California’s Already Bad Housing Crunch Worsened By Wildfires

SACRAMENTO (CBS13) — Charred buildings and devastation stretch for hundreds of miles through California’s wine country—7,800 structures burned in the Northern California fires.

Those people will need to rebuild their homes, and the timing couldn’t be worse.

“When we say there is a housing crisis, it’s everybody’s problem,” said Jeffery Pemstein, the division president with Homes by Town.

The demand for new homes is outstripping supply. But it was a problem even before the fires scorched more than 220,000 acres.

While Sacramento escaped the flames, the housing disaster lingers.

“We have a crisis on the verge of catastrophe,” explained Pemstein.

His company builds about 100 to 200 homes a year, and they’d like to double that.

“We are chasing our tail every single day trying to bring houses out of the ground,” said Pemstein.

In a typical year, roughly 10,000 to 12,000 homes are built in the entire Sacramento region.

This year?

“We may do 6,000 to 7,000 if we’re lucky,” said Pemstein.

So what’s the holdup? It’s not money and investment, and in the Central Valley, it’s not space.

In Natomas, there are more than 3,000 finished lots and plenty of entitled space for development. The only thing missing is a builder.

“So many builders left California during the downturn, and they’re slowly trickling back,” said Franco Garcia with the California Association of Realtors.

Garcia says recovery from the 2008 recession has been sluggish.

Impact fees, energy codes and environmental permits and regulations can also slow the process and add costs.

“They have to charge a higher price point to make that margin viable,” said Garcia.

Homes are going for $50,000 to $75,000 more than just a year ago.

“Higher price does not translate into higher profit,” said Pemstein.

On top of lack of incentives to build, the labor market dried up when the economy tanked.

“It’s certainly a concern. It’s certainly on the front of everyone’s minds,” said Michael Strech, with the North State Builders Association.

He says there are 25 trades involved in building each home. Those skilled workers are hard to find.

“You don’t just flip a switch and begin to build houses,” said Strech.

Without a qualified workforce and increasing costs to build, it can take years to get homes out of the dirt. Thus perpetuating a problem with no end in sight.

More from Drew Bollea
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