California cities face big fines for not meeting housing goals by Katie Pyzyk July 1, 2019, Smart Cities Dive
- California Gov. Gavin Newsom signed off on a $214.8 billion budget that legislators amended to include provisions to improve housing capacity and affordability.
- The budget includes $1.75 billion for the planning and production of new housing to increase supply, with support for local governments’ housing efforts. Cities deemed not in compliance with a state law that sets housing goals will face fines ranging from $10,000 to $100,000 per month.
- A city deemed to be in violation of state housing requirements would have one year to come into compliance before it would have to pay fines. If it does not comply, monthly fines could increase to up to $600,000, and a court eventually could overtake a city’s housing plans.
Housing has been one of Newsom’s focal points since he took office earlier this year. He has made it a point to present ideas for increasing housing capacity, improving affordability and mitigating homelessness.
Newsom and the state legislature had stalled for a few weeks on reaching a budget agreement because of the housing provisions. Much of the budget was agreed upon in mid-June, but negotiations continued on homelessness mitigation program funding and some tax measures.
Newsom illustrated his commitment to the housing cause shortly after his January inauguration, when he authorized the state’s attorney general to take legal action against Huntington Beach, CA over the alleged refusal to comply with the state’s affordable housing requirements. The first-of-its kind lawsuit required the city to amend its housing plan and allow for additional housing units for citizens of all incomes.
Housing equity and targeting wealthy cities that do not do their part to keep affordability in check are priorities for Newsom. The language written into the new budget suggests Huntington Beach could be just the beginning of the state holding cities accountable for housing. Further lawsuits and financial penalties could ensue for cities viewed as not taking the housing crisis and finding solutions seriously enough.
- OFFICE OF GOVERNOR GAVIN NEWSOMGovernor Newsom Signs 2019-20 State Budget
- CALIFORNIA LEGISLATURESB-102 Housing development and financing
To help fill the affordable housing gap, a Buena Vista project is creating inventory — one giant box at a time
The nation’s fickle relationship with modular housing may be on the upswing, as one developer scales up to serve rural and mountain communities
BUENA VISTA — Just below the second-floor offices of Fading West Development on Main Street, kids play in a sun-dappled splash park, tourists duck in and out of shops and eateries while, to the west, the breathtaking Collegiate Peaks poke holes in the sky.
In a lush, green summer, the town’s marketing pitch — “Come for a visit, stay for a lifetime” — beckons with particular potency. But like many other rural and mountain towns, Buena Vista grapples with an affordable housing crunch that puts a crimp in the “stay for a lifetime” option.
“I’ve known a bunch of friends and younger people who had moved out here, done work in the summers and then had to move away because they couldn’t find housing,” says Charlie Chupp, a 50-year-old transplant from Florida and owner of Fading West. “I saw lots of businesses struggling to keep full-time employees, a lot of people who tried to put down roots here and make a living. But they couldn’t and had to move back to wherever they’d come from.”
Chupp, who moved to Buena Vista to manage a youth camp when he felt he needed a career change, now sees his path taking yet another turn that has made him a part — potentially a significant part — of the response to the region’s housing dilemma.
In a development called The Farm, Chupp’s Fading West has engineered an attainable alternative for working-class incomes that provides much-needed local inventory. And he has done it thanks largely to modular housing, those factory-built boxes shipped and assembled into homes with which America has had an on-again, off-again affair over the decades.
Charlie Chupp, owner of Fading West Development, never figured that relocating to Colorado would lead him to become a proponent of affordable workforce housing with the creation of The Farm. He also plans to break ground later this summer on a manufacturing plant for the modular housing that makes his units affordable to those making 80% of the area median income. (Kevin Simpson, The Colorado Sun)
But the impact could turn out to be much greater once he opens a planned manufacturing facility to produce his modular models, making them a readily available option for rural and mountain areas in Colorado and neighboring states.
“It’s been touted as a savior and then disappears, back and forth,” Chupp says of modular construction. “This time, you have so few people moving into construction subcontractor careers, as far as trades, that we’re losing more and more skilled labor all the time. So what we see here is that even if you could build (traditional homes) at a lower price point, you could never create enough volume to have any impact on housing.”
The first phase at The Farm features 90 units, with about half of those completed by the end of this year. More than half will be the most affordable — townhomes arranged in five-plexes, with prices from $209,750 for a 900-square-foot two-bedroom. About 30% will be detached single-family homes under $300,000, with about 10% the biggest models in the $400,000 range.The median owner-occupied home value in Chaffee County as of 2017 was $313,200.
The second phase of The Farm’s development will feature 114 homes.
Chupp points out that the venture is “totally free market,” aimed at buyers making 80 to 140% of the area median income, or AMI. He says it would be extremely difficult to build a home, even modular, for buyers making 60% AMI, which in Chaffee County would be closer to $40,000.
“When you start slicing up the segments of this problem, there are segments where there has to be some contribution — the Habitats (for Humanity) of the world have to get engaged, tax credits, whatever, there probably has to be some subsidies,” he says, adding that builders in Buena Vista, with its limited number of local contractors, tend to aim for the higher end. “We picked the market we felt we could do as a standard, free-market concept.”
Becky Gray, director of housing for Chaffee County, notes that while modular, even with its cost savings, isn’t exactly a silver bullet to the heart of the housing crisis, it already has added much-needed inventory in an affordable range that’s in short supply countywide.
Charlie Chupp, owner of Fading West Development, stands near some newly arrived sections that soon will be combined to produce modular homes at The Farm in Buena Vista. (Kevin Simpson, The Colorado Sun)
“We’re good at producing single-family homes on two acres with wells and septic,” Gray says. “That’s never going to be affordable. If you look at the whole spectrum, we don’t have good amounts of anything but single-family. Those (other types) help entry-level wage earners, seasonal employees and young people trying to get started. Without that stock, we find ourselves in a sticky situation.”
Stacey Epperson, president and founder of the Kentucky-based Next Step nonprofit that seeks to leverage modular homes to alleviate the housing shortage, sees the modular option gaining momentum around the country.
“Manufactured housing is how affordable home ownership is being done in many rural markets today,” she says. “I’ve worked with tax credits, and it’s extremely hard to make the numbers work. They never get brought to market. But manufactured housing I think is one of the best-kept secrets toward solving the supply gap.”
Towns like those in Chaffee County, which see an influx of seasonal workers in the summer, need a wide variety of housing opportunities, including everything from over-garage apartments to quadplexes to micro-units, Gray explains. In a recent housing survey of first-year rafting guides, most signaled a preference for just camping. (And many do camp, illegally using public lands for residence, she adds.)
Then the second most selected option was micro-units and dorm-style, as long as there are storage lockers for gear,” Gray says. “They’re willing to rent a bunk bed.”
The Farm has a homeowners association that restricts short-term rentals to no less than three months. Chupp reasons that the rental-by-owner market contributes to higher prices because “anything that becomes affordable in a Rocky Mountain town, you can make more on short-term rental than you can long-term or flipping it. You see everything get bought up by investors and then VRBO and Airbnb’d out.
“One of the root causes of the ever-increasing cost of homes was short-term rentals, that’s where we put the HOA restriction,” he adds. “But we didn’t eliminate any rentals — long-term are still needed.”
To that end, Gray’s county office of housing will implement a grant-funded program to help renters deal with big up-front rental costs by offering landlords a rental deposit guarantee that the tenants can repay over time, saving them sometimes as much as $4,000 in immediate out-of-pocket expense.
Affordable housing advocates also find that even for potential buyers who fall below the 80% AMI threshold, Fading West’s townhomes can be within reach.
“That price point around here is pretty much impossible with stick-built (traditional wood frame homes built on site) or market-rate housing,” said Read McCulloch, executive director of the Chafee Housing Trust, a nonprofit that helps buyers otherwise priced out of the market. “Modular stuff really does bring the price down to a point where we can afford to play. Then we have to bring something to the table to further lower the price to make it affordable.”
Some of the detached homes available at The Farm, where modular housing has allowed developer Charlie Chupp to hit a price point that allows buyers making 80 to 140% of the area median income to become homeowners in an area where affordable housing is scarce.(NINA RIGGIO, SPECIAL TO THE COLORADO SUN)
Judith Sumner, retired after a career in nonprofit management, became the first person to put down money on a home at The Farm when she drove up from Salida, where she was renting. She’s now been there for more than a year and still loves the townhouse she purchased on the west end of a five-plex — with a stunning view of Mount Princeton.
“I did wonder about modular,” she says, “so before moving forward, I poked around online to get a sense of how I’d feel about it. Is it OK, am I moving into a trailer? No. I don’t think there’s anything about it that just walking in, someone would say, ‘This is modular.’ It just looks like a house.”
Although the development still has a long way to go before signs of construction disappear, Sumner eagerly anticipates the pavilion that’s going up on what will be a pocket park outside her front door, and the landscaping for her home in which she’s “fixated on planting a piñon pine.” She has met the few neighbors who have moved in so far and looks forward to taking advantage of the development’s common spaces.
“It’s going to be a mixed population,” Sumner says. “Everyone I’ve met I’ve really liked. With the warmer weather, we’ll be out on our porches and interacting more.”
John Goetz, who teaches seventh-grade social studies in Salida, and his wife, Carolyn, also a teacher, had envisioned traveling the world when their kids were grown, making their way by teaching wherever they landed.
Then their three young grandchildren came to live with them. They started the process to legally adopt them and let go of their travel plans. But the two-bedroom apartment they shared wouldn’t come close to accommodating their suddenly expanded family.
So they started looking for a home with more room, maybe even a small yard.
“We were priced out of the market, which was pretty sad,” Goetz says. He thought about moving to Pueblo and getting a job, but he’d lived there before and didn’t relish the idea of the hot weather — certainly not compared to the comparatively mild climate of Salida. Plus, he’s been teaching in Chaffee County for 12 years, and wanted to continue.
He was approved for a loan of $170,000 — “which was too low to buy a place,” he says. “If you go out there and look at homes in Salida, they’re around $250,000-300,000, and up to half a million is not unusual to buy a home that’s not like a trailer.”
By chance, he heard about townhomes in a Salida development called Two Rivers that were modular, attractive and, best of all, fit nicely into his budget, with a little help from some subsidies. These were units Chupp sold the Chaffee Housing Trust — a three-plex and a five-plex, slightly modified versions of the products Fading West is building at The Farm in Buena Vista. They were installed on a lot donated by the developer.
All eight units were affordable to 80% AMI. Goetz and his family bought one of them. They were hoping for a December move in, but the date kept getting pushed back until they finally took possession in April — and loved it.
“One thing about modular is that even though they’re putting it up off site, there’s still a lot of hookups and finish work that needs to be done,” Goetz says. “But it’s really nice here, they’re doing a bang-up job on landscaping. I get the feeling that once everything is set in place, we won’t be able to tell that these homes were trucked in here and set up. It looks like a stick-built home.”
They’ve got a small yard where they plan to install a patio, and also have a front porch where they’ve been sitting every evening. “For anybody who says, ‘Gee, I don’t know if I want to buy one of these,’ I’ve been pleased with what we got,” he says.
The Chaffee Housing Trust also is partnering with Fading West on single units at The Farm, where they’ll meet the 80% AMI threshold as well.
“We want to continue to partner with these other groups that are helping buyers below our price point, and CHT is a prime example,” Chupp says. “They’re finding money for people who are below our lowest point and getting them to ownership. So I think we have a good delivery tool, and other partners out there can bring us customers from different strata.”
Gray, of the county housing office, differentiates between two kinds of affordable housing: capital-A affordable, which meets government rules; and small-a affordable, meaning attainable in a more general sense.
“Charlie has made affordable with small ‘a,’ where the initial purchase price is at a price point that some professionals can attain,” she says. “We absolutely need that. His price point is slightly higher than affordable with capital A. It’s filling a need in that spectrum of housing that no one else is filling.”
The townhomes represent a key part of that. Fading West had to take the whole Buena Vista project through multiple agencies to request increased density. Chupp says he encountered no opposition.
“Fortunately, the environment was right,” Gray says. “Density is at the center of creating more affordability, not only for construction of a home initially, but for the long-term management of the infrastructure that towns have to adopt. The fewer miles of pipe underground the better.”
Carpenter Jason McClure works on the final stages of setup for a modular home at The Farm. About 65% of construction takes place at a factory in Nebraska, but workers still need to assemble the sections of the home that are trucked to Buena Vista. (Kevin Simpson, The Colorado Sun)
Looking for a drastic lifestyle shift, Chupp left behind a 20-year career, including 12 years as a CEO of Load King Industries, a nationwide manufacturing firm based in Florida. He asked himself what would be the craziest thing he could do; then settled on moving with his wife and three kids to manage a youth camp in Colorado that they’d visited and enjoyed.
He had no idea that within a few years he’d step into the affordable housing crisis as a developer with at least part of a potential solution.
When a friend told him about a 21-acre parcel for sale within the town limits, he and a small group of associates put pencil to paper to see if they could find a way to make home ownership attainable to many of the folks who found themselves priced out of the local housing market — as well as profitable for the developer.
Aiming for buyers who constitute the area’s “essential workforce,” Chupp and his associates started by considering a family making 80% of the area median income, or around $54,000. Then he worked backward toward an affordable mortgage, trying to keep it no more than 30% of monthly income.
Then came the hard part: How to build a quality, architecturally interesting, fee simple (in which the buyer owns both land and dwelling) home. No way would the math permit a traditional structure built almost entirely on site.
“Being from manufacturing, I said let’s find a modular builder who can build it someplace cheaper and ship it in,” Chupp says, and he soon learned that Colorado’s modular manufacturing largely disappeared with the housing bust. “I called 10, ended up with two in Nebraska.”
Although Chupp had no experience in development, his dad did. So he leaned on him and his associates for help making The Farm a viable endeavor — including for the engineering and design for six models that range from two townhouses to four stand-alone models.
But how to get to the price point?
For this, Chupp relied on a management system he adopted company-wide with Load King, a system developed by Toyota and shared — for free — with interested companies. Only recently, he said, have those concepts he describes as “a formalized system of thinking that helps identify value in any system, and waste in the stream” been adopted in a home construction industry that is “a target-rich environment in eliminating waste.”
As he began his calculations to reduce costs, Chupp realized all the things Fading West would have to do without: salespeople, estimators, customized products, real estate agents making 5 to 6% commissions. The Fading West web site does a lot of the work, allowing potential buyers to choose a floor plan, add options and place their order. (Chupp found a local Century 21 office willing to list his homes for 1.25%.)
“It’s totally doable in a market-driven development,” he says. “This is not trying to do something that can’t be repeated. This is a business model that works. When you look at a process like this, there’s so much waste that, if you can eliminate it, you’re not cutting the margins. You’re cutting out massive inefficiencies in the process.”
How much of an impact could modular units have on the housing crisis? Chupp knows that in a national shortage that some estimates put in the hundreds of thousands of homes annually, his efforts won’t turn the tide.
“We’ll do our part, but it’s still a drop in the bucket,” he says. “Our goal currently has been rural areas and mountain towns, focusing on creating a product that solves this essential workforce housing deficit that just doesn’t seem to have any traction otherwise.”
Charlie Chupp, owner of Fading West Development, stands inside a recently arrived modular section — the kitchen — of a home that will be assembled at The Farm. (Kevin Simpson, The Colorado Sun)
Often regarded as a low-income alternative devoid of both quality and architectural imagination, modular housing now has reappeared cast as an improved, attainable option in a market with low inventory after the recession-induced exodus from the construction trades. This time as a better-built avenue to home ownership — particularly in mountain and rural areas where traditional construction can be an uphill battle even for the well-heeled.
“The history of the modular industry has been really low-end price points,” Chupp says. “Architecturally interesting concepts were not a primary goal. You’re starting to see bigger companies address some of that stigma. But when we looked at it, we looked at how do you bring good architectural components into the modular world?”
Through his Fading West Development (a name inspired by an album by his favorite rock group, Switchfoot), Chupp not only has augmented inventory in a much-needed demographic. He’s also planning to break ground this summer on an 87,000-square-foot manufacturing space, with another 9,000 square feet of offices, across the highway from his subdivision that, in a little more than a year, he estimates will begin producing 500-600 homes per year.
Some will fill Fading West’s own projects, but Chupp anticipates that a lot of the production will also fill orders for other developers. Shipping within a 600-mile radius of Buena Vista would put him in markets in Utah, Arizona, New Mexico and Wyoming, as well as Colorado.
“We’ll partner with developers and general contractors around the state and give them a product line they can use as whole or part of their development, whatever makes sense,” he says.
A moving van arrives to move a new resident into The Farm. (Nina Riggio, Special to The Colorado Sun)
Next Step’s Epperson already has been a partner on small projects in Alamosa and Monte Vista. She says they had to ship the homes from Albuquerque.
“The potential, generally, if he’s putting a factory in Colorado, would cut down on transportation costs,” she says. “And that’s helpful to increase utilization in the state.”
Not incidentally, the plant will employ 35-40 production workers at $20-22 an hour, plus benefits and bonuses and will require an office staff of 10-12 employees.
When he started Fading West Development, Chupp figured he might do The Farm and call it good. He didn’t anticipate that the company would become an ongoing concern. But once he and his associates started working on it, they began to see the “bigger world of the affordable housing crisis across the state.”
They started meeting with other towns, other developers and realized that the demand could be considerable. What if the manufacturer was based smack in the middle of Colorado? Nobody else is building modular in the state.
In a business where transportation runs about 10% of the total home cost, could he capitalize on a burgeoning area market for modular? He started talking about building his own plant. No angel investors. Just him and a big loan.
“I know a lot more about manufacturing than development,” Chupp says with a grin. “I did manufacturing for 20 years. I felt like the market was there. The need certainly is there.”