Task force to mull helping homebuilders
| Saturday, Nov 26 2011 10:00 PM
Last Updated Saturday, Nov 26 2011 10:00 PM
A task force of city staff and City Council members is set to address how to revive the sagging homebuilding industry in Bakersfield, and it's likely they will revive an old debate over development fees in the meantime.
Local developers say they need help, especially in the form of relief from development fees paid to the city that they say are depressing construction and sales.
The ad hoc committee, called the Housing Incentive Task Force, will meet for the first time at noon Tuesday in conference room A on the first floor of City Hall North, 1600 Truxtun Ave., in Bakersfield. The meeting is open to the public.
As the number of homebuilders in Bakersfield has fallen dramatically in the last 11 years, developers are eager for relief, soon, said Matt Towery, president of Bakersfield-based Towery Homes. The $12,870 transportation impact fee developers have to pay for each new home built is a burden, according to Towery. The fee is meant to mitigate the effects of development by spending money on streets and traffic lights, for example. It was increased from about $7,300 in 2009 for single-family homes built outside a defined core area of the city.
"We have cut our prices to the bone," Towery said. "The profit margins are so small there's nothing more that we can take. So the only thing that we can address is the fee structure."
A cut in fees the city charges would lead directly to lower home prices and increased sales, Towery said.
"I'm hoping there will be a compromise everyone can live with," Towery said. But, he added, "The city seems to be unwilling to look at even suspending some of the fees to give us a breather."
Task force purpose
The task force is likely to focus on what fees the city charges and how they get paid, said Councilman David Couch, who will chair the group. For example, rather than having the transportation impact fee paid up front by the builder of a new home and rolled into the price, it might be paid by the buyer of a new home through property taxes. Any type of cost shifting from developers to homebuyers wouldn't affect current homeowners, he said.
But although development fees will be on the table, it's not guaranteed that the task force will cut them.
The first meeting will likely determine the scope of the task force, including if the city should do anything at all to help developers, Couch said.
"'Should (local) government do anything?' might be the first question," Couch said. "Or is it entirely market driven and we should stay out of the way."
The task force also will have to determine whether the city wants to spur the building of new homes or the purchase of foreclosed homes to use up that supply, opening the way for new homes to be built and bought. Whether it will focus any action on certain developments or the entire city is another issue the task force will have to address, he said.
Couch said he hopes that in one or two meetings, the task force will have some initiatives to forward to the City Council for consideration.
Councilman Ken Weir suggested in June that a task force be created to address ways to stimulate the local homebuilding industry. This came after discussions in the Planning and Development committee about ways to help the industry, such as by cutting fees or giving buyers of new homes $2,500 as an incentive, didn't result in any action.
"It's really important for the council to do what it can to get people back to work," Weir said.
State of the industry
New home permits have fallen along with median sale prices in Bakersfield.
Builders have pulled 337 permits for new single-family homes so far in 2011, down 42.5 percent from the 586 permits pulled for the same period last year.
There were 1,821 active listings for existing homes for sale in October, down almost 32 percent from a year earlier, according to the Preliminary Crabtree Report, a monthly assessment of the local housing market prepared by Gary Crabtree of Affiliated Appraisers.
Of the 1,821 listings, 41 percent were "contingent offers," which are, for the most part, short sales.
The number of foreclosed homes in the Bakersfield area actually fell from a year ago: there were 408 foreclosures in October versus 638 in October 2010, according to the report.
Median sale prices have also declined, to $132,000 in October from $135,000 a year ago, according to the report.
"If we can lower the price of a home $13,000, we think it'll make a difference to people buying a house," Towery said. "Homebuilders are competitive with the foreclosure market until you add the fees."
Towery said the homes he builds in subdivisions in northwest and southwest Bakersfield sell for about $160,000 to the mid-$200,000 level, so the transportation impact fee is significant.
Developers need relief now, said Donna Carpenter, interim executive director of the Kern County Homebuilders Association.
"What's happening right now is the cost of constructing a new home is more than the appraisals coming in. The numbers aren't working," Carpenter said. "The profit margins are so thin, which is why you're not seeing new homes being built now."
Homebuilders are looking for ways to reduce or defer fees, she said. Carpenter added that she has talked to Weir about rolling back fees to previous levels, roughly half of the current levels, for a set amount of time and then making up the difference later.
"Look at the status of builders in Kern County right now. A lot of them have gone out of business, and I think more of them are going to fall if we don't do something quickly," Carpenter said.
But, Couch cautioned that any action the city takes has to be thought out.
"Everything we do is going to have an unintended consequence, and we need to think that through before we make a recommendation," Couch said.
For example, the city needs to make sure it's collecting enough from the transportation impact fee to mitigate the effects of development on traffic and the environment, or risk being sued by environmental groups for not doing enough. Lawsuits like that would put every development at risk by chilling the building environment and putting the housing industry "back to square one," he said.
"I understand the builders' concerns, and I understand that the city has obligations to meet," Weir said. "What I'm looking for is a way to assist people getting back to work. So however that happens, that's what I'm looking for. I'm not looking just for what the builders want. ... It's got to be more balanced than that."
