A new law meant to change the way California builds into the future might be leading people to leave the Golden State in their past.
As of July 1, 2020, housing construction projects are no longer assessed a fee by how much traffic congestion they generate. Instead, a “Vehicle Miles Traveled” calculation is now applied. Developers have to account for how many miles a potential homebuyer might drive, and then offset those miles over a given threshold. Critics say the change will add costs to many housing projects.
Dan Dunmoyer serves as the president and CEO of the California Building Industry Association. He tells GV Wire℠ since the new law took effect there’s been a dramatic slowdown in new residential construction.
“Move. Move to another state. You really can’t do it here.”–Dan Dunmoyer, CEO of the California Building Industry Association regarding potential middle class California home buyers
“We’re seeing substantial delay because cities and regional governments were not ready for VMT,” said Dunmoyer. “We call it the big pause button, which is exactly the wrong thing we need right now in California for housing and the housing crisis.”
As for what that means for the middle class wanting to buy a home in the Golden State, Dunmoyer doesn’t mince words.
“Move. Move to another state. You really can’t do it here,” said Dunmoyer. “We can build homes. It’s just homes for millionaires.”
He points to places like Idaho, Texas and Arizona as places where builders actively pursue people looking to leave California.
GV Wire℠ caught up with state Senator Melissa Hurtado, D-Sanger, to ask her about the impact of the VMT law.
Last year, Hurtado co-signed a letter along with other Valley representatives that asked Gov. Gavin Newsom to delay the law’s implementation for two years. Despite signatures from 20 senators and assembly members, the law took effect July 1.
“It’s a challenge that even I face right now in terms of wanting to own my own home,” says Hurtado.
While she says there may be some good elements of VMT, if it’s hurting the supply of homes she’s not opposed to asking the governor to look at it again.
“It’s a challenge that even I face right now in terms of wanting to own my own home.”–Senator Melissa Hurtado, D-Sanger
“We really need to look at look at it all and be comfortable with being wrong. If there was some wrongdoing in terms of the policy decisions that were made that put us in this place,” explains Hurtado.
GV Wire℠ asked her, “Do you think you would encourage the governor to take another look at VMT?”
“Absolutely,” replied Hurtado.
Vehicle Miles Traveled Law Still Murky
“Even the cities that have tried to do this haven’t quite figured out how to do it,” said Dunmoyer.
VMT is the implementation plan for Senate Bill 743, which Gov. Jerry Brown signed into law in 2013. VMT’s backers say it will be an effective tool to reduce greenhouse gas emissions.
For instance, if a person drives to multiple places a day — work, store, soccer practice, etc. — all of those miles are counted up. Then a fee is calculated for the development, with the funds going to subsidize items such as vanpools, mass transit passes, and bike lanes.
An official with the Building Industry Association of Fresno-Madera Counties told GV Wire℠ last year that it has estimated that the VMT fees for a 20-unit project in Clovis would be $460,000 over 30 years — or $23,000 a unit. And, while the developer bears the costs upfront, it is passed on to homebuyers and renters. In San Bernardino County, builders were expecting homes to have an additional $400,000 in costs added because of VMT.
Dunmoyer says it’s still too early to say whether those cost estimates are too high. “We still think those are rational and viable numbers,” he says.
The City of San Diego recently tried a calculation tool to estimate the VMT costs of a development.
“The fee that came out of the calculator was fifty million dollars for a land project that was worth thirty two million dollars,” says Dunmoyer. “So the city is going to pull their calculator because it didn’t work.”
Law Implemented Despite COVID-19
“California, Oregon and Washington have started to tax people out.” – Georgeann Hoover, Coldwell Banker Realty agent
Dunmoyer says his industry believes it was just “mean” to launch the new regulations during the COVID-19 crisis.
“If you listen to the Governor’s Office of Planning Research, they’ll say we had seven years to implement it. We didn’t,” says Dunmoyer referring to what he describes as a lack of information from OPR ahead of July 1, 2020.
He believes moving ahead with rules that were likely to drive up the cost of housing and make developments less feasible didn’t add up for the builders in his association.
“We actually pulled 10 percent fewer permits last year than the year before,” said Dunmoyer speaking about data that’s set for public release soon. “Since Governor Newsom has been governor we’ve been declining at about 10 percent a year.”
The CBIA has gone back to the OPR since the law was implemented and asked for it to be delayed. The OPR wants the CBIA to let them know how it’s going.
He says the OPR has discussed putting together a ‘strike team’ to help municipalities and builders try to figure out how to maneuver the new regulation.
But, Dunmoyer says COVID-19 is making it difficult for the governor’s office to focus on other issues like VMT.
City of Clovis Bucking Trend
According to statistics provided by city of Clovis, the local community is a bit of an outlier.
Residential building permits actually increased after the implementation of VMT, based on year over year data.
- 590 units July 1 through December 31, 2019
- 604 units July 1 through December 31, 2020
Some of the answers as to why were discussed during a recent Clovis City Council candidate forum hosted by GV Wire℠.
“We’re working on transit routes both in Clovis and connecting to Fresno,” explained incumbent Councilmember Lynne Ashbeck. Some of the ways to mitigate fees from VMT are to build close to public transit.
The other incumbent on the panel, Vong Mouanoutoua, said the city closely analyzed VMT ahead of time in preparation.
“How do we improve our transit so that it becomes VMT qualifiable so that it lowers the VMT (fees)?” asked Mouanoutoua rhetorically.
Californian’s Exodus Could Reshuffle Political Map
The San Jose Mercury News reports that California is likely to lose a congressional seat for the first time in history after this year’s census, with the state’s slowing growth rate trimming its political clout, according to an analysis of new population data released this week.
The projected drop from 53 to 52 seats in the House of Representatives will lead to a reshuffling of the state’s political map, and potentially divisive congressional races between incumbents in 2022.
Scripps reports several states may lose seats, while others gain as a result. An analysis done by William Frey, a senior fellow at the Brookings Institute estimates that Texas will gain three representatives in the House, Florida will gain two, and Arizona, Montana, Colorado, North Carolina and Oregon will gain one.
Meanwhile, Alabama, California, Illinois, Michigan, Minnesota, New York, Ohio, Pennsylvania, West Virginia and Rhode Island could all lose one representative.
Raising Arizona Prices
“They’re done with everything California.”– Coldwell Banker Realty agent Liz Miller
The CBIA says there are some housing developments in Arizona seeing a nearly 100% influx of California buyers.
Liz Miller is a Coldwell Banker Realty agent serving Scottsdale and Phoenix. She says nine out of 10 buyers looking at Lake Havasu City are from California. In the Phoenix area, about 70% of her buyers are from California, she said.
“A lot of them are the people that are ready to retire,” says Miller to GV Wire℠ by phone. “It’s people that are pretty much at retirement age and they’re done with taxes. They’re done with everything California.”
She says the lower cost of living in Arizona is a major factor. “Property taxes are lower. Energy. Everything is lower,” explains Miller.
Lake Havasu City doesn’t have many of the subdivisions Californians are used to. Many of the builds are done by custom builders. There are five or six subdivisions in the area. “Those are being taken over by California,” says Miller.
Prices in Lake Havasu have gone up 18% in the last year according to Miller. She says inventory is extremely low and it’s creating a, “feeding frenzy.”
She says a development called ‘Wickenburg Ranch‘ is the most recent hotspot.
“That place is nuts,” says Miller.
Originally a dude ranch owned by famed entertainer Merv Griffin, Wickenburg Ranch is a little over an hour northwest of Phoenix. The $600,000 and above price tags are not scaring off Californians.
“Probably in the $800,000’s is the norm,” says Miller. She says people fleeing California are “cashing out”, buying these homes and still have money in the bank.
Arizona: Hurry Up and Wait
Georgeann Hoover, another Coldwell Banker Realty agent in Lake Havasu City tells GV Wire℠ there’s so much demand for housing, builders cannot keep up.
“They’re usually 18 months to two years out in construction,” says Hoover. “I mean, you can’t even get a pool built here within a year because of how much new construction and new pools are being built.”
Hoover knows about the new VMT regulation that went into effect in California last year. She’s not hearing about that so much being a driving force so much as builders running into water supply issues and other factors.
“California, Oregon and Washington have started to tax people out,” she says. Hoover says her buyers aren’t just people ready to retire, she’s seeing people relocate because of their ability to telecommute now.
Hoover points to a recent case where a Washington homeowner got an offer $100,000 higher than their asking price. “It’s just crazy times,” she says about the influx of people coming into Arizona from the West Coast.