The real looming housing crisis

The real looming housing crisis

By: Mary Lydon and Tony Pauker

We face one of the most significant housing crises this region has seen in the last half century. No, it is not the wave of foreclosures that are sweeping across our country and San Diego County. It is what will come after the foreclosure wave.

The current foreclosure epidemic is better characterized as a systemic re-pricing, actually right-pricing, of our for- sale housing stock. As we emerged from the recession of the early 1990s, housing in the San Diego Metropolitan Statistical Area was affordably priced. The cost of housing to the end consumer was not a burden to our economic growth. At that time the challenge of job creation and shifting from a military economy to a creative class was our biggest challenge.

By 2001, two things happened. First, the housing market entered a cyclic, but not astonishing, increase in value. Second, the impact on the national and world economy post-9/11 forced the Fed into lowering interest rates to levels unheard of in our lifetimes. Housing was the engine to avert a terrorist-induced prolonged recession. Unfortunately, the stimulus turned into a financial orgy of low interest, even lower oversight, and the lowest levels of accountability.

The result was believing that 25 percent annual appreciation rates for housing, and affordability levels where less than 5 percent of the population could afford the median home price was sustainable. This was simply a fantasy many fold greater than even Bernard Madoff’s Ponzi scheme.

The hand wringing over our current foreclosure “crisis” is a misguided diversion from the real issue. True, there are stories of great sadness. People losing their homes and equity, declaring bankruptcy and the impact on our economy is extremely painful. However, it was entirely predictable.

But there is a silver lining. Affordability in the region is up from the low single digits to in excess of 35 percent — still well below where it needs to be but affordability is no longer a drag to our economy. A household of average income can actually afford to buy a home within San Diego city limits rather than making the 60-90 mile commute into southwest Riverside. Credit may be tight this quarter but mortgages will become available, if for no other reason than banks will want to make money in 2009.

Looking at the sale of foreclosed homes, virtually every buyer is an owner or occupant — they are Mom, Dad, Billy and Jane, their dog Max and cat Snowflake. Concepts of “stabilization” and “foreclosure moratoria” are simply dragging out the inevitable. They would simply be the water boarding of the housing market. To pretend a family earning the median income of $72,100 can afford a $550,000 home with 3 percent down is a fantasy. Keeping them in that home is torture. Provided we do not drag our feet on this, we should be able to get through this foreclosure debacle by the middle of 2010 and move on.

So if my premise that the real housing crisis is not foreclosures, where is the real crisis? It begins in 2011, and we will then enter a challenging and prolonged period when affordability is our biggest bugaboo. Local employers will be unable to attract the best and brightest, and the young rising stars graduating from our local universities will look to other areas to live. Our society will further divide into the lower-paid service workers and the highly- compensated creative class. Our scant middle-income industrial base will be nothing more than a distant memory.

The reason for this dire prediction is we have used all available land for our traditional “Greenfield” model of suburban development. We have no more space for another Clairemont, University City, Carmel Valley or East Lake. Further, virtually every developer and builder is gone from our marketplace. None, literally no one, is in the business of entitling land. A recent Fannie Mae report given to leaders at the Urban Land Institute in late January predicted that nationally over then next decade we will need between 5 million and 6 million new units of rental multi-family housing. In the prior decade our net production was only 1 million (after apartments converted to condos are eliminated from this total).

Even worse, our municipalities do not have this on their radar screens. When the recovery occurs, as it will, we will create jobs and people will have no option to purchase new homes for a growing population.

This is not to say that we do not have available land, we just do not have available raw land. As a relatively new area — remember a century ago, there were only a few thousand people living in San Diego — we had no need to recycle land. We could simply build further out. The only real example of developing a second generation of land uses in San Diego is the growth of downtown over the past decade.

There is another reason all is not lost, demographics. People of college age and those into their latter 20s are not expecting an Ozzie and Harriet future where a couple were married and with a young family by their mid-20s, and could afford to purchase a home in Clairemont on a single income. A two-income household is the norm. People are postponing marriage, delaying having children, and having smaller families — and are more focused on urban than suburban lifestyles. While life in a downtown high-rise is certainly not for everyone, life in a three- bedroom row home within a short walk to work, transit, shopping, schools and social networks is highly desired. Vast underutilized portions of our county — those “grayfields” where we have provided acres of land to park cars so we can have a few shops — are ripe for redevelopment.

Now is the time our civic leaders and municipal planners look at the opportunities we have in this “down time” to re-engineer the way we look at land, land use and the urban form. We can plan for this shift in demographic trends, the demands the market will bring, and what we must do to effectively compete for business. This does not mean every part of the county should look like downtown. It would simply be inappropriate, and not meet the demands of demographic trends, to assume every city should plan for high-rise condos. However, a mix of low-, mid-, and in some cases, high-rise and mixed-use and mixed-income development forms can compliment the existing urban fabric.

Much can be learned from both our region and other parts of the country. Now is the time to reflect, plan and become prepared. If we do not, we should be prepared for a real housing crisis in the next decade.

 

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Infrastructure investment as an economic stimulus – Failure is not an option

Infrastructure investment as an economic stimulus – Failure is not an option

By: Mary Lydon and Tony Pauker

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2008 marks a juncture where rapidly changing economic climate, a heightened sense of environmental issues and a growing awareness of the dire condition of our infrastructure will determine and reorder the next generation of winners and losers — countries, companies, investors and people. Without optimal roads, waterways, transit and broadband width, those who fall behind will get left behind. Those with innovative solutions will become the new political and economic leaders.

[space]In countries like China, Japan, Australia and India, infrastructure planning is done at the national level and this gives them a sharp edge where the focus is based on the good for all. In the United States over the past half century, most infrastructure planning is done at the local and state level and causes a disconnect between local and national priorities. The hundreds of metropolitan planning organizations, and all the politics that goes with them, create an environment where short-sighted politicians and tax-adverse citizens collude against a future of global competitiveness.

[space]President-elect Barack Obama is considering following in line with other American presidents who have spearheaded significant national infrastructure initiatives. In 1808 there was Thomas Jefferson’s canal and road building endeavor. A hundred years later Teddy Roosevelt’s focus became power generation. Franklin Roosevelt rolled out the New Deal in the 1930s (maybe under similar economic conditions we are experiencing), and then in the 1950’s, Dwight Eisenhower’s interstate highway system. There has been no new national infrastructure agenda since.

[space]A federal infrastructure stimulus would be a win-win for the economy. Improving and replacing roads, sewers and bridges in this country have projected costs of $136 billion. Economists estimate that every $1 billion in infrastructure translates into 40,000 jobs. Job creation and global competitiveness must be a big part of the national economic stimulus package that Obama plans on rolling out on Jan. 20. An infrastructure initiative would fit that bill.

[space]Members of the National Governor’s Association met with Obama and Biden earlier this week, laying out a plan for an infrastructure economic stimulus program. There is $136 billion in infrastructure projects that are “ready to go.” The governor’s asked that if a program is put into place that the permit process is streamlined so that projects could be expedited. This is a great state and federal partnership where we all win.

[space]Infrastructure investment has the opportunity to create jobs and enhance our global competitiveness but clean air, water conservation and open space need to be planned into the equation as well. New concepts, as identified in ULI’s Infrastructure 2008 Report, include: cluster development; expanded rail and truck corridors; infill suburbs to be more urban but served by transit; congestion pricing to reduce traffic flows in urban corridors; intercity high speed rail; and water restriction in arid regions. Higher density that is clustered and connected by transit provides the opportunity for more open and green space.

[space]These same concepts should be considered at the local level. It is estimated that the city of San Diego alone may have an infrastructure deficit of $5 billion. At the same time it is clear our construction industry has been decimated. Any opportunity to not only address our crumbling infrastructure, but also stimulate the local economy should be seriously considered.

[space]The Federal Highway Trust Fund expires in 2009 and Congress more than likely will increase the gas tax from the current 18 cents/gallon, set in 1993, up to 58 cents/gallon. This is not a popular measure but would add working capital to the infrastructure stimulus initiative. Other funding strategies include tolling interstate roads; tying community development to goals for lowered vehicle miles traveled; stop subsidizing sprawl; and stop tapping user fee revenues as cash cows.

[space]ULI San Diego/Tijuana will be discussing the national and local opportunities that an infrastructure stimulus package could bring on Jan. 13 at the University Club in downtown San Diego. Come hear what San Diego has planned and how it will fit into a national initiative.

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Constraints breed creativity and entrepreneurship

Constraints breed creativity and entrepreneurship

By: Mary Lydon and Tony Pauker

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“True creativity makes the impossible possible. It can revolutionize a product, a business, the economy and the world around us.”

–Marissa Ann Mayer, vice-president, Google.

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Depression; volatility; lack of confidence; layoffs; bankruptcies; credit markets; greed; dysfunctional legislation; uncertainty.

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These are the issues of our day and it seems they will be our issues for some time to come. But there is another side to this darkness, and it is filled with great opportunity.

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Never have we been in such a place of constraints globally as we are today. History shows us, though, that necessity breeds invention; through adversity comes opportunity.

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The sometimes terrible power of nature has taught us to build better homes. Starvation in parts of the world has given rise to philanthropic programs. Global warming has fast-tracked invention and adoption of more efficient cars. What will we learn from the problems of today? How will we advance our civilization?

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Urban Land Institute (ULI) is no stranger to this conversation. The Institute works to educate, lead and inspire land use professionals. It is even credited for first coining the term, “smart growth.”

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The sixth annual ULI San Diego/Tijuana Real Estate Trends Conference will surely reveal some creative ideas for how to navigate these times. We’ll learn what’s ahead for developers, lenders and investors in the greater San Diego region. Rand Sperry and the Honorable Jerry Sanders, mayor of San Diego, will headline for this fact- filled, half-day conference taking place on Nov. 11 at the Joe and Vi Jacobs Community Center at Market Creek Plaza. The conference speakers will help us explore how the capital markets and government policy are reshaping real estate here and across the United States.

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Two back-to-back sessions on finance and development will wrap up with a special appearance by one of the country’s best-known money managers, Gabriel Wisdom, CEO of American Money Management and host of a weekly program on the Business Talk Radio Network.

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Other speakers include Dean Schwanke, Urban Land Institute; George Chamberlin, The Daily Transcript; Anne Wilson, Community Housing Works; Tom Murphy, ULI fellow and former mayor of Pittsburgh; Jim Madaffer, San Diego City Council member and chair, CA League of Cities; Sunne McPeak, president and CEO of CA Emerging Technology Fund; Jennifer Vanica, president and CEO of the Jacobs Center for Neighborhood Innovation; Chris Day, Swinerton Builders; and Kevork Zoryan, Morgan Stanley. To register for this information-packed session with the best CEO networking regionally, go to ulisd.org.

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These are uncertain times and we are in uncharted territory. We don’t know where we’re going or how we’re going to get there. We’re all looking for ways to harness our creative energy, to reveal untapped opportunities. This is how we will find our inspiration to participate in the new economic, environmental and social society we all must help to create. Each of us needs to take responsibility and discover for ourselves what role we will play during this time and then draw our teams together to implement those visions. Persistent entrepreneurship will be rewarded greatly.

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Let the innovators lead

Let the innovators lead

By: Mary Lydon and Tony Pauker

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Less than half a decade ago the term LEED (Leadership in Energy and Environmental Design) was unknown to virtually everyone in the development industry and municipal government. Today even considering a major new development that does not include sustainable and LEED features is not only at risk of not receiving approvals; it also is simply out of touch with the market.

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The role of LEED has served its purpose well. It is not only the brand of the U.S. Green Building Council, but more importantly, it is a confirmation that a project has met a rigorous test of sustainability standards. Basically, the USGBC has been the bridge for local planning and building officials in transforming building practices into sustainable projects. However, in very short order, LEED or LEED-like standards will simply become part of most cities’ building codes.

[space]The USGBC has played a great role, but LEED as a branded designation may not be sustainable when you take into consideration that we are in the middle of a technological renaissance. To put mandates in place right now may hamper innovation. To allow for an unfolding of technological innovation will ensure competitiveness, best practices and the lowering of costs of new technologies.

[space]The Gerding Edlen proposal for a new San Diego civic center is a great example. One of former Mayor Dick Murphy’s little-known contributions to the region was his 2003 mandate that all new city buildings be at least LEED silver certified. When CCDC released the RFQ for a new civic center, all respondents were willing to comply because now the net costs for such compliance are marginal and the city and market demand it. LEED silver is not a big deal and it ccan conform to existing codes

[space]Gerding Edlen, our lone finalist (after Hines’ withdrawal), went quite a few steps beyond LEED silver. They not only proposed the much more rigorous LEED platinum designation, but they proposed inclusion of concepts and technologies that push the envelope of code and design. The more tame aspects include prodigious use of solar panels. Then more and more exotic ideas, like wind turbines on the building (already a technology used in the Middle East) and green roofs – again, a technology that exists, but is far from commonplace. They also incorporated grey and black water use, which is a sustainable measure way beyond where most projects are willing to go. Grey water is the recycling of waste water for irrigation and non potable uses.

[space]In San Diego this is already done — our “purple pipe” system that can be seen in parts of the city. Although it is a technology ready to be put into place, funds to implement are very limited. Black water, however, is more extreme and refers to the recycling of raw sewage into grey water. All of these technologies are at the forefront of innovative design and engineering, and are all very relevant in our new market reality of high energy costs and water limitations.

[space]The problem is, in light of the constantly emerging and changing cutting edge technology, how do we even begin to address these methods from a code and implementation standpoint? The high cost of energy and threat of water availability has forced the private sector to innovate solutions disallowed by code. When Westfield recently won approval for the expansion of UTC, one of its strong selling points was a zero increase in water usage. In large part, this was achieved by tapping into the city’s reclaimed water “purple pipe” system. This company was pushing the edge of approved technologies. Gerding Edlen’s civic center project is moving even more out on the innovative sustainability ledge.

[space]In the spirit of San Diego as a world-renowned center for cutting edge high tech, bio tech and our emerging clean tech business segments, it makes sense to encourage the development sector to innovate — rather than limit it — within our existing code or even within the LEED standards. We do not need more regulation, but we may need more flexibility to allow private sector developers to lead the way to a sustainable building future.

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Green entrepreneurial capital leading the way to a new economy

Green entrepreneurial capital leading the way to a new economy

By: Mary Lydon and Tony Pauker

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One of the most exciting things happening in our economy these days is a path that is being solidly constructed to pave the way for a new sector in our global economy that is sustainable. Entrepreneurs with great ideas and access to massive amounts of capital, like T. Boon Pickens, are in the front leading the way. Also, global investors have poured $148 billion into new wind, solar and other alternative energy assets last year, which is 60 percent above the previous year’s investments. With big business leaders taking on the charge there is a great opportunity for a trickle down effect that will spur an economic renaissance.

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The Pickens Plan stresses that our oil crisis is a national security issue. We import 70 percent of our oil, up from 24 percent in 1970. Pickens’ vision is to couple a $1.2 trillion one-time investment in wind power and to tap into America’s natural gas reserves for vehicle use. His research shows that this will reduce our foreign oil imports by one-third, reduce our CO2 emissions and create a whole new sector of jobs revolving around a clean energy economy.

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Elon Musk, the PayPal-founder-turned-green-entrepreneur, is chairman of the electric sports car company Tesla, which has a 250 mile range and 0 to 60 mph time of 4.0 seconds. The car was designed by Lotus, a British manufacturer of sports and racing cars. While the selling price is over $100,000, Musk’s goal is to get the price down to $30,000 in three years by refining the technology. These are just a couple in a field of thousands of plans and products that are activating our imaginations.

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So how can San Diego take advantage of this rising tide of opportunities? The City of San Diego, the San Diego Regional Economic Development Corporation and the CONNECT-managed Cleantech San Diego are working together to analyze how the Cleantech market segment could benefit our region. Cleantech is defined as environmentally friendly technologies and green enterprises that promote a sustainable planet.

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A Cleantech assessment of capabilities and assets for San Diego was completed in June 2007. A regional benchmarking report is due to be released at the end of August that will show how San Diego ranks with other top Cleantech cities. Early indicators show that San Diego is well positioned largely because we already have a great technology base in place and we have an educated workforce. Hi-tech, biotech, software, telecom and building material companies in San Diego are seeing that they can easily convert their technology to take advantage of the emerging green boom. Other new emerging companies are focused on algae commercialization, bio fuels and renewable energy. Our world-renowned educational institutions, UCSD and Scripps Institute of Oceanography, and the fact that we have industrial-zoned land in Otay Mesa and maquiladoras in Baja add greatly to our high ranking in the Cleantech arena.

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Our climate also adds to our unique position for research, development and manufacturing of the booming solar market. Another up-and-coming technology that is emerging in San Diego and could potentially make our city a national hub is a new discipline that studies nature’s best ideas and then imitates these designs and processes to solve human problems. This technology is called Biomimicry. The world-class San Diego Zoo has been working with the Biomimicry Institute to explore how to leverage their work with this exciting new technology. Currently, through the zoo’s Conservation and Research of Endangered Species program, they study over 5000 plants and species in 32 countries. They are uniquely positioned to be a world player in this emerging technology. With these two technologies that fit our region uniquely, San Diego could position itself to become the Solar or Biomimicry Capital of the World.

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What does this mean from a land use perspective? High-paying jobs will create demand for a range of housing, vibrant retail and the infrastructure development to support it all. And of course there would be a great need for commercial space. As we grow, due to our geographic constraints, we will need to look at how to densify our region in a smart and sustainable manner as well.

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San Diego’s core values, as defined in the San Diego General Plan Update “developed through a multi-year dialogue with San Diegans in numerous community forums” sets the perfect tone for us to jump on the green economy train. Our physical values revolve around our natural environment and the conservation, preservation and environmental quality of natural resources. Our economic values call for a rising standard of living for all San Diegans. Cultural and society values focus on social equity and education. Green companies and jobs are in full alignment with all these values.

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Confluence of forces leads to a new era for the built environment

Confluence of forces leads to a new era for the built environment

By: Tony Pauker and Mary Lydon

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We are at a crossroads, and depending on your perspective, it could either look like we are on the precipice of a new era or that we have gone over the cliff. The incredible run of all aspects of real estate sure felt good while it lasted.

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Unfortunately, the subprime-induced credit tightening has turned into a downturn possibly more painful than we saw in the early 1990s. It appears that no property sector has made it though unscathed. Residential woes are old news even though they seem to be getting worse by the day.

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Retail spending is down, fuel costs have forced consumers to rethink vacation plans, hiring has slowed, and the story goes on. As bad as it is, and it is really bad, any real estate industry veteran can tell you that the market will inevitably bounce back with a vengeance — we just wish we knew when. But there is a bright spot on the horizon.

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This could be a time for all of us to retool and find ways to become more competitive. The interesting thing about real estate recoveries is they always seem to start small, and as the cycle becomes overheated, our irrational exuberance leads to building types and styles that prove excessive. Remember the average San Diego tract builder home produced in the late 1980s? Large homes on large lots with large price tags. As that product market collapsed and we started rethinking housing, we began planning on those very same vacant lots, houses that were scaled back in size and finish. The homes became smaller and more efficient.

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It’s interesting to observe how this has converged with the boom in sustainable building practices. In literally every past cycle, including the oil embargo of the late 1970s, we did not face the issues of global energy crisis and environmental concern.

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Now we face direct costs from oil and concerns over climate change that make still low-cost energy sources, like coal, a dubious alternative because of the long term costs associated with its use.

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This pause in the market may allow a paradigm shift to take place. In the United States half — fully 50 percent — of all greenhouse gases are emitted from the construction and operation of buildings. Cars, industry and everything else pales in comparison. Carbon emission is a proxy for another problem, energy usage.

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While some in the real estate industry may have genuine concerns of the long-term effects of carbon emission, everyone in the industry is concerned about costs. Energy inefficiency means higher operating costs. Construction waste means you purchase expensive raw materials only to discard them — at rising dump fees.

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All of these issues lead to lower yields and higher risk. As an example, a friend just moved into a new LEED certified condo with solar power. Her power bill in June was $16 — a month she used her air conditioner. The bill was a fraction of her former 1970s era single family home.

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In the past few years LEED has gone from a little know design concept to the forefront of every type of new development. Soon LEED will simply become part of our local building codes and the expectation of every major tenant, investor and asset manager.

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No one is well served by the current economic climate, but there could be a silver lining that will serve our economy and our environment as the confluence of rising energy prices, market demand and climate change elevate the dialogue on sustainability.

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Will a McMansion that does not use the latest technologies to ensure energy efficiency in a bedroom suburb be competitive when the market rebounds? Will a low-rise, non-LEED, certified office park command Class A rents, status and investors? Clearly not. The most savvy and well-positioned developers and real estate professionals have begun to focus on what is not only sustainable for environmental reasons, but the new awareness of cost. Sustainability is not more expensive, but in fact yields a better bottom line today and in the future of any real estate asset.

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The sad truth is that this retooling is not universal. China, India, Dubai and many other emerging and surging economies are looking to American expertise to help guide their land use and development activities. What is the model? Frequently it is a suburban American dream — Orange County. Wide roads, large single-family homes, sprawl — our post World War II development model that many in the United States are trying to get away from. As we look to recreate compact urban designs and transit systems that emerged in this country between 1890- 1930, these emerging economies look to our 1950s era Federal Highway Act-induced development patterns.

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Even more concerning is that their more equatorial and arid environments may be ill suited to such resource intense development. While it is true that there are some sustainable plans — such as Dubai’s attempts to develop a zero-carbon new town for 50,000 — many are not.

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We have some of the greatest intellectual capital on the planet. It is my hope that our real estate and design expertise can be harnessed during this pause in the U.S. market to evaluate more sustainable models of land use and development.

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This should not only be in anticipation of a turn in our market, but it should also create opportunities to export these models to the emerging economies that need them as well.

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ROI of sustainability

ROI of sustainability

By: Tony Pauker and Mary Lydon

[space]In past columns we have discussed sustainability, green building materials and global warming. But are we really talking about real estate and is there a connection?

[space]Portions of this seemingly unstoppable movement are deeply rooted in the concern for the environment and the science-based proof of the impact that greenhouse-gas emissions have on the quality of life of all beings on the planet.

[space]This has created two extreme camps: Camp 1 has deeply held beliefs about environmental degradation and the impacts added to that degradation by humans.

[space]Camp 2 has equally held beliefs that the concerns are rooted with inaccurate science. For a moment, let’s pull out of the equation the emotionally charged belief that humans are adding to global warming or that the science is wrong.

[space]Clearly, even without these components, we see that the climate is changing. It is with this baseline proof that we need to look at the real estate industry business model and develop strategies to take advantage of this new addition to the equation.

[space]The new global economy, especially with the emergence of Chindia (China and India) and Dubai, has massive influences on land use and real estate. Energy, efficiency and cost are the components that will play an increasing role in the return on investment or ROI.

[space]The era of readily available and cheap energy is over. We now know we have a finite amount of fossil fuel. Most energy experts suggest that even if we tap the vast Alaskan and Gulf of Mexico oil reserves our current rate of global usage will deplete these resources in the next 50-100 years. Even if we go a step further and find innovative methods to extract oil from oil shale, it is still a finite resource. Experts also suggest that the oil production peaked in the past few years, meaning that we have entered the era when the amount of oil that can be economically extracted will decline. The average consumer feels this most harshly when filling up at the pump. However, similar cost pressure affects heating oil, the electricity that powers our air conditioners and lights, the cost of our food, air travel and the hundreds of thousands of products that contain petroleum as their base. It is clear that none of these items are getting any cheaper.

[space]As land use and real estate leaders, we need to decide if we are victims or leaders. We will not solve our two- century-old focus on fossil fuels overnight, but we stand at a crossroads of economic competitiveness and energy leadership. For example, Toyota, which has led the world in the production of hybrid vehicles, has a market capitalization more than five times greater than Ford and GM combined. The reason is fairly simple; they are leading the world in solving transportation needs in concert the energy efficiency. Another leader is the Texas oil and gas entrepreneur Boone Pickens, who is making a $2 billion investment in wind energy. In a recent article in Fast Company, Mr. Pickens stated with gusto that his decision to go green is not as much about the environment but rather about the ROI. Reliance on foreign-controlled sources of energy will not only get more costly, but also become far more challenging in a global environment where we must compete for shrinking resources. Wind is renewable, domestic, and poses little environmental risk.

[space]We can see examples of how this is affecting real estate and land use locally and as individual developers, investors and property owners. The renewable energy opportunity of Imperial County, which has been identified as one of the leading locations in our nation for the development of wind and solar power, is driving great opposition to the Sunrise Power Link. Looking at the individual building or at the asset level, we see that energy and operating costs are on the rise. The higher the operating costs the lower the ROI, which lowers the value of the asset. This indicator alone builds the case for putting sustainable energy and building efficiency into place. When evaluating any income-producing property from here on out, tenants want to limit their occupancy cost (including utilities) and have a steady and predictable cost structure. Landlords seek the same metrics. If building operating costs were to see the price spikes we see at the gas pump our battered real estate industry would be in far worse shape. While utility rates have not spiked yet, it is not likely they will decline.

[space]LEED standards are one popular metric to judge and control energy usage. However, within five years, LEED will be standard in municipal building codes. In terms of new development, it is already becoming clear that space that does not meet LEED standards is simply less economically competitive. The issue is not what energy- efficient “brand” one stamps on a building. Rather, it is what systems can be built into new building, what forms of urban design and land-use planning can be instituted, to limit or even decrease the amount of energy they use. Reducing usage and thus reducing cost simply flows to the bottom line. We have entered an era when our sustainability decisions are no longer a strictly emotional or environmental issue; they are clearly an economic issue.

[space]On June 26, at the Balboa Theatre, ULI San Diego/Tijuana will be presenting awards to 15 outstanding smart- growth projects, plans and people. Smart growth is defined as economically feasible, environmentally sound and equitable to the community at large. Smart-growth principles are becoming a necessity of the ROI equation. Please join us to celebrate San Diego’s award-winning smart-growth winners and to get ideas for how to increase the return on your real estate investments. For tickets, go to ulisd.org.

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The new green belief system

The new green belief system

By: Tony Pauker and Mary Lydon

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“There are two ways to be fooled. One is to believe what isn’t true; the other is to refuse to believe what is true.” – -Soren Kierkegaard, philosopher

[space]At a recent community planning charrette setbacks for a multi-family home development adjacent to a waterway near the bay were being discussed when one of the members suggested the setbacks take into consideration rising sea levels due to global warming and the dialog ceased. All eyes were on the member who made the suggestion and one of the others said, “Oh, you are of that belief system?” A religion is a set of beliefs about our perceptions of reality. Our belief system assists our decision making process, how we live, what we buy, our relationships, where we live, how we create our cities, who we believe we are and how we think things work in this world. From the experience above we can see how the green revolution could be interpreted as a belief system. These beliefs are transforming the way we see life on this planet and with the passions that are invoked whether one believes or not the outcome may very well birth a new religion that provides a whole systems approach to how we live, work, play and worship that is sustainable, equitable and in balance with the environment and each other.

[space]Not since the Renaissance has a time been more representative of that rebirth than now. Major institutions representing decades-long belief structures are going through a metamorphosis where some may transform, some may not and never before creations will be innovated. At the EcoCity World Summit last month in San Francisco, Stanford climatologist Stephen Schneider opened the conference by stating that science has now proved a preponderance of evidence that humans are adding to global warming and it is up to the community at large to determine the risk they will take to mitigate human impact or not. He stated that incentives need to be developed for industries, companies, cities, states and nations to lower emissions and that capital needs to enter into the equation that in addition to innovation, will make many rich. He stressed that strong leadership would be the first step towards effective implementation.

[space]Brent Toderian, the new planning director for the city of Vancouver presented that their city’s new planning process will move from a livable city model to an EcoDensity model where green and affordable enter into the livable equation. Another innovative government model was presented by Dan Beard, the chief administrative officer for the U.S. House of Representatives. Speaker of the House Pelosi ordered a plan to be put in place to make the House carbon neutral because she said the Capitol needs to be a beacon of environmental stewardship.
[space]On the private side, Charlie Ricker from Bright Source Energy laid out their company’s goal of developing and commercializing new solar thermal technology that can compete with fossil fuel plants. They recently signed 5 contracts with San Francisco-based PG&E to provide 900 MW (enough to power 500,000 households) of solar thermal power to Oakland, the largest solar power plant deal to date. Thankfully private industry is taking the lead on this because when Congress passed the energy bill last December, it did not extend any stimulus for wind and solar energy production, but oil and gas kept all their credits. This is counterintuitive for these times. Japan and Germany both have a solar incentive program that will last 12 years and 20 years, respectively. Hopefully, industry will continues to lead the way and inspire Congress to do the same which would allow the country to move our attention away from Iran and re-invest military spending toward issues that are more relevant such as alternative energy incentives, education and health care.

[space]We have a local EcoCity trendsetter among us as well. Community HousingWorks, developer of Solara, the first apartment community in California to be fully powered by the sun is one of the winners of the prestigious national Urban Land Institute Award for Excellence which they will receive this morning at the ULI Spring Conference in Dallas. The jurors were impressed with the green features for sure, but were most impressed with the heart and soul that went into the details of this catalytic project. Community HousingWorks was also a recipient of a ULI San Diego/Tijuana Smart Growth Award in 2007.

[space]ULI San Diego/Tijuana will host the fourth annual Smart Growth Awards program on June 26 at the Balboa Theatre, where we will recognize the innovators, implementers, visionaries, risk takers and believers who are the emerging leaders of the green renaissance.

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Cooperation needed to succeed in emerging sustainable economy

Cooperation needed to succeed in emerging sustainable economy

By: Tony Pauker and Mary Lydon

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Joseph S. Nye Jr., is former assistant secretary of defense and dean of Harvard University’s John F. Kennedy School of Government. He is author of “Soft Power: The Means to Success in World Politics.” Soft power is a term that distinguishes the subtle effects of culture, values and ideas on others’ behavior from more direct coercive measures called hard power such as military action or economic incentives. In these changing times, soft power may be a tool to a more effective transition to the new social and economic structure that we are being propelled into.

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Since the industrial revolution our means of success has brought phenomenal new technologies in the areas of communication, agriculture, transportation, entertainment, manufacturing, finance, research and development. But when we look back to see what has been left in its wake we see war, poverty, environmental degradation, growing disparity in incomes, specie extinction, unprecedented CO2 levels in the atmosphere, melting snowcaps and disease. This is certainly not the full picture, but when one makes a comparison from this perspective there does seem to be something missing from the equation. Soft power could be a bridge to help solve some of our great challenges by connecting our advanced technology to a more solid sustainability platform.

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There are 218 sustainability-focused organizations in San Diego, and if you Google sustainable technology on the Internet, you come up with more than 10 million results. Both locally and internationally, there is not a lack of focus on sustainability. It is very clear that we do have the technology to move sustainable measures into place, but what is also just as clear is that we have not evolved our social skills to make it happen.

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Cooperation, as defined by Wikipedia, is the process of working together which can be accomplished by both intentional and non-intentional agents. In its simplest form, it involves things working in harmony, side by side, while in its more complicated forms, it can involve something as complex as the inner workings of a human being or even the social patterns of a nation. It is the alternative to working separately in competition. Cooperation is a key factor of soft power. Other components of soft power include: listening, tolerance, willingness to try new ways, for the good of all approaches, truth – such as incorporating the true costs for products and services to include environmental cleanup and renewability factors — and enlightened leadership.

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So how do we implement these big-picture dynamics into San Diego so we can participate and reap the benefits of this new world? This spring, we are already starting to see new buds of cooperation emerge. A collaboration between the county Department of Health, the American Planning Association, Walk San Diego, New School of Architecture and Design and the Urban Land Institute is working to develop models for healthy communities through the built environment. San Diego Roots, in partnership with the San Diego Natural History Museum and OB People’s Market are working to develop an organic farm and education center model that demonstrates how growing food locally is less expensive and better for the environment. The formation of the CleanTech Initiative through the Regional Economic Development Corporation in an effort to promote the expansion, attraction and retention of businesses that develop products and technologies that provides environmentally sustainable solutions. The National Energy Center for Sustainable Communities in Chula Vista focuses on building neighborhoods that consume less energy and produce less waste and is the first of an international network. The city of San Diego Environmental Services Department has taken a leadership role to work in concert with City Departments and the community to advance all aspects of more sustainable policies and procedures, and measures outcomes through a series of City Council-approved indicators and a Climate Protection Action Plan. Primary target areas include energy-efficiency and renewable energy, alternative vehicles and fuels.

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These are but a few emerging local initiatives and our challenge to you is that you get involved and become the water to help these kinds of visionary, cooperative-based, sustainability-focused technologies grow and flourish.

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Infrastructure: invest or collapse

Infrastructure: invest or collapse

By: Tony Pauker and Mary Lydon

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I was struck how a short drive could be so symbolic of our current land-use and budget situation. Early one Monday morning, I rolled out my trash and recycling bins. That always gives some guilty pleasure, like getting dessert for free at a restaurant. That is probably because I don’t pay for pick up. It had rained the prior week so I then got a push broom and swept the street in from of my house. We only have our streets swept the fourth Thursday of every other month — six times a year, assuming no one is parked on the street. While I like a clean street, I really dislike swimming in the oil ash and grit I sweep up, and everything in the gutter eventually ends up in the ocean if it is not swept. When that was all done, I started my drive. My first call was to the Streets Division of the city to request the large and growing pothole a block down be repaired. It seems only a half-inch of rain wreaks havoc with our streets (and it is a dry year). To the city’s credit, that pothole was patched within a few days. Later that day, I described my morning to a colleague who lives in a new master-planned community. He shares not of my issues (except he pays for his trash pickup).

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What this Monday-morning experience shows is the state of our infrastructure, budget and the development cycle. After World War II, San Diego we saw a massive wave of growth to house our returning GIs and supply homes for those employed in our growing defense industries. From La Jolla and Pacific Beach to Clairemont, Linda Vista, National City and much of what is the “core” of San Diego, this growth not only brought housing, retail and employment centers, but also saw the development of much of our pre-freeway backbone infrastructure. Over the ensuing decades development leap-frogged these communities into more planned communities — everywhere from Scripps Ranch to eastern Chula Vista to Carmel Valley and beyond. Each of these newer communities also saw new infrastructure, some of even with assessment districts to assure its long- term maintenance. While we grew outward, our older areas such as our downtown saw a lack of investment. Over the decades, this has led to decay of the infrastructure. But there are examples where we have turned this trend around. Without the incredible efforts of CCDC, it is very unlikely that downtown would be in as good shape as it is. CCDC perhaps creates a template that can be modified to work in other urban neighborhoods.

[space]As a small developer focusing on infill areas, we clearly hear the public outcry about the lack of infrastructure. Any new development is perceived as furthering the burden of our crumbling infrastructure. If you want to build, you better remove those overhead power lines, build a new park, fix the street and sidewalk and provide a bunch of new parking so I can keep parking my car in the street and use my garage for storage. In a new master plan, the situation is simple. Before you start you pass a bond, use the proceeds to pay for infrastructure, and the new residents and businesses pay for the bond through a slight increase in property taxes. New residents are more than happy to accept this fee because of the benefits they receive.

[space]In our older communities, we have come to expect very low costs to enjoy our location. Proposition 13 established our tax rate, more recent propositions mandated new taxes require a two-thirds majority of the electorate to levy such fees, and our charter establishes free trash service. I, too, certainly enjoy a free lunch. We have also been able to cast a blind eye to the physical impacts on our city — that is until our beach is closed due to a sewer spill (or just rain), or until we hit a pothole, or until our once verdant park is a weed patch. City budget issues aside, can we accommodate new infill growth AND enhance the quality of life in our older communities? It must be not only because we have to address the issues, but also because other cities have proven it is feasible. Denver and Phoenix have both shown leadership on improving infrastructure citywide. In San Diego, we passed Proposition MM to repair and build new schools with great success. We have proven we can build (and fix) smarter.

[space]This year, the Urban Land Institute will hold its fourth annual Planet Awards for Smart Growth and Sustainability June 26 at the Balboa Theatre. Awards will be presented for best practices in land use that are ecologically sound, economically viable, socially beneficial and culturally appropriate for development projects or plans and visionaries that accommodate our growing population, grow our economy, and enhance our lifestyle and well- being. Finding solutions to our neglected infrastructure is smart and adds to the sustainability of our region but will not be easy. Creative solutions must be found and more than likely we will need to pay for those solutions. Neglecting smart growth and sustainable strategies is potentially threatening to our city. As Jared Diamond writes about in his best-selling book “Collapse,” societies choose to fail or succeed. By ignoring warning signs, especially when a pattern of catastrophe surrounds us, we consciously choose our own peril.

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