Big projects thrive even as market slows

The number of building permits issued for individual home projects has plummeted in the Tahoe-Truckee area during the ongoing slump in the California real-estate market.

But the gloom hasn’t affected larger developers, who continue to propose large-scale projects in the North Tahoe region as if it were still a boom market.

The drop in residential construction led to layoffs in the Town of Truckee’s building department earlier this fall, but so far the planning department continues to receive development applications at nearly unchanged rates.

“Planned Community One (Coldstream), Planned Community Three (Joerger Ranch), the Railyard and Hilltop are all vying for planning time like it’s a red-hot economy,” said Town Manager Tony Lashbrook in an interview this week.

Because the planning horizon for larger projects is generally measured in years, Lashbrook said the continuing interest in such projects makes sense.

“They can pursue their land entitlements now, so when the next upswing in the market comes along, they can respond,” Lashbrook said.

Projects already on the ground Larger projects that went through planning while real estate boomed, only to come onto the market during a downturn, present challenges to developers seeking to limit their losses. Tom Grossman of GLA Morris Construction said the Winter Creek housing development came onto the market in December 2005. Because the company is building the 147-unit project in phases, he said GLA Morris is able to meter out new homes in response to the economy. “Between December 2005 and December 2006, we sold an average of three homes a month, while in 2006-07, we averaged two a month,” Grossman said. “It’s slowed a little, but is still strong.” In response to the slowed sales, Grossman said as both the developer and the builder, his company can slow down construction to keep pace with demand. “I don’t think it’s the decline in real-estate prices that’s hurting us; it’s the decline in available funding for sub-prime buyers,” Grossman said. “First-time buyers are having a much more difficult time getting loans, and that has affected the pace of our sales.”

Two-year permits

But there is a limit to how long a project can sit and wait for the market to rebound, Lashbrook said.

General policy gives project proponents two years to begin construction after winning approval, with the possibility of a two-year extension, the town manager said. But some developers, like those behind Gray’s Crossing, worked out deals that allow them to phase in their projects over longer periods of time, Lashbrook said.

Michael Johnson, Placer County’s planning director, said he’s seen no slowdown in planning in the Tahoe Basin or Martis Valley. Johnson said eastern Placer County’s commercial development hasn’t been hit as hard as residential projects in other areas.

Plans for downtown Truckee’s Railyard can’t foresee what the housing market will be like when building starts, so instead planners built flexibility into the project, said Molly Maybrun, development director with Holliday Development.

“Once the project is approved the market comes into play,” Maybrun said. “Having been involved in a number of large-scale projects, you can’t predict the future, so I believe flexibility is important.”

One way the company can retain some flexibility with the 75-acre project is by trading live-in work units with traditional residential and commercial uses, depending on the market, Maybrun said.

Developers of Royal Gorge on Donner Summit also expect their project to go through a few market cycles, but think high numbers of second homeowners may dull the lows, said Royal Gorge Project Manager Mike Livak.

“We’re not immune from a downturn, but we may expect more second-home buyers with more financial stability,” Livak said.

Permits, applications by the numbers <b>Building permits in Truckee, by the numbers</b> 461: Residential applications 2005 385: Residential permits 2005 335: Residential applications 2006 326: Residential permits 2006 174: Residential applications 2007, as of September 164: Residential permits 2007, as of September <b>Building permits in Placer County portion of Tahoe Basin</b> 50: TRPA building permit allocations 2005 54: Building applications submitted to Placer County 2005 50: Permits distributed by Placer County 2005 49: TRPA building permit allocations 2006 49: Building applications submitted to Placer County 2006 49: Permits distributed by Placer County 2006 50: TRPA building permit allocations 2007 29: Building applications submitted to Placer County 2007 29: Permits distributed by Placer County 2007