satisfaction stems from the work of our trade partners.
So we have formed the Trade Contractor Alliance within our BIA to recognize this invaluable segment of our industry and give them the voice they deserve at the executive level of our association and begin the process of revitalizing the relationship between builders and trade contractors.
We also must partner with other major business interests and employers to make housing the social and economic priority it needs to be. The Orange County Business Council, Merrill Lynch and Fannie Mae are already committed to ensuring that the business community will emphasize housing as a priority issue, and contribute solutions.
We must make these things the foundation for a modern renaissance in homebuilding that will redefine our industry for generations yet to come.
Prostor is president of Brookfield Homes Southland and president for the year 2000 of the OC chapter of the Building Industry Association. This article is adapted from his recent BIA installation speech.
