An interview with...

Tim Coyle
Senior Vice President,
California Building Industry Assoc.

What risks do we face in the Valley if we don't do some serious planning for future growth?

Well, your question presumes that we don't do plans -- and we do in California. We have a general plan process and it's designed primarily to set the local land use constitution for growth over a period of time -- usually anywhere from 5 to 20 years. So I think there is a fairly orderly process that exists today. I think the question that people have right now, at a time of unprecedented growth and yet substandard housing production, is, "Are we doing it the best way we can?" That is, are we using land efficiently and are we doing it in a way that contributes to increasing housing affordability, increasing housing supply? And we certainly don't have in place a solution to that problem. But I happen to represent a coalition that is interested in having a debate about this in the state legislature, and in fact we have our own plan designed to increase housing opportunities in the high job growth areas -- in the urban areas -- in a way that does accomplish that balance that Californians are always looking for in dealing with the issues or the question of growth.

Could you describe that plan?

The plan is to establish the policies in the high job growth areas that will encourage more development than what is occurring today. One of the problems that we have in building communities is that, today in California, some of the urban centers have become no longer competitive with suburban development. Now, let me say very clearly that the housing needs of California call for a variety of housing types but are we doing everything we can in the urban areas to help us meet our housing needs? No, we are not. And primarily because those urban areas are less competitive with the suburban areas, they are less affordable to build in than are the suburban areas. And as a consequence most of the new development tends to migrate away from those job centers. And of course some of the problems that occur are that we get even more congested traffic, we get working men and women traveling to far away places, long commutes to and from home to get into work, to leave work. And ultimately that works against some of our economic interests from the standpoint of productivity, environmental interests, from the standpoint of potentially fouling the air with these long commutes. So what the goal should be is to make housing developments more possible in the areas where the jobs are being created, where the growth is really beginning.

I gather that a lot of the infrastructure of urban Valley centers is not what is should be and that is causing some major problems.

This whole energy crisis tells us that we have really ignored the basic infrastructure investment that any state would need to accommodate its future growth. Whether you are looking at energy -- and we're clearly in a crisis right now, and not because we're over-consuming; we are the second most energy efficient state in the nation, but because we lack supply. Same thing when it comes to water. Thank goodness we're not in the middle of a severe drought, but if we were we would again be focusing on the absence of investment in increasing water supply in California. Our roads suffer from the same problem; our public schools suffer from the same problem. So it's not a difficult comparison then to housing either. So when you talk about infrastructure, whether we need it for housing development in the urban areas, whether we need it for agricultural production in the core of the Central Valley, California unfortunately for the last two or three decades has been AWOL on infrastructure and until we begin to turn that around we will do a poor job in accommodating growth, we will make it much more expensive and bad planning that you suggested may be occurring in California may continue.

How can we develop a regionalist approach to solving the problem?

Well if regional approaches to solving problems mean more government then I think it's a bad idea. If it means cooperation, coordination; if it means that local governments have the fiscal or financial wherewithal that they need to be able to accommodate new growth as part of a regional strategy or a county strategy, frankly then it might begin to make some sense. But I think there are some fundamentals that have to be addressed first before we opt for some alternative approach to government and that certainly begins with the fiscal footing in localities all across the state. Right now cities and counties are virtually bankrupt when it comes to providing the additional services and infrastructure to accommodate new growth. You can't paper over that with some new regional planning, land use, government scheme so basic issues like local government finance of services and infrastructure would have to be addressed first before any serious consideration would be taken certainly by the home building industry. And I think I speak on behalf of broader group of interests -- including local government -- before any serious consideration would be given by us to that idea.

In your view, where is the next major growth area within the Central Valley?

Well, in a way you might be able to calculate that on the basis of bad public policies in the high job growth areas. Let me give you an example. Today we're sitting here in a subdivision just outside of downtown Sacramento that is thriving as a new housing market. Not just because we have job growth in Sacramento but because we have job growth in the Bay Area. It just so happens it's no longer competitive to build housing in the Bay Area, so home builders have migrated to Sacramento to build the housing that is affordable to working men and women. There's plenty of housing for rich people in the Bay Area; just not enough for school teachers, for public safety employees, for young professionals, for young high-tech workers. And as well as for the people that really do represent the fabric of our communities: the true hard working men and women that take care of a lot of services that make our quality of life a good one no matter where we live in California. So right now, growth in the Central Valley, unfortunately in large measure, is being driven by restrictive land use, restrictive growth, and exclusionary housing policies in the high job growth areas along the coast. And I won't forecast where growth will occur over the next decade in the Central Valley. I just know that if job growth and population growth continues at the pace that it is in these high job growth areas, and they do nothing about meeting their housing needs, then that growth in the Central Valley will occur a lot faster.

Do you know what percentage of homes sold here go to buyers from the Bay Area?

No, I really don't, but there's been a lot of anecdotal reporting on that. This has become an interest of not just the home building industry -- obviously we do our forecasts and our surveys when it comes to prospecting new housing markets. It has also become an interest of planners, of local elected officials regionally, regional representatives, state elected officials, for issues like transportation. For example, Interstate 580 that goes over the Altamont pass from the Central Valley into Silicon Valley; there have been vehicle counts on that, comparative over time, to judge just how much traffic is coming from the Central Valley into that particular job center. But no, I don't have any real good information on that; not scientific information at this point. But we know it's occurring. We know it's occurring because, frankly, the men and women in the home building industry, they survey the customers. And they tell us, the representatives in Sacramento, that a much larger percentage of home buyers here in the Sacramento area are moving from the Bay Area, and even commuting to the Bay Area for their jobs.

What's the median price of a home in the Sacramento area now?

Median home price in California is $262,000. And just to give you an idea of what that means to a young family: the median household income in California is about $43,000, and in order to buy the median price home, that income would need to double. You'd need to have somewhere in the neighborhood of $82,000…$83,000…$84,000 as annual income. That's not counting the cash down payment you'd have to put on a $262,000 home. So when I said earlier that we aren't building enough housing, it's reflected in those very high home prices.

Could you describe the "village" concept of development?

Well, you know, the village concept is already at work in a lot of places already in California, in the way in which masterplanned communities are designed and ultimately approved by localities. They're supposed to be pretty much self-contained. I think the village concept works if some attention is paid to those issues I mentioned earlier that right now make urban areas in California uncompetitive with suburban areas. So if you put the right policies in place…if you encourage high density development…if you provide for town centers as really a meaningful place for people to gather, to go, and work…if you provide the right balance of amenities, including parks and other recreational facilities -- in other words, address the needs of consumers -- I think you can do a village concept anywhere in California, if you assemble all the right policies. But in California today, if your infrastructure is inadequate…if lawyers are suing homebuilders, if neighborhood groups are rising up in opposition and challenging city councils to not approve higher density housing…if the treasuries of local governments are empty, to be able to provide for the services and needs of a growing community, a village concept won't work there.

What will it take to convince established urban centers that this is what people want?

Well, actually, that's a pretty easy answer. It's going to be political. Because the ranks of the have-nots are increasing, and they all vote, and if their needs aren't being met, I think they'll be heard, and they'll see the changes made.

What does high-density development look like?

In California today, I think most homes are built, by the way, much more densely than in the past -- four, five, maybe six units to an acre. If we could built them attached -- that is, have them share a common wall, as is done back east (actually as is done in most communities where the litigation environment isn't what it is in California) -- you can double that number fairly easily and still provide the amenities that homebuyers are looking for. But today in California, you can't get insurance to build a housing development that has units sharing a common wall. And until that litigation problem is solved, you won't see densities for homeownership housing like those that I'm describing that are possible, and attractive to consumers.

Around here, no one would want to have a common wall…

Sure, I mean, price helps dictate whether people choose a home like this or an alternative. If they don't have an alternative, they're going to either figure out a way to afford this home, or they're going to rent. And in California, we have almost as many renters per homeowners as any other state in the Union. There's only one other state with a greater ratio than ours and that's New York. So we can accomplish higher densities and have a society of renters -- which I don't think California wants. We need a balance, but today California suffers from a terribly low homeownership rate. Homeownership is what most people want. In fact, by a rate of three immigrant families to one of all adults -- representing all adults -- homeownership is the number one priority for that immigrant family. California is a state of immigrants, and so homeownership is a very high priority. But as I said, if the price is too high, because you can't build a more affordable product, then you're going to have more renters, and bigger homes for those that can afford to buy.

What does your association do, in conjunction with others, to help low income families afford houses?

Well, there are a number of things that we always try to do. We try to build homes that are safe, that are high quality, at the lowest possible price. And you know, when you look at the fixed costs that go into a construction of a home -- that's land, labor, materials -- prices have been relatively constant. Now land is a real problem in California, because it's very, very expensive. It becomes more expensive the more you restrict development. But it's the uncontrollable costs that really begin to create a problem for the homebuilding industry to create housing that's affordable to entry-level homebuyers. Let me give you an example: Northwestern University did a study about a year and a half ago in San Diego County. They calculated what the costs were to a homebuilder to go through the approval process, to clear all the environmental hurdles, to pay all the fees that were necessary, to accept some of the zoning restrictions. And at the end of the day before a shovel of dirt had been turned, the average to that homebuilder was $96,000. Now how many homes affordable to entry-level -- I mentioned the median income family in California; they could have a better shot at buying a home in that San Diego community if it didn't cost so much to just begin construction. So we have to address some of these cost factors as a way to help families of all incomes be able to afford not just homes to buy, but apartments as well. I mean, there are some very good housing subsidy programs for low income renters today, where the cost per unit is more than or equal to the median price home in California. We need to build that housing for those low-income families. We absolutely do, but how much of that cost is going to some non-productive use? That's a concern of builders of all types of housing, and in California unfortunately, we've cornered the market on excessive regulatory and permitting costs, and that's an issue -- a big issue, a huge issue -- as my example suggests in San Diego County that has to be addressed.

What's being done to deal with some of the brownfields and empty lots in downtown Fresno?

Well, if you're asking the question, "Can we make more of downtown Fresno than is being made today?" -- probably. And can we do it through economic signals and force? Yeah, I think so. Ultimately, if we continue to see this pattern of outward migration from the job centers eastward into the Central Valley, those economic forces will be there very, very soon in downtown Fresno. Yeah, I think it can be done. Look, houses don't get built unless there's a market for them, whether it's entry level housing, or trade-up housing for families that have owned once before. Downtown Fresno will, with economic expansion and prosperity, see improved and increased demand for housing in that area. And frankly, again, if the city fathers and mothers in Fresno examine some of the mistakes that have been made in some of the other job centers that have made those downtown areas elsewhere non-competitive with suburban development then before things really get going in Fresno, maybe some of the good planning, the smart growth housing outcomes that so many people here in California are interested in, can occur there.

Have we made any inroads with the farming communities, in terms of development on farmland?

Oh, I think so. I think I mentioned to you when we met last time that in Fresno for example there was a stakeholders' get-together, and they formed an alliance. Of course things are going to move a little bit with both the agricultural economy and the non-agricultural economy, and that's kind of been a little bit back and forth in Fresno. But I still think the same spirit of cooperation exists today there that did two or three years ago when that alliance was formed. And frankly, I think that is a good model for communities elsewhere in California. Do I believe that, whether it involves ag land or not, those type of stakeholder get-togethers can occur? I think that the probability is greater that they can today because of that increasing number of have-nots in California; those who have become disenfranchised by the lack of housing being built in the areas where they want to work and raise and educate their kids, recreate, enjoy their family. And right now, their interests are going unmet. So I think the chances are pretty good for these groups to form, and again whether it involves the ag interests getting together with the development interests, or other stakeholders…it should occur, but I think the likelihood that it will all over the state is growing -- which is good news, I think.

What is your association's take on farmers' attempts to establish trusts or land easements so that their land will always stay either open, or used only for agriculture?

We feel very strongly that a grower who owns his or her property ought to have his or her property rights always protected and preserved. And if that's their choice, they ought to be entitled to it. At the same time, if their choice is to convert a broccoli crop into a wine crop, they should be entitled to that as well. As well as if they decide to convert a wine crop into a California State University. We feel very strongly about that, and we will always back up the farmer who wishes to preserve his or her property rights.

What kind of issues and problems do developers in an area like this have to contend with in order to maintain ecological resources?

Well, out here in this particular subdivision, there were a couple of issues that really held back progress on approving this community. One had to do with flood risk, and the city of Sacramento was so committed to meeting their housing needs in this particular area, that they got together with the flood control district and raised close to $100 million to make the improvements necessary to overcome that flood risk. So that's why we have building here today. Unfortunately also, simultaneously, with that flood concern there was an issue or two raised about certain species that dwelled here, in habitat that might be affected by the development. And even after agreements were reached to mitigate the impact that this housing would have on that habitat -- setting aside quite a bit of open space and acreage for those species -- we still had some environmental groups that wanted to stop the development. And that's one of the problems that we have statewide, is that while these environmental policies and laws are very well-intended -- and California homebuilders abide by them regularly with generous mitigation requirements -- it's not unusual to see in a subdivision like this three acres of open space set aside for one acre developed. That's not an unusual ratio in California. Some of these laws and regulations are being abused by extremists who just simply don't want any more housing, any more commercial development, presumably any more people in their particular community. That's a problem with infill housing for example. Neighborhood groups tend to use environmental laws as a legal weapon to block that new housing, that high density, infill housing. They use it often to block affordable housing developments, something that -- as the former Director of Housing for the state of California -- I had to deal with on a regular basis, in communities where the need was profound for this type of housing. So that's one of the policies that we have to deal with if we're going to meet our housing needs, and if we're going to grow smart in some of our urban areas. And let me say one more thing. Let's not forget that those who are concerned about the environment, that are concerned about endangered species…they're all home-dwellers in California. It's a fundamental human need that we have to meet. You can't have one or the other, so the constituency that's interested in environmental preservation and protection -- and that's all of us in California -- needs to accept that a balance gets struck in order to accommodate everybody's interests, including those of the environment.

So many of the small strip malls growing out of communities in the Valley are, frankly, really ugly. Are there guidelines for developing those kinds of malls?

In 533 communities, counties, and cities in California, the answer is yes. There may be some people that don't like those design requirements, and they might want to think about talking to their elected representatives about changing them.

So it's a case of, "If there's a plan, we'll follow it."

Oh, we have no choice. We're really the only major business in California or maybe the nation that has to get as many approvals as we do to build on property that we own -- to use property that we own to its highest benefit. So yes, there isn't a plan out there that is proscribed by a governing body that we don't have to follow.

If you had the opportunity to talk to a young family that was just coming into the area, anywhere in the Valley, what advice would you give them in terms of finding a home?

I don't know if I'm in a position really to give a family advice about finding a home. What I want to do is make sure that the decision makers at the state, at the local, at the federal level are giving that family every opportunity possible to be able to own a home. Because I think it's symbolic of this great nation. I think it has proven that it is a high priority of each and every individual or family in this state and in the nation. And frankly I think we have a compact as a union and a state with each new generation to provide that type of economic opportunity. A good environment, but an opportunity to be able to get an equity stake, to own a piece of America -- and that's what America represents. So I'm not sure I would want to counsel an individual family at all. I would certainly congratulate them if they're owning a home for the very first time. We just want to make sure that families in California and individuals in California have that opportunity.

Presentation also made possible by a grant from
the Great Valley Center