Coronavirus: Lockdowns slow Bay Area home construction, future projects

The coronavirus pandemic has created confusion, delays and
uncertainty in housing projects around the Bay Area, despite a
crushing need for new homes from an industry deemed essential to
work through the regional lock-down.

Shutdowns in local government offices have distanced city
planners and inspectors from developers, making the already
sometimes Byzantine development process more complicated. Staff in
Bay Area cities are shifting as many development functions as
possible online. Residential builders and small contractors are
struggling to understand and adapt to the variety of new work
policies and limits forced on local governments by the
coronavirus.

The region’s housing crisis, already hampered by high land
costs, a lengthy local process and environmental regulations, is
getting a roundhouse from the pandemic.

“Things will be slower,” said Bob Glover, executive officer
of the Building Industry Association of the Bay Area. But industry
insiders say no one yet knows how long the delays will last.

But the slowdown will ripple — or crash — through the
industry with unknown damages to affordable and market-rate housing
projects, smaller contractors and construction workers.

A survey by the National Association of Home Builders released
last week before shelter-in-place restrictions spread across the
country found developer confidence remained solid with strong
consumer demand for new homes, although industry executives expect
the pandemic to slow sales during the next six months.

Much of the work needed to finish and fill a home or condo —
from final inspections to recording of title — depends on
government services. Bay Area cities have shuttered planning and
inspection services, telling developers and contractors to call or
email.

Rosalynn Hughey, director of the San Jose department of
planning, building and code enforcement, said the office has
switched to its emergency plans to keep projects going. Most
planning functions are being done online or through email,
videoconferencing and by phone.

Inspectors with appropriate protection and social distancing
will be allowed to perform site visits on housing
projects, she said. The city is setting up video
inspections for small home renovations, like kitchen remodels, and
plans to grant final sign-offs remotely.

“Without a doubt, there are going to be delays,” Hughey
said, but how long “we’re not really sure.”

Stanford University has temporarily shut down construction
projects. Mountain View has ceased taking new and resubmitted
planning applications. Inspections for private developments have
been limited to health care facilities and affordable housing
projects, according to the city.

In Redwood City, commercial development has been halted but work
on all types of housing and crucial infrastructure continues. City
inspectors and site workers are being asked to follow precautions
recommended by the public health officials. The city is also
considering remote video inspections.

In Oakland, planning services are being offered by phone, online
or, in some cases, by appointment. Walnut Creek and Concord offer
similar limited, remote services, according to city websites.

Developers and contractors are scrambling to figure out the new
rules and levels of service. The local chapter of the Building
Industry Association expects to send surveys to 100 cities in the
region seeking clarity.

“Everyone might not be providing the same level of service
during this three-week period,” Glover said. Some homeowners are
in limbo, waiting to move into their new homes while expecting to
leave their old ones. “How do you accomplish those key things to
get people into new units?”

SummerHill Homes CEO Robert Freed said the company is managing a
variety of challenges — keeping employees safe, adjusting project
deadlines and meeting client needs.

SummerHill has housing projects in various stages of development
across the region, including Moraga, Santa Clara, Fremont, Foster
City and Mountain View. Progress has varied from city to city,
depending on the availability of inspectors and other city
staff.

“Where possible, we are continuing to build,” said Freed,
who has spent three decades in the industry. Sales work, including
client conferences and virtual tours, are being done remotely.

The consequences for affordable housing — typically dependent
on a complex collection of funding sources, and layers of
government oversight and deadlines — are more daunting.

California Housing Partnership CEO Matt Schwartz said the delays
could seriously impact project deadlines and financing.
 As the economy weakens, investors become more
cautious. If bankers pull back from new investments in affordable
housing, he said, bold projects to address the state’s housing
needs could be knocked back on their heels.

“Right now, the dominant factor in the market seems to be
fear,” Schwartz said. “That could be devastating for housing
production generally.”

Developers of affordable housing say tax incentives and
financing are tied to strict construction deadlines. Missing target
dates could endanger projects.

“We need our contractors to work and we need our local and
state inspectors to inspect that work in order to meet those
deadlines,” Eden Housing president Linda Mandolini said in an
email. “We are also working on extending the deadlines which
require both federal and state action. There are significant
financial consequences for missing them.”

Smaller contractors are also wrestling with shelter-in-place
guidelines. Despite pent-up demand for new housing and home
improvements, an extended shutdown could stifle projects and lead
to industry layoffs.

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Randy Zechman, CEO of solar installer CleanSolar in San Jose, said
most in the industry considered the shelter-in-place restrictions
to ban smaller commercial and residential projects. Even if
contractors are considered essential, he said, “how many
customers are really going to be calling to get solar?”

Zechman does not plan layoffs from his 50-employee company right
now and expects the slowdowns will be hardest on his installers and
electricians. Generally, he said, “the majority of workers in the
construction space are paycheck to paycheck.”

The company can hold out for a few months, he said. Beyond that,
he said, “I don’t know the answer.”

Staff writer Aldo Toledo contributed to this report.

Source: FS – All – Real Estate News 1
Coronavirus: Lockdowns slow Bay Area home construction, future projects