Curtailing Housing Choice

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Dean Wehrli & Dog

What are your thoughts about efforts by regional planning agencies to promote greater development of higher-density housing in the Bay Area?

I believe they have led to unrealistically high-density levels and a bias toward urban transit-oriented locations to build housing. The bulk of the demand for [for-sale] housing is among folks who want to live in suburban locations in more conventional types of housing. I’m afraid this is a top-down approach and a one-size-fits-all attitude. Don’t get me wrong. I think it’s a very laudable goal to work to reduce greenhouse gases. But they are trying to push all the housing development toward the large cities. The fact remains that most homebuyers are looking for single-family homes with large garages and yards. For many environmentalists and planners, high-density urban housing is the Holy Grail, and they are making it increasingly difficult for new suburbs to emerge. Though demographic shifts will help drive demand for this product, this will not be to the exclusion of demand for more conventional housing types, as some planners and academics believe. Most people don’t want to live in the very high density urban core housing projects that are envisioned as very much the norm in the future in the Bay Area.

Describe the results of surveys your company has done on this issue among prospective homebuyers?

Surprisingly, results in the Bay Area are not that different from results we see nationwide. The most popular housing style here was suburban large-lot at 32 percent. Suburban master-planned communities were chosen by 25 percent. Urban housing, or high-density, was selected by only 5 percent of the survey respondents. The guidelines of the [Sustainable Communities Strategy] would push most future residential development in the Bay Area toward very high-density product types in urban transit-oriented locations. Four of every five new homes built over the next three decades would need to occur within Preferred Development Areas that allow for only very high-density living averaging 38 units per acre.

What is the cost to developers to build different types of housing?

The other fact that indicates the plan is not feasible is the cost of podium, high-density housing. High-density housing only pencils when you command very high prices in desirable locations. Developers tell me the per-unit cost of building high-density housing is very expensive. The cost to build a mid-rise residential building is $300 per square foot. For a podium-style residential building, the cost is about $225 a square foot. For a frame townhome, it’s less than $100 per square foot. The cost to build a single-family suburban home is $65 per square foot. Urban housing is a vital niche, but it is just a niche, and in many ways a small part.

What is the state of the Bay Area housing market today?

For-sale housing is doing very well in the central Bay Area, especially in the San Jose area and Dublin. The rental market is also very robust. New homes are selling very briskly, because there’s a major lack of housing inventory in the Bay Area. It’s crazy low. In outer suburban areas like the Dublin corridor and Mountain House, sales are just fantastic. It’s a very hot housing market.

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