Building inventory

Darlene Giampaoli and her husband, Chris, of Epick Homes, were chatting one day last week after work when he mentioned the company likely would have to hold off on putting more houses on the market “because our sub[contractors] are yelling at us saying, ‘We can’t keep up,’” she shared.

It’s one example of what she knows to be true for a lot of builders right now, based on her experience as the president of the Chico Builders Association and the decade she spent working at Epick.

“Obviously, it’s a booming industry right now,” she said. “I’m seeing that it’s a great time, but it comes with its own set of problems because you almost can’t keep up with the demand.”

This is easily confirmed by looking at the sheer number of projects and permits the city is seeing for new homes and apartments. City Community Development Director Leo DePaola told the CN&R that activity is “very robust”—as of September, 554 maps for housing units (a single home or apartment) were waiting for approval and 1,212 were ready to go, and that doesn’t include housing that will be built at the Meriam Park or Oak Valley developments.

Epick Homes is currently erecting houses as part of the Mountain View and Sycamore Glen subdivisions, which, by their completion, will bring about 400 homes to north Chico in an area bordered by Floral Avenue, Eaton Road and existing homes to the east.

It’s quite a contrast to where things were before the recession. The market took a drastic nosedive, hitting as low as 60 permits for single-family homes approved in 2010, according to city data. Since then, the number of permits issued per year has shot up to as many as 282 in 2016, dipping slightly to 275 last year.

There were years when Epick Homes sold only one to three houses, Giampaoli said. Now, that number is closer to 100 per year. “We saw a lot of [construction companies] go under. Those that survived are thriving right now, but they’re also stressed.”

That stress comes from trying to increase supply to meet the current demand, without enough accessible, shovel-ready land and available sub-contracted employees. That is a common refrain in the development community right now.

All of the available land suitable for residential construction in Chico comes with some sort of development barrier, Giampaoli said. Those impediments may include environmental hurdles, or a lack of significant infrastructure, like sewer, sidewalks and major interchanges.

From the city’s perspective, however, Chico’s population is growing much slower than anticipated seven years ago, when the general plan was adopted. Community Development Deputy Director Brendan Vieg said the city has adequate land to meet its needs based upon the trending growth rate, about 1.2 percent per year.

Based on feedback from the development community, city staff is pursuing a land absorption study to understand where there are constraints that could prevent developers from building and increasing the city’s inventory, like the ones Giampaoli mentioned, and how the city can provide encouragement or relief, Vieg said.

Despite these challenges, DePaola anticipates development activity will surpass last year’s numbers by this spring. “It’s really well-rounded,” he said of the variety of building planned for Chico. Four new subdivisions, two hotels and two veterans projects were recently approved, DePaola noted.

Vieg said the city can focus on creative solutions to addressing the current demand, as well, which is also outlined in the general plan’s five-year update. One example is AMCAL Multihousing Inc.’s The Post on Nord, at 1200 Nord Ave. That project will house 652 people in two four-story buildings, and was created by tearing down an old apartment complex.

“It’s a mosaic of opportunities—it’s not just this green field of development on the edge of the community,” Vieg said. “It’s a three-pronged approach: new growth areas, redevelopment and infill.”

Even if the market slows and builders are able to start meeting the demand, home prices could still rise, Giampaoli said. She pointed to recently updated state green building code requirements, increasing costs, and pending changes to the city’s development impact fee program. Giampaoli said the price tag will be significant, as much as $22,000 per home, based on latest estimates. Costs are also increasing for supplies like lumber, and labor prices will continue to rise to meet new minimum wage requirements.

Right now, that’s just the way the market is, Giampaoli said. And that has obvious implications when it comes to affordability. According to the North Valley Property Owners Association’s latest figure, the city has a 1.5 average vacancy rate for rental homes and apartments.

“When you have such demand and such little supply, those prices are just skyrocketing,” Giampaoli added. “When people can’t afford to buy, they’re renting. There’s nothing available to buy, there’s nothing available to rent. We need more supply. That’s just what it comes down to.”