Local construction numbers are down markedly since '06

Commercial building permits consistent, remodels increasing

Posted: Sunday, December 27, 2009

Did you decide to have a new home built this year?

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

If so, you were one of less than 40. Construction of new homes in Juneau has slowed in recent years, and though professionals in the industry say they expect to build more new houses and to see a better economy in 2010, they also say that current land and building prices likely make most new single-family homes unaffordable.

That's where new approaches to housing come in.

Why less construction?

Local developers agree the national economy has been the primary contributor to the decrease in residential building, though other factors contribute.

"It just costs so much to build; it's hard to build anything affordable anymore. We continue to see our costs rise," said Lowpete Construction owner Richard Petersen.

Petersen said fuel costs have increased the cost of materials. He also said land prices have increased, largely because of increased federal regulation and more environmental concerns.

"I don't see those costs ever coming down," he said. "It's getting prohibitively expensive to build homes. You can't just ... buy a piece of property, build on it, and expect to make any money.

"Each and every year we just have more (federal) regulations and paperwork we have to deal with, and a lot more coming down ... I wouldn't say the city has done a lot to help, but they haven't hindered it either."

Dan Miller, project manager for Bicknell Inc., said four years ago, Bicknell built 15 homes. This year it built one.

Kelly Corrigan, owner of All Season Construction, attributes the slow year to the national economy, apprehension in the media, and former Gov. Sarah Palin's vetoes of some Southeast Alaska projects.

"It's a combination of things when things go good, and when things go bad, it's usually the same thing," Corrigan said.

Bruce Abel, president and CEO of Don Abel Building Supply, said the Juneau Assembly needs to do more to reduce barriers to development.

"If the mayor and the Assembly really intend to address this issue in a meaningful way, then they will have to start with a solid pro-growth mandate and then listen to the stakeholders from the building industry and adopt their recommendations. Fixing the problem really isn't that difficult if the political will exists," he said.

Looking up in 2010

Many say the Kensington gold mine, slated to open in 2010, will have a positive effect on the building industry in Juneau.

"It seems like things are starting to loosen up. Lots are moving. With these interest rates, it looks like it should be a good year," Corrigan said, adding that the extended federal tax credit to homebuyers also is beneficial.

The average rate for a 30-year fixed-rate mortgage in Alaska was at 4.86 percent in the second quarter of 2009; a tax credit of $6,500 is available until April 30 for qualified home buyers.

Miller said he expects that new housing will see an uptick in the coming year, but doesn't anticipate that those houses will cost any less.

"The building community would tell you can't build less than $300,000 and make a profit. There's a big gap in terms of what the market will allow to be built versus the type of housing that we need. We need more volume and multi-family rental units, but it's hard to construct those," said Scott Ciambor, affordable housing coordinator at the Juneau Economic Development Council said. "The old days of buying a piece of land, developing it and selling it are over. It's difficult to do that these days, because materials are expensive."

New ways to build

"Affordable housing - it's a puzzle. And it's not a ten piece puzzle ... it's a 5,000 piece puzzle. Each piece is something that it's going to take to create affordable housing," Miller said.

Building a five-star plus (energy efficient) house, which earns a rebate from the Alaska Housing Finance Corporation and means owners will pay less in utilities, is one of those possible pieces, he said. Better building technologies mean homes are more durable and maintenance costs decrease. Increasing zoning requirements for higher allowable density within the urban service boundary also will decrease costs, he said.

Bicknell built small houses on small lots a few years ago, and they sold "like hotcakes," he said. "They were very successful."

They were still about $300,000 a piece, however.

Miller also said the city could donate land, offer it at a reduced rate, offer waivers or reduce certain fees, such as the $1,500 sewer connect fee, the $750 water connect fee, or the $3,000 building permit and review fee.

Deputy city manager Kim Kiefer said the Affordable Housing Commission has discussed waiving some of those fees, but that would most likely mean an increase for someone else.

"It has been talked about, but ... it's how do you make sure you have enough money to maintain the system that we have? As you add new buildings on (and) expand, you need to be able to maintain (the system)," she said. "If you decrease the fees for certain areas, it needs to be made up for."

Petersen said municipal infrastructure extensions and higher density zoning, both of which the city has been doing, will help alleviate the problem. Some pieces of land within the city's urban service boundary have been rezoned for higher density.

The Assembly also recently approved other zoning classifications, such as the single room occupancy zoning specification, in hopes of increasing affordable housing. Housing First Executive Director Jennifer LaRoe said the nonprofit is in talks with the Glory Hole and Polaris House for a potential single room occupancy building.

• Contact reporter Mary Catharine Martin at 523-2276 or maryc.martin@juneauempire.com.

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