The local residential housing market has seen a spike in
activity this year, a trend that could signal the beginning of
Morgan Hill’s economic recovery if it continues.
The local residential housing market has seen a spike in activity this year, a trend that could signal the beginning of Morgan Hill’s economic recovery if it continues.
Building permit activity in the city’s community development fund has jumped drastically compared to 2009. Through Sept. 30 the city has issued 779 building permits, a number that is likely to quickly eclipse the 792 permits issued the entire year in 2009.
While those numbers include every category of building permits, which are required for projects as small as installing a new water heater or tearing out a wall, and as large as constructing a new shopping center, the rise in new homes approved this year is particularly promising for the city’s financial outlook.
Permits for 111 new houses have been issued thus far in 2010, according to city staff. In 2009, the department approved only 25 new homes as the region’s housing troubles worsened.
“We are cautiously optimistic this is the beginning of the rebound (from the recession),” community development director Steve Piasecki said.
The recent recession that was caused by a nationwide housing and credit market crash resulted in significant losses of sales tax, property tax and hotel tax revenues for Morgan Hill and other cities. This summer, economists declared an end to the recession, and city staff predicted the local recovery to begin late this year.
The loss of revenues forced the city to make substantial cuts to services, including 10 layoffs and more than $2 million worth of reductions this year alone. One of the layoffs – a municipal services assistant – was in the community development department which processes building permits, as staff saw a decline in demand for the services due to the downturn.
Most of the new homes approved this year are parts of larger developments, including 49 units under construction in the Horizons senior housing community on McLaughlin Avenue, just north of downtown, according to Morgan Hill development services technician Elizabeth Bassett.
Also owing to the increase in building activity is the Morgan Glen development off Tilton Avenue, where 27 homes were approved for construction this year; Rancho del Pueblo near Church Street and Bisceglia Avenue with 14 units; and the development formerly known as Lone Oak off Barrett Avenue.
Since the beginning of the year, 11 homes have been under construction at the Barrett Avenue development, and seven of those have already sold, according to Tony Lupina, real estate agent for Alterra. Lupina was involved in the sale of some of those homes, which have been listed for about $500,000 to $750,000.
The market as a whole is still struggling, as the same homes would have gone for $675,000 to $1 million-plus back in 2007, Lupina said. Builders and developers are still trying to catch up on previous allotments for hundreds of new homes that were planned at the peak of the housing boom, but haven’t proceeded for two years or more due to a combination of foreclosures, a lack of financing and few buyers.
“We see it as very little competition,” Lupina said. “You see only two or three places (in Morgan Hill) offering new homes.”
City staff estimate building permits will bring in about $350,000 in revenue for fiscal year 2010-2011 – a drop from about $433,000 last year. The cost paid by builders for permits is based on the value of each approved project.
But that’s peanuts compared to pre-recession years, when permits dumped $1 million into the community development fund by the end of fiscal year 2006-2007, city budget manager Jimmy Forbis said.
Total revenue expected in the department this year, including fees from inspections, is about $1.6 million, also a decline since fiscally more sound years such as 2007-2008 when the department’s revenues were about $2.6 million.
And the city has some breathing room before the demand for former levels of community development services returns to previous heights, as the department issued 1,161 permits in all categories in 2007 – including permits for 170 new housing units, Bassett said.
It is unlikely the department will have to submit a mid-year request for more staffing to the city council, Piasecki said.
New commercial construction remains non-existent in Morgan Hill, with no permits issued in that category so far. Eight permits have been processed for work to be done on existing commercial properties, including additions, grading, plumbing and electrical projects.
Another category of permits that has risen sharply this year, though not a significant revenue generator, is that of new solar power system installations. So far in 2010, 88 such permits have been issued, Bassett said. In 2009 only 28 solar panel installation permits were approved in Morgan Hill.
Program administrator Anthony Eulo said solar power is “catching on” among homeowners in the area.
“People are interested and concerned about their use of energy,” Eulo said. Plus, marketing by solar power providers has become more vigorous in the area and the cost of materials has dropped in recent years.
Unlike other building permits in Morgan Hill, those for solar panels are not based on valuation, as the city instead charges installers a flat fee as an incentive to encourage the use of solar power, Bassett said.
