Real Estate News

Housing plans piling up: Which will get built?

Sacramento’s new home market has yet to fully revive from its recession-induced coma, but that hasn’t stopped developers around the region from jostling to get new housing projects approved so they can be first in line to tap pent-up buyer demand.

A new analysis shows more than 650,000 homes and apartments in some stage of planning or approval in the the six-county area, far more than twice the number planners say actually will be needed to fill the region’s housing demand over the next 20 years.

Some are old plans, still lying around from the pre-recession days of the early 2000s, and may no longer be viable. But many are new proposals pitched by developers as a modern type of suburban community that features tighter, more urban-style neighborhoods and houses that use water and energy efficiently.

The real estate land race indicates that builders sense an improving economy. But it is also reflects more hope than reality, some planners say. They predict less than half of what is being envisioned will get built.

Officials with the Sacramento Area Council of Governments, a consortium of 22 cities and six counties, say the region has a tough task ahead. Cities and counties will need to agree on which projects have the best chance of getting off the ground in the next decade, so the region can focus its transportation, sewer and water improvement money in the right places – and avoid a messy free-for-all that actually could inhibit growth.

“If we don’t get practical and develop a focused, step-by-step implementation plan, one of the biggest side effects will be slower growth than we would otherwise have,” SACOG head Mike McKeever said.

SACOG is obligated to put together a federally approved regional transportation spending plan this year, listing, among other things, which roads are expected to be built in the coming few years to serve growth areas. McKeever said the region has a limited pool of transportation and other infrastructure improvement funds, and that subdivisions far from existing communities will eat up more of that money.

McKeever stopped short of saying the region’s transportation improvement money should be focused on housing projects in or near existing developed areas, saying instead that cities and counties need to try to get an idea of how much housing they want or expect to see built in downtowns, in existing neighborhoods, or out in “greenfields” and rural areas.

The area experienced a real estate boom in the early 2000s, when it was turning out nearly 20,000 new housing units every year. That annual total fell to a low of 1,200 in the recession. Builders and regional planners say they believe a healthier market, on the horizon, will create a demand for about 11,000 new dwelling units annually.

But some real estate professionals say they still don’t see housing demand taking off anytime soon. Sacramento’s job uptick isn’t strong enough to launch many people into the homebuying market just yet, and that means many would-be developers will sit on the sidelines, with their plans, for years.

“I do not see any boom coming,” said John Hodgson of The Hodgson Company, which specializes in helping developers get projects approved. “If you can’t sell, you are probably not going to build.”

John Costa of the North State Building Industry Association said his group sees the market taking shape now, and projects that by late 2015 “it all comes together.” West Sacramento Mayor Christopher Cabaldon predicts the region will see what he calls house construction “clumps” in the next few years: a series of small surges in house building, but no massive building spree like in the early 2000s.

Landowners and developers are spending millions planning for their moment.

SACOG’s recent review of the region’s planning pipeline shows that virtually every city and county in the region is readying for the moment the market picks itself up. Roseville has 13,000 housing units in the pipeline, Elk Grove 17,000. Folsom is eyeing its new expansion area, south of Highway 50, for 10,000 homes.

Most of the housing projects are planned for open spaces outside existing urban areas. If all were built, those “greenfield” developments would account for nearly 500,000 housing units, far more than the 300,000 housing units SACOG projects will be needed over the next two decades to accommodate population growth. Another few hundred thousand new units are tentatively planned for existing communities.

Developers in the Jackson Road corridor, wedged between Rancho Cordova and Elk Grove, are among the most ambitious in the region. They propose a series of communities that they say will bring more housing near jobs along the Highway 50 corridor, and will be designed with a more small-town feel than the traditional suburban tract layouts popular in Sacramento since World War II.

One of those projects, a community of about 5,800 homes and apartments called New Brighton, exemplifies the iffy nature of residential real estate in Sacramento. In the works for years, New Brighton would be located on Jackson Road at Watt Avenue, near a major light-rail station and close to jobs in downtown Sacramento and Rancho Cordova. Developer Randy Sater of Stonebridge Properties calls it a “new urbanist” village, focused around 300-plus acres of urban farms, sprinkled throughout the community much like golf courses once wended their way through some suburban housing tracts.

“We were attracted to this notion of a community built around wellness, of having fresh produce and good food,” Sater said. “Food is an identifiable way to build community.”

The project has received good reviews from planners as it moves toward obtaining county entitlements. But Sater this week declined to even guess when it could be built. “There is the small issue of the market for housing,” he said. “When it (will return) and what will that look like.”

Rob Burness, a former Sacramento County planner and now a member of the Environmental Council of Sacramento board, said local governments like the county Board of Supervisors should seize the moment in guiding which projects get built, and not simply let the market decide who the winners and losers will be.

“The idea that the market will sort out this excess of development is probably true,” he said. “But regional cooperation should sort out the priorities in ways that support the transportation network, and (provide) jobs and housing balance that’s in the best interest of the region.”

The latest housing development push has prompted mixed reactions around the region.

Plans for several housing subdivisions in the El Dorado County hills recently prompted slow-growth advocates to push for a ballot measure that would prohibit the county from approving residential subdivisions of five or more parcels until traffic congestion is improved on Highway 50. The group wants the county to work harder to bring more jobs to the foothills, so residents don’t have to drive long distances to work.

Conversely, the market for infill housing built in downtown cores is showing some signs of reawakening. Developers and city planners have their eyes on projects underway in West Sacramento’s Bridge District next to Raley Field and downtown Sacramento’s Township 9 housing project, which is being built around a light-rail station. The question: Will those projects provide a “go” sign for other developers by showing they can be profitable?

Some local leaders say the biggest housing challenge will be in aging post-World War II era suburban neighborhoods. Those saw some of the biggest drops in values and income levels in the recent recession. Refreshed the housing stock will be key to reinvigorating those areas, and helping them attract some newly arriving Sacramentans who might otherwise be lured to homes in fringe subdivisions.

“Older neighborhoods suffer as new neighborhoods are built,” said Rancho Cordova Councilman David Sander. “Unless they are dealt with in detail-oriented way, things can get very bad. It is maybe the greatest untold story in our region over the next 30 years.”

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