Younger market for Ventura?

Nothing doing for the next two years when it comes to building new homes. But then demand from a new generation of Californians will mean an updated version of the American Dream.

That's the message I heard this week at a conference in San Francisco on "Multi-Family Housing Trends," held each year in conjunction with the massive Pacific Coast Builders Conference. I attended to participate in a unique session that encourages developers to partner with the public sector and community to produce more compatible and sustainable development. Called "Planning for Approvals: Real Solutions in Real Time," the audience watches as the developer's "cookie cutter" site plan is rejected, three alternatives are designed and eventually through interaction with the city government and the community, a far better final plan emerges. Although the actual site is a real one, I play the city manager of the fictional town.

The conference kicked off with a compelling talk by one of the nation's leading housing analysts, Robert Gardner of the widely respected Robert Charles Lessor & Co. Here are the grim factors that will continue to depress the residential development business:
• Low consumer confidence levels
• Too many units in the resale market and in foreclosure
• Uncertainties about prices and values, keeping legitimate buyers on the sidelines
• Unrealistic expectations regarding consumers’ housing purchase power
• Questions about the health of the banking system
• Concerns for the degree of the sub-prime /foreclosure problem

Gardner expects home prices to continue their decline by another 10-15%, with a real possibility of another 15-20% drop if the economy continues to sputter. Under that scenario, prices don't pick up again until 2012.

Already across the western U.S., prices have fallen back to 2004 levels and sales have dropped 54% off the 2005 pace. There are, of course, significant regional differences, as well as wide variations when comparing new vs. resale and single family homes vs. condos. But out of the welter of data, a clear trend emerges for Southern California: although we have too many new and foreclosed homes on the market, buyers are reluctant to buy into a falling market. That has made apartment building a far safer bet.

We're seeing that in Ventura. After a major homebuilder dropped its plans to build on both sides of the railroad tracks on the bluff overlooking Harbor and Seaward, a local developer has submitted a plan for the southern side of the site that calls for building more than 300 rental units. The plan was given a cautious go-ahead from the majority of the Council, with the clear signal that there should be a mix of ownership units as well. Out on the east side, another developer has submitted another plan for more than 300 units near the Johnson Drive freeway entrance next to the Century 16 shopping center.

Whether these projects will win approval or ever be built is an open question. But there was a real sense of gloom about moving forward with "for sale" units in most markets. Not only is the market continuing to deteriorate, banks and other financeers are under glaring scrutiny about the loans and investments they make.

In these predictions, Gardner is very much in the mainstream. But what made his presentation compelling was his analysis of future trends. In his view, we are not just looking at a cyclical downturn: we are looking at a generational sea change away from suburban tract homes and toward higher-density urban living.

What will drive this new model? Higher gas prices, obviously. But much more importantly is a younger generation looking for a hipper, greener and more affordable lifestyle -- as well as part of the aging baby boom generation looking for a lower maintenance, higher amenity alternative.

Here are some of the demographic factors drivng this emerging trend:

• Large households are plunging (25% decrease 200-2006 in households of more than 5 people) while small ones are growing (almost 20% increase in households of 1 or 2.)


• Over the next ten years, the age group that has been buying larger suburban homes (40-54 year olds) will drop by almost 4 million, while the younger group (25-39) will surge by more than 5 million. And aging baby boomers looking to potentially downsize will swell the ranks of 55 and up by nearly 14 million.

The huge baby boom generation is leaving the stage of wanting to move up (which usually meant moving outward from the urban core.) The next generation (the so-called Gen X cohort born between 1965-1978) is much smaller than the Gen Y group (born between 1979-96.) Raised on "Friends" and "Seinfeld," surveys that fully 71% of that group expect to live in an urban rather than suburban setting -- and one-third say they would pay more to not have to drive to work, shopping and entertainment. Rising fuel prices will only make that trade-off more attractive.

These trends are already reshaping metro areas like Portland and the Silicon Valley. In Portland, for example, the proportion of owners living in attached homes has shot up 54% in the last six years.

Here are Gardner's predictions about an evolution in the American Dream:

• Intown areas and inner suburbs will remain on an upward trajectory
• Diversity, walkablity and proximity to jobs will be keys to site selection and premiumsRenters will represent a steady stream of demand as Gen Y will shift toward homeownership in 2018
• Product types -- smaller and affordable and should have focus on design over size
• Suburbs will need to evolve to remain attractive to Gen Y with more walkable areas, including new and existing town centers – urbanizing suburban commercial nodes
• Master-planned communities will need a greater variety of product and higher connectivity

So, if Gardner's case is on target, what does it mean for Ventura?

The community Vision adopted in our 2005 General Plan actually anticipated this shift. More in-town attached housing in our historic Downtown and along the transit corridors of the Westside and Midtown. A greater variety of home types in more suburban settings. Improved transit as well as making walking and biking safer, more convenient and more attractive. Encouraging a greater mix of uses so residents have a choice about whether they get in their cars to shop, work or seek outdoor or indoor recreation. Promoting high wage, high value jobs to keep residents closer to home for making their living.

These principles appeal both to the younger cohort looking to buy their first dwelling as well as empty nesters ready to give up the big home and big yard. That puts Ventura in a strong position for long-term success as we welcome the next generation of families to live the American Dream along the California coast.

Can we afford sprawl?

Suddenly the price of gas is validating the long-standing critique of suburban sprawl. The Wall Street Journal writes today that: "Today, the subprime-mortgage crisis and $4-a-gallon gasoline are delivering further gut punches by blighting remote subdivisions nationwide and rendering long commutes untenable for middle-class Americans." This morning's LA Times highlights the plunge in values in far-out Victorville and Lancaster. CNN over the weekend carried a story: "Is America's suburban dream collapsing into a nightmare?"

Of course experts differ on whether today's high gas prices are an irrational spike or a long-term reality. And certainly in the short run, there is no reason to believe that the doubling of crude oil price in less than a year is a permanent situation. But any serious observer would agree that even if a declining economy eventually brings down the cost of oil and gasoline, fuel is never going to be as cheap as it's been for the last half century. Even if drilling were resumed offshore in California and the vast resources on protected reserves were thrown open to exploitation, the time and investment needed to bring them online will ensure costly energy for a long, long time.

So that leaves Ventura in an enviable position. Yes, we've suffered from high home prices and a dearth of private sector jobs. But now we have an opportunity to be a model for sensible, compact development that enhances livability and energy efficiency. There is an opportunity to bring back some of the jobs and investment that for too long flowed to the far fringes of our region (requiring costly transportation upgrades to facilitate those long commutes.)

But with every opportunity comes challenges. First, we need to find ways to promote local jobs so fewer of our own residents jump on the 101 Freeway in the morning. Second, we have to be more open-minded about new development in older areas. Third, we have to actively improve alternatives to driving: transit, walking and biking.

Hard as those challenges may seem, the alternative is not workable. We can't go back to cheap gas. And we can't afford to spend what we are now spending on gas.

For more on how we can adapt to the new energy costs, check out the report on "Transforming Urban Environments for a Post Peak Oil Future" on our Green Ventura page:

www.cityofventura.net/GreenVentura/

Grand Jury weighs in on 911 Fee

Grand jury.

It can send chills down your spine.

Tracing its history back to medieval England, a criminal grand jury meets in secret, summons witnesses under oath, listens only to the prosecutor and hands down indictments of the accused.

Less well known is the institution of county grand jury. Made up of mostly retired citizen volunteers, the purpose of our county grand jury is to investigate inefficiency and corruption to "insure that government is serving the best interests of Ventura County's citizens."

As City Manager, I meet once a year with the incoming jurors to brief them on our city's organizational structure and current issues. I've also been summoned on occasion to testify on various matters the jury is reviewing.

This week, the grand jury is releasing a report on Ventura's 911 Emergency Communications Fee. It is a careful and thoughtful report. While I can quibble with some of its findings and recommendations, the basic thrust of the concerns are valid. The grand jury is right that the fee is based on estimates of future revenue and is lower than could theoretically be charged. Their recommendation that we notify phone users in writing of the annual upcoming choice between monthly fee or per use fee is reasonable. It would address the complaints we received of a handful of phone users that they missed all the media coverage and city communication on the deadline this year.

The Grand Jury also supported the Council's decision to hold off on hiring six additional police officers and three more firefighters until the funding from the 911 Fee is quantified and stabilized.

Congratulations to the Grand Jury for wading through the emotions and myths regarding the new fee and providing careful analysis and thoughtful recommendations.

Grocery stores

One of the thoughtful comments made on my last blog entry on retail trends asked "why was attracting core destination grocery stores not addressed more forcefully by the city during 'boom' times." Of particular concern was the corner that Vons seems to have on the market in Westside/Downtown/Midtown area of Ventura.

"I am frustrated with Macerich and their lack of development on the 'backside' of Pacific View Mall," explains the anonymous commenter. "The point that Von's made 'payments' to keep another grocery retailer out of this area should not be so easily overlooked by city government," referring to the lease payments Vons continued to make on a vacant building on the northside of the mall.

So why hasn't the City successfully recruited more supermarkets and/or grocery stores?

Traditional supermarkets are modest contributors to sales tax revenue, since most groceries are exempt from sales taxes. Moreover, since they serve an adjacent market area, there is little net revenue in adding another to compete with the ones already there. So despite a reasonable desire among residents for wider supermarket choice, it is not been a major focus since supermarkets do not meet our top two priorities in economic development: high wage jobs and revenue that helps fund basic city services.

It's also helpful to note that new grocery stores generally follow growth, since people are actually spending less of their food dollars at supermarkets. More people are eating out (particularly young people) and more are buying their groceries at Costco, Walmart, Target and speciality retailers like Trader Joe's and Whole Foods. The majors have added very few stores outside high growth suburban areas since the last supermarket strike when so many shoppers found lasting alternatives for at least some of their shopping.

The commenter makes note of this, expressing disappointment that Trader Joe's didn't come to Downtown and Whole Foods went to Oxnard. Trader Joe's is still looking for a site and looks ready to sign for a location in Midtown. While we courted Whole Foods, we could not offer the same kind of incentive package or totally flexible site that Riverpark provided. Both the developer and the City were motivated to make them "an offer they couldn't refuse" to help get their shopping center off the ground.

Which raises the challenge of siting a grocery store. Grocery stores don't tuck into tight infill sites -- at least not yet. That's largely an economic reality -- supermarkets get lower rents because the surrounding retailers pay higher rents to share the same parking lot with a major generator of customer traffic. So add in the parking and a neighborhood and you need 10 to 15 acres -- hard locations to find or assemble in developed areas.

So even during the "boom times" it would have been a challenge to lure a new supermarket in an area without major population growth. But despite the tough economic times, there are still some positive opportunities. Besides the second Trader Joe's in Midtown, Tesco has applied to build one of its "fresh convenience" hybrid stores on Thompson near Seaward. Also, there are some struggling local markets that deserve a fresh look. The venerable Jue's Market on Main in Midtown is under new ownership and changed it's name to Green Market. The meat counter is worth a special trip, even if the variety and price of items like breakfast cereals doesn't compete well with supermarket majors. Of course, if more neighbors shopped there more, they might not be able to add lots of new products in their current space, but they could bring down their prices -- and shoppers could save money by using less gas driving to Vons or beyond. A great little produce market on Seaward in the Pierpont has quickly established neighborhood loyalty -- and, of course, we have the Downtown and Midtown farmer's markets and little stores like the new Indian grocer on Main.

So, yes, we are not likely to get a brand new 50,000 square foot Ralphs in Midtown anytime soon. But with a little open-mindedness, there are other alternatives to Vons -- and Vons deserves credit for investing recently in upgrading their local stores, even if they aren't feeling the heat of direct competition.