On Tuesday, a number of people came forward talking about the unsuitability of the Cannery site for a business park. They noted the lack of interest in the site and also the problems with Davis in general.
Moreover, while everyone seems to believe the site is not practical for a business park, few seem to grasp the unsuitability for housing.
Finally, I am still stuck in the same place I was and have been – why do we need to approve more housing now?
The city has talked the talk on economic development for years, but recently they have seemed to be walking the walk. However, to do that, you need places to put big research and university-oriented facilities.
In Davis, the pickings are few and the Cannery site remains the largest contiguous site available for high tech and research development. Let us shelve the debate, which is interesting, over whether this site works for high tech and where the ideal site is.
The city has identified three potential alternative sites, the Nishi Property, Northwest Quadrant and East of Mace along I-80.
I am going to tell you this right now, all of these sites are DOA. The Nishi Property is clearly an alluring site, but it has such severe access issues that it renders it almost useless.
Nishi either exits on the already-congested Richards Blvd, or they would have to find funding for a below-grade crossing below the railroad tracks with access on the UC Davis campus.
The problem is that not only is that something that is very expensive, the city CANNOT prioritize getting a grant for that spot so long as they have the festering issue of the railroad tracks on the other side of Richards where Union Pacific is threatening to wall off the residents.
As a result, the city is in a political pickle, where they cannot get that crossing without unleashing a political tsunami and they will never get Measure J approval to dump more traffic onto Richards.
That is the problem with all three of these sites, they are Measure J votes.
East of Mace and Northwest Quadrant are electrified fences. It was only four years ago that hundreds of residents of Davis traveled to Woodland to protest the Board of Supervisors studying those areas for future development.
Next to Covell Village itself, those are two of the most vulnerable areas and would be on the forefront of any land use fight.
The bottom line, if the city is serious about economic development, they CANNOT re-zone Cannery before getting approval to proceed on the alternative sites.
Second, despite what everyone who praised the project on Tuesday night believes, this is a bad spot for housing. Joe Krovoza is absolutely correct about access issues. It is a property that is locked on three sides with no northern, eastern, or western access.
The city would need to do a problematic crossing of the tracks to get to the west. Covell Village will not allow eastern access. Northern access does not work.
And even to the south it is a problem. You have a major thoroughfare which means, as the Mayor fears, without a grade-separated crossing at the Southwest and Southeast corners of the project, this becomes just another commuter and automobile accessible development.
He said on Tuesday, “I will vote against the project until there are grade-separated crossings at the SW and SE corners of the project. These would cross Covell (likely under as that takes less displacement) so that bikers and walkers will be truly safe from traffic.”
As much as I opposed joint planning of the site, which was always seen as a way to force development of Covell Village again, I understand from a logistical standpoint why the previous city staff saw the need to do so.
Finally, why this and why now? I heard a number of people applauding the site. I understand the city staff likes working with the developers because they are professionals trying to do their best on the site, and they have been responsive to challenging and unique needs.
Nevertheless, I think Maynard Skinner, a former mayor, who has admittedly supported some awful projects like Covell Village, hit the nail on the head. First, we do not need housing right now. The city has enough housing entitled to serve the city until 2015. The real estate recession is continuing, with little reason to believe there will be an end in sight.
He wrote, “During the work of the Housing Update Steering Committee (of which I was a member) Bob Wolcott stated in 2008 the city had enough housing entitlements for over 500 units which will serve the city until 2015.”
He added, “That was long before the full impact of the ‘Great Recession’ was understood. Now we are in 2011 mid-year and we know that due to tough economic times the current housing inventory will last much longer.”
But even aside from this point, the project just is not that good. The transportation and sustainability plans are sub-par. They lack specifics that are needed to evaluate. Remember, this project in various forms is at least five years old, and yet there is no specific sustainability proposal on the table.
Senior housing components are lacking and fall well short of what the city has approved as guidelines.
Finally, as Mr. Skinner puts it, “The proposal is lacking in creativity. It is just more of the same type of cookie cutter housing which we have enough of.”
In short, why do we need “this” project? What makes this project so good? Why do we need 600 units when the voters in the last six years have turned down a 2000 unit and a 200 unit site, in part because they perceived that we do not need the housing.
A lot of people brought up the fiscal analysis, which I agree is lacking. But of all the problems, that is the one I worry least about, because it is easy to solve as long as you have a good analysis. You simply add in fees. I have no doubt this council will get that part right – for past councils it was a different story.
But in terms of the key issues – the need for housing, the challenges of finding business park alternative sites, and the challenge of this parcel of land – I do not think we can overcome those very easily.
—David M. Greenwald reporting
David I completely agree with your assessment and would like to expand on one aspect you mentioned, the appropriateness of this site for housing. So far, I can see two major disadvantages of this site. One is the issue of adequate entrance and exit points which do not seem feasible.
The second is the issue I would like to address. At least one speaker in favor of the project mentioned it’s walking distance from the Nugget
Shopping Center as an advantage. I doubted this statement so I decided to objectify it as well as possible. On line there is an easily referenced resource called the walkability index which scores addresses based on street address into categories based on a 1-100 scale
Walker’s Paradise( daily errands do not require a car)
Very Walkable (most errands can be accomplished on foot)
Somewhat Walkable (some amenities within walking distance)
And two categories of car dependent (either a few amenities within walking distance or almost all errands requiring a car)
I then tried to apply this to the ConAgra Site
1) Using the corner of J St and Covell as proxy for the southern part of the development gives a Walk Score of 51 or Somewhat Walkable
2) Using F and Anderson as a proxy for the northern part of the development gives a walk score of 8 or car dependent
For comparison within Davis, I used the ConAgra office at 313 F Street which has a Walk Index of 94 or Walkers Paradise.
According to this assessment, 69% of current Davis residents have a higher walkability index that even the most favorable ConAgra location.
Even if there were excellent access to this site ( not possible) and even if it were in close proximity to convenient public transportation ( most of the residences are not), there would still be the issue of the car dependency to reach most community amenities. This will be especially true for many of those community members most in need of affordable housing, low and fixed income, seniors whose days driving may be limited, and others of limited mobility.
I simply do not believe that what Davis needs now is another car dependent, suburban development, even one with several attractive amenities built in to make it more attractive
Because adding supply is still profitable for the builders and it will alleviate demand pressure reducing prices and making Davis more affordable.
[quote]A lot of people brought up the fiscal analysis, which I agree is lacking. But of all the problems, that is the one I worry least about, because it is easy to solve as long as you have a good analysis. You simply add in fees. I have no doubt this council will get that part right – for past councils it was a different story.[/quote]
Excellent analysis, altho I don’t quite agree on one point. I think fiscal neutrality is THE KEY ISSUE, bc of the city’s current dire economic situation. My fear is that it will take only a single vote on the CC to approve this project – even if it is truly a net fiscal negative – by naive Councilmembers who may not understand the voodoo economics often used to make housing projects “pencil out” when in fact they do not.
I heard a lot of verbal tap dancing that night, about whether this project was a net fiscal negative. Mumbo jumbo about if certain assumptions were changed slightly, somehow even a slightly net positive could be achieved for the Cannery, that sort of thing. This is nonsense.
I would strongly urge all CC members to take a very hard look at the issue of fiscal neutrality, and look very carefully behind the facade of numbers given to the underlying assumptions. Don’t be blinded by promises of Universal Design and other goodies, and ignore the basic tenet that this housing project cannot cost the city any money.
[quote]Because adding supply is still profitable for the builders and it will alleviate demand pressure reducing prices and making Davis more affordable.[/quote]
When the projected prices of these homes comes out, I think you will find they will be far from affordable…
It doesn’t matter what they cost all additional supply puts downward pressure on demand.
Medwoman:
The other problem that people are failing to consider is that the project goes half a mile deep into Cannery and no one is living on the street. So people who live at the top of the project would likely be walking nearly a mile to Nugget. That’s not exactly walkable. Taking the median distance of quarter mile depth and adding to it the quarter mile or so to Nugget is still a lengthy walk for people. Bikeable, but walkable is less accurate.
Elaine:
I understand what you are saying, but I watched how the process unfolded on WHR, the developer in the end added additional fees per unit because they wanted fiscal neutrality, if they did not get there, to me that was on Navazio. But leave that point aside, the point is that you can make a project fiscally neutral so long as you define fiscal neutrality more clearly.
It would be nice to have some ‘trickle-up’ economics in the housing market for a change. Build rental units at market rates or lower, to provide housing directly for those who need it most. We know the demand is there for that.
When prices were going up the usual suspects on this blog were against adding supply claiming it wouldn’t make a difference. Now that prices are going down you see these same no growth advocates arguing that we shouldn’t build because there is no demand. Of course at the right price there is plenty of demand and for those getting good deals that is a great thing.
The University is in the process of building a huge amount of rental property that should put additional pressure on prices.
[quote]the point is that you can make a project fiscally neutral so long as you define fiscal neutrality more clearly.[/quote]
But that’s my point – they never define fiscal neutrality clearly!
Elaine: Okay but I think you had a point when Souza-Saylor-Asmundson controlled council. But regardless of whether we agree with ConAgra, I have no doubt that Rochelle-Dan-Joe-Sue are not going to let this be a negative hit on the city budget.
Well put Don. I don’t see it as particularly advantageous to the community a a whole to have the price of existing homes further deteriorate as a means of providing more affordable housing when we could just provide it directly as you suggest. I freely admit that this is outside my area of expertise. Mr. Toad, can you explain to me how the further loss of home values for whatever reason benefits our community as a whole ?
[i]” I think fiscal neutrality is THE KEY ISSUE, bc of the city’s current dire economic situation.”[/i]
I don’t disagree. However, most of what goes into ‘fiscal neutrality’ is outside the control of the developer. If a project is a net negative, it is primarily due to bad decisions made by the City Council before and after a project is approved.
On the before side is our misguided ‘low-income’ requirement. If we would let the market function on prices, the amount of money generated by property taxes would be sufficient. But, instead, we force the developer to sell a quarter of his units at sub-market rates and that ends up robbing the City of property tax.
State law requires a much smaller percentage of homes be ‘affordable’ than we require in Davis. (Note that the percentage of ‘affordable’ never has an impact on affordability in the marketplace.)
My preference for an affordable housing program which would help residents who are first-time homebuyers with their down-payment, instead of screwing around with how much a seller can charge for his house. My plan would help a lot more people who need help.
Another question on the before side is how much in developer impact fees we charge. Our policy should be to determine how much a project impacts the city up-front and make sure the developer pays 100% of the bill for the costs he imposes on the rest of us and the City as a corporation.
On the after side is how much we increase the compensation of our cops and firefighters and parks workers and so on. What we have done in the last 20 years is to inflate employee comp by 7-10% per year, all the while knowing that property tax income to the City will inflate at half that rate or less (depending on how rapid houses turn over).
So if we want a fiscally neutral housing project, we simply need to do three things:
1. Charge developer impact fees which are realistic, given the costs a project will impose on the City;
2. Reform our affordable housing ordinance; and
3. Restrict the growth of total labor compensation to the rate of inflation of revenues paid into the City.
What I often hear from the no-growth people in Davis is that “we cannot approve new housing, because doing so drains the City’s budget.” What they fail to say is that new housing projects would never be bad for the budget is we didn’t have such fiscally irresponsible policies which create the drain.
Typo: “What they fail to say is that new housing projects would never be bad for the budget [b]if[/b] we didn’t have such fiscally irresponsible policies which create the drain.”
[quote]My preference for an affordable housing program which would help residents who are first-time homebuyers with their down-payment, instead of screwing around with how much a seller can charge for his house. My plan would help a lot more people who need help.
Another question on the before side is how much in developer impact fees we charge. Our policy should be to determine how much a project impacts the city up-front and make sure the developer pays 100% of the bill for the costs he imposes on the rest of us and the City as a corporation.
On the after side is how much we increase the compensation of our cops and firefighters and parks workers and so on. What we have done in the last 20 years is to inflate employee comp by 7-10% per year, all the while knowing that property tax income to the City will inflate at half that rate or less (depending on how rapid houses turn over).
So if we want a fiscally neutral housing project, we simply need to do three things:
1. Charge developer impact fees which are realistic, given the costs a project will impose on the City;
2. Reform our affordable housing ordinance; and
3. Restrict the growth of total labor compensation to the rate of inflation of revenues paid into the City. [/quote]
Nicely said!
I think they could abandon any local requirement for affordable housing that exceeds the state requirements. Just focus on density.
[i]The University is in the process of building a huge amount of rental property that should put additional pressure on prices.[/i]
The amount of rental housing the university is building will barely cover the amount they have failed to provide over the last decade’s enrollment growth. Davis needs many more units to achieve and sustain a healthy vacancy rate of 5%. Rental prices in Davis have barely moved; in 2010 rents actually went UP in Davis while they were decreasing in every surrounding community. The university expects to grow in enrollment over the next decade, and West Village will not provide for that housing growth. Finally, the university is building above-market rental housing.
West Village will not fix the Davis rental market.
[i]”Finally, the university is building above-market rental housing.
West Village will not fix the Davis rental market.”[/i]
I don’t recall anyone saying it will ‘fix’ our supply problem. However, there is no scenario in which adding rental housing for 3,000 students, even if those rentals are ‘high end’, won’t result in lower rents [b]for all marginal renters[b] in Davis compared with not building those 3,000 units.
I don’t really know if the new units were middle end or low end in price it would have any more of an impact on rents elsewhere in Davis. The key is that adding those units increases total supply and most likely will not increase demand for housing in Davis. As such, those 3,000 students won’t be living in ‘high end’ housing in town. That effectively lowers demand in Davis.
Oops. Don, if you could kill the bold face type on my post after “renters in Davis”, that would be great. And then just remove this post. My bad. Sorry.
Only those who bought in the bubble or borrowed out their equity are hurt by declining home prices. If you bought before 2003 you are not hurt by the decline in prices in Davis. High home prices are not a good thing, they eat up too much of your income and cost too much in interest. Low home prices are better for people who have mortgages. The working homeowners of Davis would be better off with lower home prices and less debt. By restricting supply Davis has made it harder to afford to live here. Increased supply and reduced prices make it easier to live here except for those that are upside down with their equity.
I would agree with your assessment if everyone’s intent wee pre to live in their home forever. However for an individual who, for example, bought their home before 2000, paid off their mortgage, and was counting on the sale price of their home as part of their retirement planning, a decrease in sales price will certainly be disadvantageous.
Oops! Should have read if everyone’s intent were to live….
Projected enrollment increase at UC Davis 2010 to 2020 is more than 4,400 students.
[i]”If you bought before 2003 you are not hurt by the decline in prices in Davis.”[/i]
You are hurt if you ever plan to sell. As Medwoman stated, the only people truly unaffected are those who keep their homes until they die.
That said, the big drop in home prices (relative to the peak) has made Davis and most parts of California more affordable to first-time buyers (presuming they still are employed and can get a loan). In a sense, this change in market prices for ownership housing has amounted to a transfer of (relative) wealth from the haves to the have-nots. Of course, in doing so it has turned a lot of former haves–people who thought they had equity in their homes–into have nots.
Historically, U.S. home prices–like land prices–have inflated at roughly the same rate of inflation, somewhere in the 3-3.5% per year range. It looks to me like it’s going to take maybe 5 years before the excess supply of single family homes is fully absorbed in our region. That means most cities will have flat or falling prices for houses.
But once the excess supply–meaning mostly that the houses which are now in foreclosure or will soon go into foreclosure–is purchased by investors who have sufficient capital to own and manage them, we will likely return to normal market conditions.
Hopefully, if the federal government stays out of the mortgage market, the future bubbles in housing will not be so great as what has happened since 2008. But, of course, eventually we will have future bubbles of various sorts. That has been true for hundreds of years, going back to the great Tulip Mania of 1637.
I’m not real concerned about the home-ownership market. I think Dan Wolk and Rochelle Swanson are misguided if they think developing the ConAgra site is going to help young couples and families find places to live in Davis. ConAgra will sell the site to homebuilders who have already effectively stated their intention is to sell to people making $100K a year or more. The housing market will settle itself out, and building new homes will have only a small impact given the regional housing conditions. As noted over and over, there are LOTS of inexpensive houses within reasonable driving distance of Davis right now and for the next 5 – 10 years.
But there are lots of young adults who don’t have rental housing at a reasonable price here. That includes my employees and kids, none of whom are affiliated with UCD in any way. They pay a premium to live here because of insufficient rental housing. We need 500 – 1000 housing units in the very near future, and probably double that amount (or more) over the next decade. Where are they going to go?
[i]”… we will likely return to normal market conditions.”[/i]
I can think of one possible scenario in which my prediction is wrong: if the U.S. dollar goes into freefall. If that happens, then we will experience hyperinflation in hard assets, including land. In other words, people will want to get rid of all of their excess cash, which is losing value, and convert that into tangible assets, like real estate or minerals.
As much as I was certain in 2004, when I wrote it in my column that Davis was in an unsustainable real estate bubble, I am certain that the U.S. currency is going to go down in value at some point in the next 5-10 years. That devaluation may be gradual, or it may come in a flash crisis. But take my macroeconomic word on it, the dollar’s future looks bad to me. We have run current account deficits–meaning we have been borrowing from abroad to pay for our consumption–for too long. At some point not too far off, those holding U.S. currency or U.S. debt, will lose faith in the dollar and start to sell it in big numbers.
When that happens, the dollar takes a big dive, and inflation in the United States will go through the roof. A loaf of bread which costs $2.50 zooms to $10 or more. A gallon of gas quadruples in price. Meat and fish become unaffordable to most Americans in a short period of time. All of us are suddenly poorer. This scenario has taken place in every country where its currency collapses. We are not immune to it, forever.
All that said, once the dollar finds a new equilibrium, we won’t have to have an endless period of hyperinflation. If we don’t have a trade deficit or a big federal budget deficit and the Fed manages the money supply smartly, we could have normal, 3-4% inflation from here on out.
Rich Rifkin: If you believe we will experience a round of hyperinflation, then you shouldn’t be so worried about our pension liabilities. Our pensions are only inflation adjusted to the tune of 2% a year. It wouldn’t take all that much inflation for the pensions to be worth very little, and hence our obligations small in today’s dollars. That scenario would get the city off the hook, and be horrific for its citizens.
Slaying deflation has been the entire point of QE2 by the fed and in doing so the fed has tried to stabilize the housing market. Of course it has not been as successful as hoped as the Fed Chairman admitted the other day. Much of the money went into the stock market which is up around 20% in nominal terms but only around 2% against the Swiss Franc since the start of the latest round of money printing by the fed.
At any rate you are technically correct anyone who owns property is hurt by price declines, but, as you admit, if you make no transaction you are not affected by swings in the housing market. When I look at houses at Zillow I often see transactions where people have long term gains in their houses ranging up to 500% in Davis. These people are relatively unaffected by a 20% decline in housing prices and I wonder what percent are really underwater in Davis. I’m sure it is high among those who bought in the last decade or borrowed out their equity. I do feel for those who felt compelled to buy in the bubble but don’t have much empathy for those who borrowed to take trips, pay off the credit card or buy a car or another place that is now underwater. Still as someone who has waited for many years to buy, with some cost in standard of living, I’m quite irritated by those who argued against building during the housing bubble claiming that somehow Davis was exempt from the laws of supply and demand but now we shouldn’t build because of lack of demand. Clearly there is plenty of demand or prices would not still be 2-3 times higher than in surrounding communities. It seems to imply that we want to protect those who are struggling but as someone who felt no such compassion when acting prudently it feels as if this is being used as a smoke screen by those who fear having more people live here.
If you argue we shouldn’t build when prices are high and we shouldn’t build when prices are low you shouldn’t be arguing either because clearly price is not your real concern.
As for the $100,000 a year income that Don Shor claims will be needed to buy at Conagra that would finance a $277,777 mortgage or about a $350,000 house using the standard 36% income to debt ratio with a 20% down payment. Unless someone has a pretty good job or a two income family $100,000 seems like a lot and certainly you would want to have enough savings to make it through a job loss or health problem but that $350,000 price tag seems quite reasonable in Davis where distress sales are still in the $200/square foot range.
Of course if you are retired and sitting on a huge capital gain and want to downsize and cash out your equity but still like living here $350,000 might seem like a bargain.
One caveat, with interest rates so low a family with a $100,000 income can spend $28000 a year and qualify for a mortgage so they may currently be able to get more debt to service on that income. This would allow Conagra to get somewhat higher prices but I would caution against people taking on additional leverage unless they are have a locked in interest rate because this sort of “creative financing” is how people got in trouble in the first place.
[i]As for the $100,000 a year income that Don Shor claims will be needed to buy at Conagra that would finance a $277,777 mortgage or about a $350,000 house using the standard 36% income to debt ratio with a 20% down payment.[/i]
You’re right, if I adjust for current market conditions (my 100K was based on a year or so ago) the young couple or family will need an annual income of about $139,000 a year assuming the homes are at median price. But I assume that conditions in 2 – 3 years might be closer to what they were a year ago than now.
How many young couples and families do you know who make $139,000 a year, who are looking for homes in Davis?
[i]”That scenario would get the city off the hook, and be horrific for its citizens.”[/i]
True. Inflation is welcomed by those deeply in debt. It’s a nightmare for lenders. And considering that all commodities are priced in a global market, any decline in the value of the dollar makes all Americans poorer. A steep decline in the dollar will mean a massive increase in U.S. poverty.
Actually many young two income households could make that sort of money.
Mr. Toad, “many” is a very vague term. If you were to take a guess about a percentage range that your “many” equates to, what would that percentage range be? And what do you think the typical age of such couples would be? And how many children would they have?
My family is one. We have some friends that just had a baby they met in law school and are almost 30. A better measure is to look at the great people we know who left town and bought in nearby communities instead. Off the top of my head I can think of a handful. The best measure however is the differential between average price in Davis around $525,000 and targeted price according to Don Shore of qualifying with an income of $100,000 that translates into $350,000. If the developers can undercut the market by almost $200,000 and make money they will be doing the people of this community a huge service. One additional point most of the housing we see is old and run down and in need of major remodeling or repair so the cost savings of buying something new would even be greater than buying something old at the same price.