TriPointe Homes - Thomas Grable

Oh, thanks for having me back.

Sure. The California Building Industry Association, or CBIA as we call it, is a statewide organization. It's a trade association. Home builders, our makeup is really everybody that is involved in the process of providing housing in California. We represent between 80 and 90% of all the housing units that are built in our state, and we represent some of the largest land owners, land developers, as well as some of the biggest publicly traded home building companies, and also the medium-sized and even small private home builders up and down the state. The people who rely on the California Building Industry Association are really all the trickle-down businesses, from contractors to architects to land planners, you name it, that go into building a house. All of our trade partners as well as all of our design consultants, they're all part of our total organization.

True. Yes, what I like to describe is a three-legged stool that's been expanded now to five legs. Our association is involved in certainly first advocacy on our behalf, but also education and also business development opportunities. But the other two legs I add to that now is advocacy and more advocacy. So that is the primary purpose of what CBIA does. And there are different divisions within the state in different geographical areas, from Northern California to LA to Orange County, you name it.

Yes.

Yes, yes. We have an executive committee and the chair does rotate in and out of the executive committee from our board. But the chair is generally a builder or land developer by charter. So we are kind of the engines of the train. Obviously we carry a lot of cargo along with us in order to do what we do. But in terms of being the tip of the spear and being involved in the issues that either make or break housing opportunities, yes, us builders are the ones that are at the leadership level for that.

Well, when people learn about what we actually have to go through just to build a home, they wonder why you do this, or how long it actually takes till something actually comes out of the ground. A lot of times to take a new community proposal through what is called the entitlement process, or what we call entitlement, that can take years. And it can take twice as long to get a community approved as it does to actually build it.

Yeah, so it happens.

Housing has such a broad spectrum of issues associated with it. So what could be a secondary or tertiary type of issue still affects housing. For example, the Natural Resources Committee, that's where a lot of environmental policy is. Environmental policy affects our business. The Insurance Committee, whether it's the state Senate or the State Assembly Insurance committees, right now that's front and center in the news in terms of property, the ability to get property insurance, especially in outlying areas that are close to wildland areas. So those committees affect what we do. But the Housing Committees of both the Senate and the Assembly, we regularly meet with the leadership of those committees as well as leadership of each respective house of the state, both the Assembly and the Senate. But also, you mentioned something I want to clarify. You talk about housing crisis, and that's something that occurred to us: we don't have a housing crisis from the sense that if we had the ability to build homes, we would and could. We would be able to solve our supply chain issues that we've had of late, as well as the labor that's necessary to build. We can build homes. So in actuality, we don't have a housing crisis from the standpoint of builders not being able to build homes fast enough if they can. What we have instead is a housing policy crisis. And the housing policy crisis is something that's been over time, last 40 years basically, as California has become more and more restrictive on the ability for builders to build and to satisfy the demand. The layers and layers of requirements and restrictions and regulatory issues make it not only more difficult but more costly to do it at the end of the day. So on the one hand, it weeds out competition; on the other hand, it really restricts it. And so now you have COVID where nobody was building anything, and the byproduct of that flows downstream. So you have housing prices that really didn't come down at all, and part of that is because you still have very limited supply available. And then you have people in Sacramento, the governor and others, saying we need to build more affordable housing, and we need to build more housing period. And then you're focused on the affordable housing, and then you're requiring individual cities by the mandate that you put together to have a target of a certain amount of affordable housing units within each city. And each city throughout the state has got a number from Sacramento, many of which are completely unrealistic from the mayors that we've had in here talking about it. At the same time, the goal is you got to try. And then how does it go at the end of the day? If the builder can't build it, or the city's not building it, or it doesn't pencil, or I can't find some land to be able to do it, then you don't get anywhere at the end of the day.

Well, you would call me silly, but that is not happening at the state level. We continue to have to advocate for more housing opportunities, but we're still batting back a lot of legislation that works counter to that. We have a regular hit list that comes out through the course of the legislative season. In the course of that, we're monitoring where bills are going through committee as they are introduced. Last year we had almost 300 bills that were introduced that had an influence toward housing or against housing, what we call housing creators or housing killers. But there were 300 bills in one year. The vast majority of those were housing killers, they were not housing creators. A lot of them seemingly may not have been directed at housing but had a housing impact. Insurance being one of those, wildfire legislation. While it seems like the right thing to do, when you look at the facts...

Well, the first thing to understand about infill development is you're talking about properties that generally have something on them already. So in a lot of cases, we're going in and buying a property and we're tearing down something. At Tri Pointe and other builders, we do that. We've had shopping centers that are no longer relevant, office complexes, even schools. For example, Huntington Beach had one elementary school per square mile, and then all the kids grew up. Now they don't have the need for that many elementary schools in that city, and never will, even with infill development, even if they satisfy the RHNA numbers. So when you look at where the opportunities are to build in infill, they are selective, they are far between. It's not something you can just go and buy 10 homes, tear them down, and build 20 homes in their place. It's very difficult to do that. And you're also looking at really smaller developments that are not going to move the needle in terms of the overall desire to create substantial additional housing. Where you're able to get bigger developments is where you have larger plots of land, which then gets back to where does that go. We like infill housing. It is difficult to get out of the ground, but once you do get it going, usually you're building in an area that is starved for housing, so there is demand. You just have to make sure that you're designing the right product, the right density, and the right price in order for that to happen. But infill generally does have a lot of pent-up demand. But you need balance. You need to balance the infill development with the greenfield development. You're not going to be able to accomplish what we as a state need to accomplish to provide some stability with our attainable or lack of attainable price points, lack of affordability, unless we're building more housing to fill the need for the demand. Until we do that, we're going to still have a challenge in our state to drive down affordability.

Yes, and the environmental lobby is very, very powerful. They have a great deal of influence. And I'm an environmentalist too. I want us to preserve the environments that are truly important to us and should be enjoyed by all. However, there is the notion that if we just stop housing of all kinds and cause people to go elsewhere, to other states, it will further solidify the environmental agenda of the environmental lobby. The problem is people are still coming here. So what you're doing is driving out the middle class and making a situation where only the very wealthy can afford, and then you have everybody else, and then you wonder why we have the societal issues that we do, especially in the more urban environments. The other thing about our state is most people don't realize that when you look at what is actually built on the land of our state, if you took the total amount of concrete, pavement, buildings, and even private yards, not counting that as open space, 6.8% of our state is built upon. That's it. You don't realize that. You drive around Los Angeles and you think, oh my gosh, or you fly over on a plane and you think there's no trees, I don't see a park, it's all buildings. As opposed to you fly over other parts of the country and you see lots of lakes and green and forest. But the difference is you're only flying over the urban area. You're not flying inland in terms of the state. You really don't have to go that far east to get to the point where it's really not that developed. So the challenge is providing opportunities where you're at least providing people with the ability to get into a home, whether it's a for-sale home or even a rental home, even looking what rental prices have done of late. But you need to have both the infill opportunities. You need it all. You cannot solve the problem with just affordable housing or state-funded housing or assisted housing. You need all classes.

Well, interestingly enough, CBIA was the tip of the spear and continues to be the tip of the spear on that issue. That was first raised at CBIA two and a half years ago, and now it's in the headlines. We were starting to see the creep of insurance rates for new development, especially the developments that are on the outer edges of our urban footprint, closer to the wildland areas. They were seeing huge spikes of increases in premiums, especially for attached homes, so townhomes, condominiums. They were experiencing triple-digit and even quadruple-digit increases. For those folks out there that aren't aware, an attached home, one catches fire, it'll spread very quickly. That's the risk. So the risk is the entire building. So we started talking directly with the insurance commissioner and his office, as well as the governor's office and the legislature, about this challenge, what's coming down the pike. And sure enough, it happened. Now you start to see, with the inability of insurance companies to adjust their rates to what their actual losses are, they're exiting our state, or they're just pulling back dramatically. For real world examples, I used to have a lot of insurance policies with State Farm. They just woke up one day and said, hey, we had a bunch of losses, we're done. State Farm over the years had either cut off the spigot and then they'd come back and then they'd go, and they're not coming back anytime soon. I talked to my State Farm guy and he just said, look, you're screwed. I'm just paraphrasing. I actually think that's what he said. But you have other large companies, Mercury and Liberty and others, that have just said, look, I can't take it. We've had lots of losses, we've had lots of natural weather events that have caused damage, and then you have the going forward risk. So now in a newer building, you don't have the issues of the electrical and the plumbing and the roof and what have you. But we're hearing stories that if a building or a property has an older roof, you're just going to get declined. And it's happening to people who've been in their home for 20, 30 plus years that aren't necessarily up against a wildland area, they're just in the area. I'm going to actually switch gears a little bit and come back to that and talk about housing on the outlying area. Wildfire is a hot issue, especially when you're talking about the catastrophic losses that we've seen in recent years, whole towns being leveled, Paradise and Greenville and places like that, tragic. However, in 2008, as the state continually updates their building codes and fire codes, there was an update that was extremely substantial. Homes that were built after that code cycle was adopted, basically homes built from 2010 onward, those homes are among the most fire-hardened structures that we've ever built, short of the pyramids. The homes that we're building today up against those fire-prone areas are extremely fire-hardened. We use very specific construction techniques to insulate those homes from fire risk, to the point where when we're building a new community on the edge of a town, we're building a wall for the older homes in that town. For example, if Paradise had had a new subdivision on its eastern flank, it would have blocked it. It wouldn't have just run right through the whole town, or certainly would have protected a good number of structures that otherwise were lost. So we're able to claim the mantle: we are the wall that the city wants us to be building in those areas to provide that protection. And we've got data and facts and figures that absolutely support that. But again, those are facts.

Well, again, you really need for us to be building up against and providing that barrier for the older housing stock in those communities because of our ability to withstand. This has been proven. We had the fires here in Orange County, was it five years ago in Irvine? Those fires went right up to the back fences of new housing. Not one structure was lost. Not one. It didn't have any substantial fire damage. But when you talk to the insurance company, they don't care because if they have to pay the claim, they're saying it's risk.

Well, and you're not allowed to adjust your rates commensurate with your losses. That's something that the... just say no.

Well, one of our big pushes for this year is a school bond on the November ballot. There is a need to build new schools in our state. I mentioned earlier that in some of the older cities, the need for schools has become a lot less, but in the areas that we are building, especially places like here in Orange County and the Inland Empire and up in LA County and places like Santa Clarita, there is need to build new schools, but there's no money to do it. So the state's going to float... well, first we have an election to decide if we'll do it, and then if it passes, the state would float the bonds which would fund the development.

Exactly.

Not yet. It's not till November. So for those people out there, keep an eye on it. Make sure you vote, make your vote count. I think you should vote for the school bond thing. It's a good thing for everybody.

So cbia.org, and also here locally, biaoc.com for local events. We encourage anybody and everybody to be involved. We engage with a variety of different kinds of partners. The Realtors are a frequent partner of ours, California Chamber of Commerce. We have a lot of coalition partners. And we do partner even with people that we don't always agree with and see eye to eye with, such as labor unions and environmentalists. But if there's something that is good for all parties, then we're going to build coalitions wherever the need is.

Well, thanks again for having me, and we certainly will keep up the fight.