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More Talk About Housing Crisis; Few Conclusions

September 24, 2001

Article by Steve Silverman

Marked by a moment of silence and last minute replacements for speakers stranded by the World Trade Center tragedy, the Urban Land Institute/University of Southern California Lusk Center Real Estate Summit went on as planned Sept. 13.

The topic, a crisis - albeit of less import than that week's events: How to bring California's developers, environmentalist, and politicians together to build enough housing to support an impending population boom.

Close to 200 developers, government officials, lawyers and environmentalists gathered at the invitation-only forum at USC to discuss how to deal with the problems of growth and development expected in Southern California and throughout the state during the expansion.

Despite a spirited debate with sentiments of compromise and cooperation expressed by all sides, participants were not optimistic.

"The frustrating thing is that we've been talking about these issues for 10 years," Playa Vista CEO Peter Denniston says. "Talk is cheap; we need to make some fundamental changes to our business to respond to this growth."

Sharon Kaplan, a principal of planning and entitlements at the consulting engineering firm PSOMAS, had similar sentiments. "We're all just talking to ourselves," she says. "State representatives are sadly lacking from the event."

The ULI tried to recruit more governmental participants, but the efforts were hampered by the power crisis and a state legislature that is still in session, Susan Kami, a ULI executive director, says.

Still, all was not a wash.

Attendee Allan Kotin, an adjunct professor at USC and principal of the real estate consulting firm Allan D. Kotin & Associates, felt the event was a good start.

"Most conferences don't lead anywhere," he says. "This one is strong enough and prestigious enough to have the potential for impact beyond a simple exchange of ideas."

Indeed, Julie Bornstein, director of the Department of Housing and Community Development for the State of California, felt the discussion groups were productive.

"For the past 20 years, local government hasn't encouraged housing over commercial development," she says, referring to some of the unintended consequences of Proposition 13.

"There are some specific program ideas that I will bring back the housing department to deal with the issue," she says. For instance, Bornstein plans to submit suggestions concerning tax incentives at the event for consideration at her office in Sacramento.

U.S. Census projections indicate California's population will grow by 44 percent, adding at least 15 million residents to its cities by 2020.

According to Gary Cusumano, CEO of the Newhall Land and one of the keynote speakers at the event, 75 percent of that growth will be in Southern California and 66 percent will be the result of internal population growth, or so called "births over deaths."

"It can't be stopped without population control," Cusumano told the audience in his keynote address. "And I don't see that on the horizon."

Attendees agree: almost 2 million homes will have to be built over the next 10 years to keep up with demand. That's twice the number of homes built over the previous decade.

Over the next five years, Los Angeles County alone will have to build up to 30,000 new homes each year to keep up with demand, Cusumano says. After that, an astonishing 50,000 homes per year will be required to keep pace with the growth, he says.

Attendees participated in "working groups" led by a panel of experts ranging from academics and government officials to developers and environmentalists. The groups discussed issues such as entitlement reform; the balance between jobs and housing; water and power issues, and urban quality of life.

The conclusions of each group will be formally summarized in a research brief published by the Lusk Center and ULI. The research brief will include a plea for more flexible zoning laws, tort reform, public relations efforts stressing the benefits of development, and fiscal incentives that encourage local governments to choose residential housing projects over commercial development.

The importance of political involvement to a developers success is one thing participants could agree on.

"Our business is a political business," says Gary Hunt, a senior advisor to The Irvine Company, in his closing remarks.

"Democracy, planning, and growth are political decisions subject to the approval of constituents."

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