What Really Matters?

First and foremost: GO GIANTS

The state of California is in a terrible state. According to the last count only three people in the whole state completely understand the new budget, one is the Governor and he is having a difficult time explaining it to his constituents, the other two live alone and nobody knows who they are. For the past thirty years school initiatives passed as well as those for fast trains, highway expansions and save the universe bonds. Californians have grown weary of the state’s perpetual begging and badgering and no longer believe the politicians, teachers unions, environmentalists, and the news. This may be an electorate who says no to everything this year. “Governor, go pound sand.”

More than once I have pointed to the incredible number of associations, departments, commissions, and agencies that seem to proliferate at the state level. No department is immune. Many are at cross purposes, all cost money. And the streets still fall apart, kids can’t read, and more and more people are out of work.

This is not the blog to find answers; if I knew the answers I would bottle it and sell it on street corners (with a license of course, I’ve applied but still waiting). Besides no one listens anymore – it’s all shouting and finger-pointing, then when they lose, they go away and sulk. But they will return, bet on it.

Let’s just look at one example, the California Environmental Quality Act (CEQA for short). Forty years ago its goal was simple; analyze a proposed project so that all the major issues are set before a city council or county supervisors for a more educated approval or denial. If has morphed into a huge industry that fundamentally says to most developers “No way, no how.” Due to the volume of paperwork generated for even the smallest project, no one reads the reports, no one understands them, and what is more important, nothing gets done due to the potential for lawsuits. Even now litigation is built into the planning process. Not on the document itself but on “how” the document was produced, and its scope, and its facts. CEQA on CEQA.

Huge developments and projects (from residential to industrial) take years to evolve and get built, many go through economic shifts (like the last four years), they never turn out as they are planned. These projects become instantly out of sync with the approved Environmental Impact Report (EIR). Thus, is there any value in the document itself? What is its purpose then? Is it worth the costs? I can assure you that every nickel spent on an EIR is passed on to the consumer through higher and higher pricing.

It’s all about consultants and experts, in fact a whole industry - with little or no culpability - has grown serving these interests. To my point, just have the governor announce that CEQA should be thrown out and a newer and more streamlined process will instituted that quickly looks at a project and then allows it to move forward. Stand back, the screams from state agencies (water quality, traffic, etc.), Sierra Club and other environmental groups, as well as NIMBYs, NONONOs, and other special interests will cause deafness. The system is broken and BandAids won’t do the job.

The legal world just loves CEQA and EIRs. This process and these documents become so convoluted that only $500 an hour attorneys understand them, just get six in a room and listen to their opinions – none will agree. It is supposed to be a factual document, based on real science and real calculations, phooey. Much is opinion and speculation based on extrapolations the greatest computers couldn’t calculate. And if it is a “pet” project, they try circumvent the process, such as the High Speed Rail’s attempt to avoid CEQA and “speed” things up. Welcome to our side of the street.

It is now a process that is fundamentally structured to hobble or squash concepts and projects. Whether a new town, affordable housing, gas extraction, high speed rail, highways, and even solar projects – go figure. The defenders say that the courts have continually been fair and just when reviewing these claims. Now that is the problem in and of itself - if the process were fair and just, these documents should not have to be decided in court. Years of lost time and money are wasted in the courts.

A new process must be developed to assess projects. Do I believe that this can happen? No. Do I think that the various special interests will give up their assumed importance? No. Do I believe that the state will find a way to make allow things to happen again? No. Do I believe we are a long way from building and growing ourselves out of our problems? Yes.

Why do you think in this state “shovel ready projects” didn’t happen? The EIR wasn’t and it still isn’t finished.

Stay Tuned . . . . .

The Future of Housing Development in California

After looking at the title of this missive I am shocked that I even have a tenth of the expertise to ponder such a thought. Let’s go over my qualifications: homeowner, community planner, urban designer, mortgage holder, and California resident. I do not have banking credentials, a financial resume, or even a minor in accounting. So there . . . I have all the necessary qualifications and maybe more than the usual talking face on the tube.

I just finished reading John Mauldin’s latest newsletter on the current state of banking and mortgages. If I wasn’t concerned before, I am very close to extremely concerned and breathing heavily now. I recommend his weekly newsletter, it is free and worth millions.
(see: http://www.frontlinethoughts.com/printarticle.asp?id=mwo101510)

Without the underpinning of secure titles and mortgage papers there will not be a housing industry. If there is no assurance by a title company that the house and property being purchased has clear title, no one will expose himself or herself to the risk. The banks won’t, the builders won’t, the landowners won’t, and the buyers won’t.

A few months back I wrote about whether the master planned community is dead, I offered that I thought it was. The reasons are numerous and obvious to all in and out of the industry. Now I am concerned that this mortgage mess and with it the attendant foreclosures will lay low the housing industry as a whole for years to come. There are very few adults supervising the children now. Lax management, creative and outright fraudulent banking practices, too much money chasing too much money, and a general “I am in it for myself,” attitude has contributed to this mess. With very, very, few examples most of the players in this industry have contributed to the problems we face today. Builders, developers, bankers, unions, politicians, and even the buyers have all had their collective hands in the cookie jar. The jar is now empty and there is a sharp bear trap on the dark bottom.

There will be a few housing projects that will move forward. Most are urban high-density projects that have some political muscle behind them. They fit agendas and programs created through the particular cities they are in. Salvaged school sites, environmental reclamations, transit oriented communities, and maybe even a few old fashion developments. But large-scale communities with thousands of acres and units are well out of the realm of the possible now. And probably through the rest of this decade; we are reliving the 1930s.

Coming is a time of retrenchment and financial reconstruction on a scale not seen in modern banking and it will be worldwide. This banking rebirth must be based on the underlying principle of property rights and ownership and on the free market exchange of money, goods, and land. If these are not supported through regulation, law and insurance they are meaningless.

As can be seen in the Mauldin article we are in tenuous times and I fear for the whole structure of our industry. The first blog I wrote in early summer dealt with the demise of the design industry and the collapse of architectural and engineering firms. While some still cling to a few projects it is now a war of attrition and survival. This economic disease will spread through the construction industry; few will remain and they will be the very large conglomerates and the very small custom builders.

Look at a house. Walk through a new home (assuming you can find one) and count the industries it took to build, equip, and furnish it. Then multiply those items by one and a half million and you will understand what I mean. We waste our political wind taking about green industries, alternative energies, electric cars, iPads and other distractions. To say our politicians are intellectually lazy would be too kind, these impacts on the banking and housing industry need far more coverage than the sound bites of the foreclosed house sign and the grieving owner. Where are the adults when the sand box needs them?


Stay tuned . . .