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46 Manteca housing starts
Strong January follows 304 more homes in 2009
Manteca builders started 46 new homes in January.

It is a pace that could translate into Manteca leading all jurisdictions in San Joaquin County for the third straight year in new housing starts. Manteca in 2009 built 304 new homes to account for just fewer than 60 percent of all housing starts in San Joaquin County. The next closest jurisdiction to Manteca was Stockton with 120 housing starts.

It was also the biggest January for new housing construction in Manteca since 2002 when 803 homes were built for the year. January historically is the slowest month of the year for housing starts in Manteca.

The data from municipal building permits also reflects two solid trends – homes are getting bigger again while market pressures are keeping the prices charged by contractors fairly low as hungry firms are cutting margins to get the edge to secure work.

The average home started has 2,521 square feet. That is up 427 square feet from January 2008 when 13 new homes were started. It actually cost less, though to build the larger home today. The average cost of a new home started in Manteca in January 2010 was $150,111 compared to the smaller home in January 2008 that had an average cost of $154,044. Those dollar amounts reflect the cost of actually building the home and do not reflect $42,000-plus in city growth fees nor the price of infrastructure or land that sends the typical finished lot before housing is started to $103,579 in Manteca.

New homes built in Manteca were pushing a 2,900-square-foot average in 2004. That compares to a 1,577-quare-foot average in February 2008. New home starts – just 10 – and the construction value made February 2008 the worst month for the house building industry in what is now being dubbed The Great Recession.

Another 28 homes were partially through the approval process at city hall as of the end of January.

Those 74 homes that permits either were issued or else are pending the completion of the review process are among the 957 finished lots in Manteca subdivisions that are ready to build.

A Manteca City Council subcommittee is cobbling together recommendations for the full council on ways to further stimulate housing construction to put more people back to work by chipping away at the city’s record post World War II unemployment rate of 15 percent.  An informal city survey of residential construction sites did not produce a large number of Manteca residents among crews. The goal, however, is to stimulate the overall economy by the impact that adding 1,000 new residents a year will have on increased demand for retail and services. The strategy is to try to make sure building activity stays at 300 homes per year.

Unlike new subdivisions that are on the perimeters of existing development and are being processed but haven’t broken ground, the 957 finished lots for all practical purposes are being served already as the streets and parks are in place that already being maintained. Police and fire coverage is also partially based on geographic concerns involving response times. Both departments are already responding to the seven neighborhoods where the finished lots are located.

That means the city could benefit in the current tight budget situation if those lots are developed as they wouldn’t be a major strain on services. That means the city could use anticipated property and sales tax generation to ease the revenue shortage that just this year forced almost $14 million in general fund cuts to balance the municipal budget.

BIA wants some fees reduced, others suspended
The Building Industry Association of the Delta is recommending the city reduce growth fees for a period of time. They also want council to temporarily suspend the “bonus bucks” that can run as high as $17,500 per home in a bid to get building activity to pick up and put more people back to work.

The Manteca Public Works Department devised a model to determine what the typical cost to build a new home is in Manteca today. The model has land acquisition, financing, and closing costs at $18,200 per home using a typical 2,000-square-foot home on a 6,000-square-foot lot as part of a 250-home subdivision being built on 60 acres.

Project approval costs such as environmental studies and various city fees add another $1,800 per home. Offsite construction improvements – everything from streets to landscaping and sound walls – add another $11,920. On-site improvements that are basically the infrastructure within the subdivision’s boundaries from street lights, pipes, sidewalks to installing utilities and then turning them over ready to go to PG&E, Verizon and Comcast – adds $23,826.

The building fees and growth fees add another $48,464.

That brings the cost to finish a lot to prepare it for building to $121,079. The house construction at $75 per square foot is a $150,000 cost. There is also a $30,000 cost for sales and marketing to bring the final tally in at $301,079.

If builders can secure $300,000 net for the home after selling costs are covered they will still lose money, roughly $1,079. In many cases homes are indeed selling below the cost of the finished lots as a way to keep developers ahead of the loans and to retrieve in-ground investments.

If a developer can reduce losses significantly they can stay afloat.

The problem is with just short term incentives the builders would simply build the 957 homes and nothing else.

The council subcommittee is trying to come up with a long enough window with reduced housing fees that would encourage developers to invest millions of dollars up front on entitled lots that are nothing more than barren land but have approval to move forward.

The builders that hire primarily Manteca contractors and sub contractors such as Raymus Homes the Next Generation have projects among the nine subdivisions that have entitled lots totaling 3,252.

In addition another 5,249 single family residential homes are among development plans pending at city hall.