Homebuilders Optimistic But Challenge Government to Do More



There are new figures that point to small improvements in the local economy, giving new optimism that we are seeing some economic recovery. Don Patton of Cascade Central Business Consultants reported that last month Central Oregon had a 15.6 percent increase in building permits over March, giving us a total of 158 for the first four months; this is 30.4 percent more than the same period a year ago.  Residential sales in Bend in April increased by 41 percent from a year go although the average price was down by six percent. Redmond was a little more startling: starting with a 53 percent increase in sales but a whopping 31 percent decrease in price.

Patton commented in his monthly report:  One thing is for sure; the builders have to receive some financial breaks if they are to keep building.

In this issue we asked custom home builders to give us their take on the current home building market.  It has been a very challenging time for local builders and those who have been able to stay in business report they have become more efficient by streamlining personnel and systems, focusing on building on customers’ lots rather than spec homes and expanding popular green building techniques and sustainable building practices.

Like most other surviving businesses in our region, company leaders with support from hard working employees are finding ways to deliver more for less and yet maintain high standards
of quality.

Builders pointed out that because of lower costs in construction materials, labor and land it’s a great time to build a new home. Customers seem particularly interested in energy incentives including ground source heat pumps, active solar panels, home automation and LEED for Homes certification.

Builders are unyielding in lamenting the lack of available funding for construction projects from local financial institutions. The comments are interesting because in a recent financial issue of Cascade Business News bankers and credit union representatives said they had money to lend (and their advertising reinforces this sentiment). However, we hear from everywhere else that there is no money available for construction loans.

Moving past the lack of funding, the biggest complaint arises from the high cost of building fees. One thought as it relates to building is an SDC abatement for a period of time to stimulate residential and commercial projects.

Greg Garrick of Norman Building & Design noted that as a homebuilder another area is to address the appraisal system currently in place.  In an effort to concentrate on past problems, regulators have put in place in Oregon and elsewhere an approach that simply does not reflect reality, according to Garrick.  “It needs to be addressed in a sensible way to allow for a healthy and strong home construction industry.  Proper valuation of real estate held as collateral is of vital importance, especially in this time of economic uncertainty. Competent and qualified real estate appraisers serve as a crucial safeguard in our banking system, but lax enforcement and ineffective federal oversight have only served to diminish this safeguard.”

Mike O’Neil of SolAire Homebuilders believes long-term stabilization of the local and state energy incentives will improve the continued expansion of renewable energy systems on homes and buildings in Central Oregon, lowering our community dependency on volatile oil-based energy sources.  He recommends that local and state entities also continue to look for ways to reduce the cost of their own overhead, reorganize their workforce and provide education and training for employees recovering from these tough times.

While there is an optimistic bent to our builders’ comments, there are still valid concerns in lending practices and local / state fees that hamper the region’s construction industry.

Last month, Cascade Business News highlighted an example of a physician who had local professionals undertake research on potential development fees for a contemplated 4,500 square feet building as part of his planned relocation from Prineville to the St. Charles Medical Center campus area in Bend.
Partly based on those initial estimates, gathered last spring, he decided to proceed with the project. But the increases in fees sanctioned by the City of Bend last summer meant that by the time permits were to be pulled early this year, associated permitting costs alone had more than doubled.

In this issue Simon Mather provides this project as a clear example of the struggle owners and builders face when building in Bend. The physician states succinctly that had he known that his building fees would double he would have considered switching to another community, such as Redmond, where costs were ostensibly considerably less.

The City of Bend adopted new planning fees last July, but the reaction from individual applicants and the building and development community has been negative, prompting overtures from industry representatives that costs could be nearing a “tipping point” in hindering business growth – especially worrisome in regard to a faltering economy’s prospects for a fragile recovery.

Now Bend is looking at potential adjustments in planning-related charges after encountering a growing groundswell of concern regarding the effect of hikes implemented last year. This is a crucial time for local jurisdictions to look at ways to drive building activity through effective reductions in associated costs or streamlined processes.

When the public voices its concerns about a city’s lack of support for local businesses, such as they did in a recent Bend Chamber of Commerce survey, it’s time to find effective ways to stimulate growth and economic development.

Deschutes County recently unveiled a $310 million budget proposal that lowers property taxes in Countywide Law Enforcement District No. 1 and establishes a new economic development fund, nearly $300,000, aimed at creating and retaining private sector jobs in the County.

The fund will be a partnership between the County and Economic Development for Central Oregon (EDCO), with the money used to provide low-interest loans and forgivable loans to business seeking to relocate to or expand in Deschutes County. All loans will be tied to specific job-creating targets, thus taking revenue the County has received as a direct result of the economic crisis and applying it to a program aimed at boosting economic recovery and growth.

However, the County’s budget also proposes a 15 percent increase in building permit and land use planning fees. This increase in fees does not seem to be in sync with the county’s efforts to decreases taxes and enhance economic development.

NorthWest Crossing General Manager David Ford, who is involved with Bend’s Building and Development Council, aptly pointed out: “We understand that we are all in this together. We want to explore the whole range of associated questions and work in a collaborative effort to see how we can help encourage positive economic development.”
Are any of our elected officials listening? PHA


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