Housing Renaissance

Many North Bay housing developments are back on track—although not always as originally envisioned and often with new owners.

 

When considered in retrospect, the first hints of an economic downturn, in 2005, were an ominous sign for architects and developers. More than a temporary setback, they were precursors of a slowdown that eventually left plans on drawing boards and forced land to lie dormant for years. Now, though, the environment for housing has changed, and many developments are back on track—although not always as originally envisioned and often with new owners.

“We were going full bore on subdivision after subdivision after subdivision. We couldn’t keep up,” says architect Katherine Austin, AIA, of Sebastopol, looking back. But then the economy faltered, and, as the recession deepened, “Everything ground to a halt,” she recalls.

Austin had completed designs for several projects and, with final maps approved, the developers had done substantial work—paying mitigation fees, acquiring the appropriate permits, completing streets and grading and putting utilities in place—but the projects didn’t go forward. It was typical of the times, as many developers, unable to sell properties in the wake of poor economic conditions and the subprime mortgage crisis, filed bankruptcy or lost their property to the very banks that had provided financing. “Everything sat fallow for many years,” says Austin.

Picking up the pieces

Now, though, construction of new homes is seeing a revival, and once-defunct subdivisions are back in play, either with new developers, who were able to acquire properties from banks for pennies on the dollar, or (more rarely) with the original owners, who were able to wait for the housing market to rebound.

It’s a changed environment that continues to evolve, with fewer foreclosed properties on the market and new owners reviving previously approved plans. Most of the distressed properties have sold, which opens up the market for new homes. According to Austin, properties with final maps approved on them suddenly became sought-after, and most were purchased at a bargain from banks. Now there’s a break as people work behind the scenes to obtain properties with tentative maps. (Developers get entitlements based on tentative maps and then need to develop final maps that they submit for approval. After they get approval, they can get building permits and start construction. Work is currently being done behind the scenes to make properties with tentative maps attractive to developers who have the potential to buy the properties; the new owner would then have to do the work necessary to get final map approval.)

Before work came to a halt, she’d completed the designs for several subdivisions. Now, as conditions improve, three of those projects have come back to life and are either completed or close to completion. The final maps were still valid, so as the new owners were ready to proceed, she updated the plans to meet current building codes, but the designs stayed intact otherwise. Some developers are also looking at the feasibility of other projects she designed that haven’t yet gone forward, reports Austin. Typically, she explains, a tentative map is only good for two years, but the governor signed legislation several times during the recession to extend those maps, which kept them viable.

The larger challenge now, she says, is that a builder has to acquire property and build with a very narrow profit margin. “Right now, it almost costs more to build a house than it can sell for,” she observes.

The positive news, however, is that people are back in the market for new houses. “A lot of people didn’t fall prey to unscrupulous lenders,” Austin says, and now they have the financial means and are looking for homes. However, she sees changes in what they’re seeking. Development was getting denser, such as townhouses and duettes, but now, she says, “Small-lot, detached home subdivisions are coming back.” Of the three projects she’s seen go forward, Piner Meadows (previously known as Meadow Park) in Santa Rosa is a 29-unit community currently under construction, and Arista Place (formerly Dennis and Barnes Subdivision), also in Santa Rosa, has 33. Pine Crest Estates (Litchfield Subdivision) in Sebastopol has only 11 houses.

Detached, single-family homes are in demand, and “People are interested in getting more for their money,” says Austin, who observes that duets (a pair of attached homes) are out, with some being redesigned to make them stand-alone dwellings.

Moving forward

In Napa Valley, the Vineyard Oaks subdivision in Yountville is indicative of the trend toward small developments of single-family homes. Initially, Healthy Buildings USA of Napa partnered with members of the Knight family, who’d owned the land since 1948, to develop a subdivision with a focus on energy-efficient homes. But, in February 2013, Ryder Homes acquired the property, complete with entitlements and plans. Ryder’s architect, Hunt Hale Jones Group of San Francisco, redid the designs to give kitchens views of the vineyards and eliminate basements to accommodate Yountville’s high water table. “It’s totally different. They have a different look. They’re modern farmhouses,” says Cyndi Gates of Gates Estates, the subdivision’s agent.

Vineyard Oaks is comprised of 12 houses, including four affordable homes on one lot. “Nowadays, they try to get you to do some affordable housing,” says Gates. Four of the semi-custom houses are under construction, and grading is underway to prepare the other sites. Gates has already had inquiries from people interested in buying second homes or retiring in Wine County and says, “It’s fun to see how positive people are.” She reports that vineyard views and an easy walk to Yountville’s shops and restaurants make it an appealing location.

Meanwhile, in Marin County, construction of Rose Lane, a mixed-use development of 85 units in downtown Larkspur, is also well on its way.  The former Niven Nursery property was underutilized and in increasingly derelict condition for more than a decade before The New Home Company acquired the parcel from Larkspur Project Housing Partners in 2011. Without any substantial changes to the plans, the houses started when the city issued a building permit in March 2013. Project manager Mark Chamberlain says the property came with entitlements and approval of the final map, so all the company needed to do was obtain the remaining approvals. In addition, “We had to do a small amount of remediation to clean up the site,” he says.

He finds that, as the economy improves, families with more disposable income want to move up, so the development contains some large family homes. But it also has age-restricted cottages for seniors. “People want to move down into smaller houses but maintain a nice lifestyle. We’re seeing it on both sides. We’re seeing growth across the board,” says Chamberlain, who observes that Rose Lane is a desirable location because residents will be within walking distance of transit, shops and downtown. “The nature of the site makes it a wonderful place to live and visit,” he says.

Chamberlain describes Rose Lane as “a difficult project in a small city.” However, he credits the city of Larkspur and the Department of Public Works with being extremely helpful in the process, which is a major factor in a development’s success.

On the positive side

Larkspur Director of Planning and Building Neal Toft says The New Home Company had to prove ownership and the right to use plans after the property changed hands but didn’t make any major changes to the approved development. “There were no changes of real substance,” he says, thus, it was relatively easy for Rose Lane (initially called Rose Garden) to move forward with grading and building permits.

He says the project provides some benefit to the city, including restoration of native habitat along the creek adjacent to the property, known as Arroyo Holon Creek, as well as improving the site itself. The site had been in a degraded state for decades, so, “It was kind of a blight. The old nursery was a quasi-industrial site, most of which wasn’t being used,” he says. In addition, he observes that the development connects areas that were previously separated. “It was the hole in the donut,” he says. “Now it will be a neighborhood that links to downtown and to nearby schools and parks. It will help create a more vibrant, walkable community,” he says, adding that it fits well with the scale and demographic of downtown Larkspur. In another plus for the city, The New Home Company honored the deeding of a 2.43-acre parcel to the city for a community facility. Last year, the city adopted a master plan for a combined community center and new library to eventually be developed on the site.

Room for improvement

Despite the renewed activity, Austin believes that, for development to continue, changes have to take place. For a start, she believes federal, state and local governments need to evaluate mitigation fees. “It’s a broken system, and there’s only so much land,” she says. “We should preserve our open space, but let us build in the cities and be realistic about fees,” she adds, citing a project that would have to pay a mitigation fee of $235,000 for only four lots, as required by federal agencies, to offset its impact on salamanders, wildflowers and wetlands. “We need to reexamine fees and understand the assets [a development] brings,” she says.

She’s also concerned about the availability of water. “The new problem is going to be water,” she says, pointing out that northern Sonoma County depends on Lake Mendocino, which is almost dry, so some developers are considering digging wells. Water conservation is important as well, and retrofitting older homes so they won’t use as much water is becoming a trend.

She finds that housing development doesn’t always pay for itself and says, “Nobody can afford to start from scratch.” She expects to see more dormant projects come to life in the next five years, but predicts that home prices will have to go up so developers can afford to build them. “People who aren’t involved in development don’t have a clue,” she says, adding that they think builders make a lot of money, which often isn’t true.

Developers and architects, she observes, are an important part of the economy. They build the roads, sidewalks and buildings we all use and, says Austin, “We’re building homes for people. It’s a very worthy thing to do.”

 

The “D” Word

Nothing riles Marin County residents faster than the threat of high-density development in coveted residential areas. And, right on cue, no sooner had the Marin County Board of Supervisors designated Tam Valley and Strawberry (in unincorporated Mill Valley) and Marinwood in north San Rafael as Priority Development Areas, than the protests began. The goal of the supervisors was to secure state grants for road and traffic improvements, but residents believed the designation would lead to high-density development that would destroy the character of their communities. The supervisors listened to their constituents and removed the designations.

It’s an issue that’s at odds with other priorities. “If we don’t want more density, but want affordable housing, we have a conflict,” said Dr. Robert Eyler, CEO, at the Marin Economic Forum Conference in 2013.

Larkspur’s Director of Planning and Building Neal Toft says his city has engaged in a study that looked at transit, jobs and housing and is considering a moderate level of density for infill near transit in the Larkspur Landing area, which includes the Golden Gate Ferry, the future SMART train and access to Highway 101, Highway 580 and the Richmond Bridge. The city has recently released the draft SMART Station Area Plan, a plan for future mixed-use development on specific sites in the area.

Toft reports that allowable residential density in the area is 21 units per acre. The Station Area Plan studies a range of up to 30 to 35 dwelling units per acre on some sites. There are currently no specific developments under consideration based on the proposed plan. Toft says initial outreach showed the community was receptive to mixed-use and a little higher density, although traffic along Sir Francis Drake Boulevard and the Greenbrae/Highway 101 interchange is a major concern for the community. The plan outlines a suite of improvements and policy measures designed to minimize, if not improve, traffic conditions. “Development has the potential to enhance the community if it’s done correctly,” he says.

 

Development Impact Fees

Tiburon is a community that’s largely built out, with little space left for new development. Nonetheless, when new construction does occur, the town collects development impact fees, which are based on acreage or number of units, explains Community Development Director Scott Anderson. The planning department reports to the town council annually on the town’s five kinds of fees: traffic mitigation, street impact, affordable housing in-lieu, storm-water runoff and parks. Anderson describes those fees as “pretty much universal among cities and councils.”

Parks are part of the state subdivision land act. “Over a certain size project, you can require land,” says Anderson, explaining that virtually every city and town uses some form of the Quimby Act, the state document that sets guidelines for development fees for parks. “Everybody plays with the same set of rules,” he says.

Every community collects fees that allow for a variety of improvements, but they vary from one municipality to another and sometimes from one project to another. Larkspur, for example, collects fees for parks and traffic impact, but in the case of Rose Lane, it didn’t require a fee for storm water runoff because the project implements a low-impact design (LID) approach designed to manage storm water runoff onsite and minimize impacts to water quality. This is now required for all significant development projects. The city’s fee schedule dates to the early 1990s, and Director of Planning and Building Neal Toft notes the city is preparing to review the fees and update them in the near future. “It’s likely that they’re low relative to today’s costs for capital improvements,” he says.

Sebastopol Planning Director Kenyon Webster reports that fees intended to mitigate the impact of development on public services include water, wastewater and traffic impact fees, and the revenues go into special-purpose reserve accounts so they can be used for that specific purpose only. “The impact fees haven’t been revised for a number of years. I’d expect that, at some point in the future, they will be,” he says.

In Yountville, fees increase annually, based on the ENR index [Engineering News-Record publishes a Construction Cost Index and Building Cost Index for use in in the construction industry] for the previous year. “Based on this index, fees for fiscal year 2013 to 2014 are 2.3 percent greater than last fiscal year,” says Planning and Building Director Sandra Smith. Yountville collects fees for impacts on water, sewer connections, civic facilities, drainage and flood control and public safety, as well as traffic and parks.

Beyond paying fees to municipalities, developers must also pay impact fees to local school districts to help cover costs associated with increased enrollment.

Development Profiles

Location: Santa Rosa

Developer: Aaron Matz

Architect: Katherine Austin, AIA

Completion Date: 2013

Description: A 45-lot subdivision. The original developer, CarCo, built houses on 14 lots, and the new owner built an additional 31 single-family homes and two second units.

Location: Sebastopol

Developer: Ryder Homes

Architect: Katherine Austin, AIA

Completion Date: 2013

Description: 13 single-family homes. Ryder built 11, and Habitat for Humanity built two, which the original developer, Pinnacle Homes, deeded to the organization to meet the inclusionary housing requirement.

Location: Santa Rosa

Architect: Katherine Austin, AIA

Projected Completion Date: 2014

Description: 29-lot subdivision includes two single-family homes with detached second units over garages, two attached single-family homes in a duette configuration, 24 single-family homes and one lot for emergency-vehicle turnaround.

Location: Downtown Larkspur

Developer: The New Home Company

Architect: Dahlin Group Architecture Planning

Projected Completion Date: 2015

Description: 29 single-family homes, 42 age-restricted (55+) condominiums and 14 cottages (eight age-restricted and six affordable)

Location: Yountville

Developer: Ryder Homes

Architect: Hunt Hale Jones Group

Projected Completion Date: Late 2014

Description: 12 single-family homes, including four affordable houses