HESPERIA — As the High Desert housing market attempts to surge back to life after the Great Recession, building experts and civic leaders warn a proposed state law would be detrimental to further growth in the region and the state.
They say Assembly Bill 199, which mandates paying prevailing wages to workers on new privately constructed residential homes, will drive up development costs, resulting in higher rental and housing prices that the majority of Californians won't be able to afford. Assemblyman Jay Obernolte issued an email to constituents on Friday saying the bill could add $90,000 to the price of a new home in his district, which includes the entire High Desert. And Obernolte said Democrats, who have a super majority in Sacramento, are pushing the bill, which makes it virtually unstoppable for Republicans. The GOP's only hope would be for Gov. Brown to veto it if it is passed in both the Assembly and Senate.
"The bill is an industry killer that would put a stop to home building as we know it," said veteran home builder Chris Canaday of CT Properties of Orange County, who has developed properties in Adelanto and Barstow. "We have not recovered from the recession. And given the many issues home builders currently face in California, the bill would put recovery in a deeper hole."
Introduced in January by Assemblyman Kansen Chu, D-San Jose, and the labor union group California Building and Construction Trades Council, AB 199 is expected to inflate the cost of housing construction by over 40 percent, depending on the region.
Many say the measure comes when homeownership rates are at abysmal levels. California homeownership is at its lowest level since the 1940s, currently 49th nationally. Home construction has declined by some 80,000 homes per year over the last decade, the Daily Press reported last month. The bill comes as the median home price is rising across Southern California.
According to real estate tracker CoreLogic, the median home price in December for San Bernardino County reached $299,000, but that's still far lower than the median price in most other Southland counties. Orange County led the way at $665,000, Los Angeles was at $520,000, Ventura was at $519,000, San Diego was at $495,000 and Riverside was at $347,750.
"This Assembly Bill is insane and it's sure to drive up the cost of housing all over the state if the industry survives," Mayor Pro Tem Russ Blewett told the Daily Press. "We still haven't fully recovered from the recession and now we have to deal with this. It will be a major setback for the housing industry and overall growth in California."
Last month, the Baldy View Chapter of the Building Industry Association of Southern California joined nearly 60 other organizations in sending a letter to Chu that voices the group's "ardent opposition" to the measure that would eliminate the long-standing residential exemption from prevailing wage rates and thereby make private, market-rate residential development a public works project.
"This measure would have dramatic negative cost implications for newly constructed and privately financed housing in California and it could not come at a worse time," the letter said. "California's Department of Housing and Community Development estimates at least 180,000 units must be built a year to keep pace with demand, not accounting for the backlog of 2 million units that has accrued over the past several decades."
Canaday said under the proposed law, building costs would skyrocket by some "40 to 50 percent or even higher" and thousands of businesses could face the possibility of closing.
"About 20 years ago, the drywallers tried to go union, but that bill never passed," Canaday said. "That would have been a minor increase in construction costs and many builders could make it work. But there's no managing this monster of a bill that will destroy everything in its path."
The BIA letter mentions a report by the California Legislative Analyst's Office that found that the state's average housing costs are two and a half times the national average. It also revealed that faced with high housing costs, commute distances and the resulting adverse environmental consequences are significantly increased as residents search for more affordable housing, such as in the High Desert.
The LAO report also found higher housing costs shift spending away from paying health insurance, resulting in adverse health consequences, the increased likelihood of becoming homeless, increased dependence on government subsidized services and a shortened lifespan.
"Given that for every $1,000 increase in the cost of a home, 15,000 California households are priced out of the market," the report said, "this measure would directly impact hundreds of thousands of Californians and their ability to attain the American dream of homeownership, disproportionately impacting teachers, firefighters, police, nurses, service employees in the public and private sector, minorities and millennials."
"If the bill passes, landowners would have to reduce the price of land to make it profitable," Canaday said. "High end customers could probably afford it, but it would still be a stretch for them and the builder that would barely break even."
"Who's going to be able to afford a house if this bill passes?" Karen Sanchez, president of the High Desert Association of Realtors, asked the Daily Press. "If you make it impossible for a builder to build, where are people going to live? We already don't have enough homes or apartments."
Calling AB 199 a "short sighted" measure by a legislative body that doesn't understand the "unintended consequences" the bill will produce, Sanchez said the bill will price nearly everyone out of the market and would make mockery of home appraisals.
"This may be a boon to guys who build modular homes," Canaday said. "I don't think they would be included in the new measure. I also can't image a state full of modular homes."
Rene Ray De La Cruz may be reached at 760-951-6227, RDeLa Cruz@VVDailyPress.com or on Twitter@DP_ReneDeLaCruz.