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Led by multifamily, S.D. housing starts boom in February

San Diego housing starts more than doubled last month on an annual basis, led by a five-fold increase in permits for multifamily homes, but industry observers remain wary that new-home construction is on its way back.

County municipalities granted 674 total permits during the month, 161.5 percent more than February 2010 and 43.7 percent more than in January, according to numbers collected by the Construction Industry Research Board (CIRB) and released by the California Building Industry Association (CBIA).

Permits have now been pulled for 1,143 units during the first two months of the year, up 110.5 percent over the first two months of 2010.

There’s been an especially pronounced increase in multifamily building during that time.

The 541 multifamily permits issued in February were the most in any month since 633 were pulled in April 2008, and more than in any February since 756 were pulled in 2006.

Multifamily permits rose 514.8 percent over last February, and 83.4 percent over January.

After pulling only 357 permits for multifamily homes in the last six months of 2010, county builders have now pulled 836 such permits through the first two months of the year, a 439.4 percent jump from the same period a year ago.

But monthly permit totals at the county level can be unduly inflated by a single major project, and might not accurately affect homebuilding activity in the area.

One major project that could have begun securing its housing permits over the last two months is Civita, a major mixed-use development in Mission Valley by Sudberry Properties that will eventually include 4,800 housing units.

The first phase of the development is to include a 306-unit apartment complex, as well as two townhouse buildings totaling 200 units, expected to be delivered by late August or early September.

Shea Homes will construct the two townhouse complexes, while Sudberry will handle the apartment building.

Neither Marco Sessa, senior vice president of Sudberry, or Paul Barnes, San Diego division president of Shea, immediately responded to requests for comment on the permitting status of the Civita development, which began grading at the end of 2010.

(Update: Neither Sudberry nor Shea have pulled permits for individual homes in the Civita development. The ongoing construction is for the master plan infrastructure, according to Sessa.

"We are a couple weeks away from [pulling the permits] on the apartments," he wrote in an email. "Shea is a little behind that, scheduled toward the end of April."

He said Sudberry would pull all of the permits for its apartment complex at one time, but Shea would pull the permits for its townhouse projects in phases, since the construction itself is scheduled in phases.)

“Nobody in my shop has come in and said ‘We’re at it again on the multifamily side!'” said Borre Winckel, president and CEO of the Building Industry Association of San Diego.

Meanwhile, activity in the single-family market has decreased noticeably so far this year.

Single-family permits issued in February fell to 133, 21.8 percent lower than last year and down 23.6 percent from January.

Through the first two months of the year, county developers have pulled 307 single-family permits, 20.9 percent fewer than during the year-ago period.

Housing experts and regional planners have said the county would be forced to accommodate its growing population with urban infill and redevelopment, rather than through green field development, as has historically been the case.

A shift in that direction would eventually mean more multifamily units, and fewer single-family homes.

Scott Sandstrom, president of New Pointe Communities, said the county’s need for housing in dense areas is only part of the uneven increase in permits by housing type. It’s also driven by the lower per-unit cost of multifamily housing.

“As it turns out, in both market demand and supply, it’s easier to get off the ground with multifamily in San Diego right now,” he said.

Statewide, housing production declined in February compared to both last February and January.

Permits were pulled for 2,088 housing units across California last month, down 41 percent from the same month a year ago and 26 percent from January.

The 1,204 permits for single-family homes were a 34 percent decline from February 2010 and 26 percent from the previous month, while the 884 multifamily permits showed a 48 percent fall from the year-ago month and 24 percent slide from January.

New state building codes made effective at the start of the year required all new homes to include fire sprinklers.

Developers might have fast-tracked projects to secure permits before the end of the year to avoid that requirement, leading to weak permitting totals to start the year, according to Mike Winn, CBIA’s president and CEO.

“Continued weakness in the job market and strict lending standards continue to weigh on the home buying market, which in turn is having a negative impact on homebuilding,” Winn said in a release accompanying the figures.

Likewise, San Diego’s relative strength compared to the rest of the state is likely a result of its superior job growth, according to Sandstrom.

Housing starts reached their lowest and second lowest annual totals on record in 2009 and 2010, respectively. Industry experts have therefore downplayed large yearly increases in activity in any given month. Significant increases merely bring activity back to acceptable levels, they’ve said.

Winckel has blamed an arduous permitting process for the poor permit totals of recent years.

More permits have been pulled through the first two months of 2011 than in the first two months of any year since 2007, when 1,359 were pulled. Two years earlier, in 2005, county municipalities approved 2,382 permits during the first two months of the year.

Sandstrom said it currently takes far longer to permit a home than to build one.

“That’s why I think we’ll have a shortage when the market turns in earnest, is that the backlog of permitted lots are going to be quickly swallowed up once the market warms, and it takes years, not months, to get approvals,” he said. “So you have a possibility of a warmer market just devouring approved projects, then there will be a supply problem because no one is permitting new projects. We’ll continue to have an up-and-down marketplace, because we can’t efficiently bring product to market.”

There’s also a sense from outside the housing industry that overbuilding during the mid-2000s housing boom played a key role in the market’s ensuing bust, and that a return to 2005-level permitting isn’t desirable.

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User Response
1 UserComments
discdude 3:41pm March 23, 2011

"Boom" is a horrible word to use. I had to laugh when I read that headline this morning. How about some perspective?

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Borre Winckel

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