U.S. Drought Monitor, the National Drought Mitigation Center

California, and Californians, are between a rock and a hard (dry) place.

A four-year long drought parches the land. Mother Nature pits farmer against farmer, money against those without it, and power against the dispossessed. That's, of course, wildly over-simplistic. The worsening crisis, without doubt, has surfaced untold cases of human nobility, of resilience, of unhesitant generosity, one person to another, and has stirred that most democratic of processes, chaotic political debate, a valiant lurch toward a "right solution" when many divergent interests seek it.

Californians (and Nevadans, Arizonans, New Mexicans, and Coloradans, to the extent that drought has affected them) are struggling with the drought, not just because it nests within a thorny, complex hive of jurisdictions, judgments, and passions, but because the pain and anguish of the crisis coincides with and collides with the pain an anguish of another, separate crisis: housing affordability in California.

In San Diego next week, as part of the Pacific Coast Builders Conference, California Building Industry Association ceo and president Dave Cogdill will host an afternoon "Water Forum," which is likely to be one of the more animated PCBC sessions. It takes place on Wednesday, June 24, in Ballroom 20D, at the San Diego Convention Center. Our friends, Jacob Atalla, Vice President, Sustainability Initiatives at KB Home, and Don Hofer, Vice President of Community and Land Development at Shea Homes, will address "Delivering Solutions in Real Time: Innovations in Water-Efficient Landscaping and Water-Use," as part of the two-and-a-half hour conversation.

Cogdill and I spoke this week about the issue, and he followed up our conversation with a series of notes and observations that I'm appending to this post.

"The intuitive response to the water emergency would be to 'stop building new homes,'" says Cogdill. In fact, moratoriums are under consideration in several of California's geographical mosaic of 411 water districts and local governments. The science and the facts of how people respond to water reliability are not as simple as that, Codgill says.

The math of California's existing home stock--especially houses built before 1980--and new home construction works out in favor of new home development as a water conservation strategy, Codgill notes. What's more, drought is just one of California's crises. Affordability--especially housing affordability--is another.

New Geography contributor Wendell Cox recently offered this analysis of California's affordability dilemma, "The California Dream Has Moved Away:"

Poverty rates grow in California, where housing affordability is at an all-time low.
Source: Wendell Cox, New Geography

Layered, the California drought and the California housing affordability crises make for a complicated conversation and debate. A persuasive argument for a smart approach to one crisis can paint oneself into an illogical and regressive approach to the other, equally dire issue. That's not even to mention the $40 billion and 200,000 jobs that residential construction contributes to the California economy.

And of course, champions of anti-development are among the first and most vocal advocates of home building moratoriums, ostensibly because of their water reliability concerns.

"This issue is custom made for folks that don't want any growth, so it's important and imperative that we as home builders and developers push back and state the facts," says Cogdill. "We're part of the solution, and we have a great story to tell about the quality of actor we are in this drama."

Here's the notes Cogdill shared with me on the issue, and a preview of the conversation and debate at PCBC next week:

The drought in California has predictably prompted discussions on water reliability and consumption throughout the state - from increased conservation, to usage by various industries and even how we build and design our communities.

Fortunately, the California building industry has taken great strides over the past several decades to lead the way on more sustainably designed homes to both reduce indoor water consumption and increase energy efficiency. While the homebuilding industry continues to grapple with the impacts of the Great Recession, it remains committed to designing and building homes and communities that set a national standard for resource efficiency.

This memo serves to summarize the following:

  • What the homebuilding industry has done to design and build more water and energy efficient homes and communities
  • How policymakers can avoid exacerbating the home affordability crisis as they manage drought mitigation
  • How the homebuilding industry is rebuilding its economic footprint from the historic recession

Leading from the front: mandatory water efficiency in building standards and retrofitting existing housing stock
The California Building Industry Association's (CBIA) membership has a long history leading the nation in building and developing communities that maximize energy and water efficiency, and specifically supported intelligent regulatory and legislative actions that promote more environmentally sound communities. This includes proudly supporting the nation's first mandatory green building standards (CALGreen) and updated plumbing fixture standards through the Energy Commission, which required a 20% reduction in indoor water use. The CALGreen building standards were implemented in 2011.

Currently, new three bedroom single-family homes with four occupants use an estimated 46,500 gallons of water per year in internal use - a 50% reduction from homes built in 1980. Because of the water conservation mandates for new homes over the past four years, there is significant opportunity in the building sector to save water by creating incentives to motivate current homeowners of older homes to retrofit their plumbing fixtures and appliances. Current research shows that existing homes represent the greater water savings potential than newly constructed homes in the state, as new homes in the state account for 0.1% of all housing stock.

"But the need for more conservation doesn't mean we can't build housing, said Sierra Club California Director Kathryn Phillips."
-The Orange County Register: In the Continuing Drought, Can Orange County Keep Building?; 5/3/2015

As of January 2014, California has a total housing stock of 13,624,000 dwelling units and of that 9,153,400 (67%) were constructed prior to the adoption of water-conserving plumbing features. This means that 2 out of every 3 homes in California were built without complying with any water efficiency standards, and if existing homes were required to comply with most recent building and plumbing building standards, over 300 billion gallons of water could be saved or 920,665 acre feet of water. Moreover, indoor retrofits are inexpensive and would be widely accessible to a wide range of household incomes with government incentives: the average cost to upgrade existing housing with new water-efficient showers, fixtures and toilets would cost on average $1,500 or less per home. [2]

Preventing drought mitigation from compounding the state's shortage of housing and damaging the economy

"Already, California has the highest poverty rate in the country when cost of living is factored in, and skyrocketing housing costs will push even more residents into the margins.

Local and state government, private builders, community leaders and residents must work together to break down the barriers that get in the way of smart, sustainable housing growth."

-Speaker of the Assembly Toni Atkins
LA Daily News; Op-Ed: The Costs of Not Building Housing; 5/22/2015

It is an ill-kept secret that California is grappling with a serious housing affordability problem - with effects most acutely felt in large coastal urban centers. With drought mitigation measures largely being delegated to local water authority boards, it is critical that drought mitigation measures do not create a cascade of unintended consequences by unnecessarily targeting homebuilding.

A March 2015 research analysis by the non-partisan California Legislative Analyst's Office outlines the serious impacts to California's hardworking families and the state economy due to the lack of new housing construction. According to the study, the median price of California home costs $440,000, two-and-a-half times the average national home price of $180,000; and the state's average rent is $1,240 per month, 50% higher than the rest of the country.

With demand far outstripping supply and a current housing shortage, the study states that steep competition - particularly in coastal areas - drives up the cost of housing statewide. As a result, people are spending more of their income on high housing costs, increasing the supplemental poverty measure. The bottom line is California would need to build 100,000 units per year more than we are building today to seriously mitigate its problems with housing affordability.[3]

Should the current housing shortage be exacerbated by ill-conceived drought mitigation measures, the resulting economic harm could be costly for the state. 2014 research shows that the new home construction industry generates a total economic output of $38.6 billion to the state's economy and supports over 209,000 jobs statewide. While the industry is strengthening its recovery from the devastating recession, its total statewide economic output is still lagging far behind its peak in 2005 of $68 billion and more than 486,000 jobs.

Building Less Housing Than People Demand Drives High Housing Costs.
...A shortage of housing along California's coast means households wishing to live there compete for limited housing. This competition bids up home prices and rents...

High Housing Costs Problematic for Households and the State's Economy.
Amid high housing costs, many households make serious trade-offs to afford living here. Households with low incomes, in particular, spend much more of their income on housing. High home prices here also push homeownership out of reach for many. Faced with expensive housing options, workers in California's coastal communities commute 10 percent further each day than commuters elsewhere, largely because limited housing options exist near major job centers. Californians are also four times more likely to live in crowded housing. And, finally, the state's high housing costs make California a less attractive place to call home, making it more difficult for companies to hire and retain qualified employees, likely preventing the state's economy from meeting its full potential.

Excerpts from the Executive Summary of the Legislative Analyst's Office report: California's High Housing Costs: Causes and Consequences:

The building industry has worked hand in hand with state regulators and key elected officials to support effective, smart policies that maximize both energy and water efficiencies. As policymakers work to resolve the most dire ramifications of the drought in California, they must also ensure they do not jeopardize California's still nascent economic recovery. Drought mitigation polices that would curb new construction would not only jeopardize jobs, it would compound an already difficult affordable housing environment.