Suburbs in the City

The 14 new homes rising on a vacant lot in south Torrance were far from finished and were not yet officially for sale.

But that did not keep eager buyers from maneuvering through the building site to ask construction workers about prices and other details, says developer Gerald Marcil.

“I don’t have any fear that they will sell and will sell quickly,” said Marcil of the homes, which will be priced in the $300,000 range.

Instead of building in subdivisions on the suburban frontier, Marcil is one of many Los Angeles-area home builders who are taking advantage of the renewed demand for new houses in close-in, urban neighborhoods.

Residents looking for short commutes and housing in desirable neighborhoods have snapped up expensive view homes in the South Bay and cottage-style row houses in Orange County. Competition for available sites is fierce, with rival developers scrambling for overlooked building sites ranging from former drive-in theaters and truck terminals to surplus schoolyards. One project of high-end houses in Long Beach will be built atop what is still an active oil field that will need an environmental cleanup.

The expense can be justified because new homes in established urban neighborhoods are precious commodities. Despite the strong demand, less than 20% of all new residential construction takes place in the region’s mature urban areas, where available land is scarce.

Only a tiny portion of this new construction is located in lower-income neighborhoods, where the need for new and additional housing is pronounced. But economics dictate that most of the new homes will be marketed to wealthier buyers, leaving lower-income residents with few choices. Government support--through financial incentives and subsidies for builders--”will help but will certainly not fill the demand [for low-income housing] by a long shot,” said Richard Peiser, an urban and regional planning specialist at USC.

Still, as Southern California bounces back from a deep economic slumber and construction picks up, many urban planners and government officials hope to steer that future growth back into existing cities and suburbs instead of spawning still more suburban sprawl.

Infill development--the term used to describe new home construction in existing urban areas-- is seen as an important tool in accommodating a growing regional population, which is expected to add nearly 7 million new residents by 2020.

“We can either continue to develop as we have, which is to keep going farther out, or we can go back and reinvest in our cities and make [vacant and underused sites] productive once again,” said Bev Perry, who oversees the housing and economic development committee for the Southern California Assn. of Governments, a regional planning group.

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Many planners see the construction of new, centrally located homes as a partial remedy for a long list of urban ills, ranging from blight to debilitating commutes. There are even those who argue that such projects help reduce air pollution by reducing the time people spend driving to and from work.

In Pico Rivera, the Braemar Group worked with the city’s redevelopment agency to clean up a 13-acre site that was once dominated by abandoned houses and derelict motels. The Calabasas-based home builder is constructing more than 100 single-family homes and a senior citizens’ apartment complex as part of the $30-million project.

The development caught the eye of Pedro and Rosalinda Rodriguez, who faced the prospect of grueling daily drives if they purchased a new home in the Inland Empire. But last May, the young couple moved into their $191,000 house, which is more than big enough for their two children and less than a 20-minute commute from their jobs in central Los Angeles County.

“It’s very quiet and pretty here,” said Pedro Rodriguez, 29, who works at a nearby railroad yard. “Everything is working out fine.”

Even in Orange County, where new subdivisions continue to eat away at former ranchland, many developers and civic leaders have embraced infill housing. In Brea, the city has helped in the construction of three infill projects with about 160 homes in its downtown redevelopment area.

“There is a market” for these houses among first-time home buyers, empty-nesters and childless couples, said Perry, a Brea city council member. “We found people love it. They are buying it.”

As the economy picks up and traffic gets worse, demand will only grow for infill housing, said Mark Buckland. president of Olson Co., a Seal Beach-based developer now building 1,500 homes at infill sites across Los Angeles and Orange counties.

“We feel as time goes by the opportunity for our business increases because our [homes] are closer to the job base,” Olson said.

Olson is part of a league of builders and developers that specializes in home building in the city. Unlike building hundreds of houses at once in a master-planned subdivision, infill specialists build as few as six or 10 homes at a time on overlooked scraps of land. They team up with cities and redevelopment agencies to clean up industrial sites for housing and soothe nearby homeowners by promising to reduce traffic and clean up blighted areas.

It’s more costly and time consuming to build in the city than in a subdivision, where the appropriate zoning is already in place and the construction of hundreds of homes at a time can reduce building costs. But builders say the higher prices and high demand can make many infill projects lucrative. It also helps that there is little in the way of competing new homes nearby.

Home-building giant Kaufman & Broad Corp. said its profit margins on infill projects can exceed those in much larger subdivisions by 15% and more.

“Selling prices are higher at infill locations because they are proven areas where you already have employment,” said Glenn Brown, director of technical services for Los Angeles-based Kaufman & Broad.

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The scarcity of available sites, especially in more affluent areas, can unleash a bidding war among developers. In many cases, developers have to come up with a complex package of programs and incentives that will win community and government support.

“It’s just easier to go to the suburbs and build houses,” said Jeffrey Lee, president of the Lee Group, which specializes in infill construction projects.

In Culver City, for example, the Braemar Group teamed up with the Lee Group to compete with more than a dozen other firms--including Kaufman & Broad--to develop the now-closed Studio Drive-In. Braemar and Lee won the competition to build 57 homes, but only after including space for a school for children with learning disabilities. The developers also agreed to contribute $80,000 for public art.

“It’s not about paying the most money,” said Avi Brosh, executive vice president of Braemar. The development “has to have a civic-minded slant in order for it to be successful.”

In many cases, cities and their redevelopment agencies have had to donate land and provide other financial incentives to make inner-city home building a profitable venture.

The city of Commerce, for example, is working with developers to build 26 homes on the site of a former truck terminal by providing land it purchased for $2.7 million, according to Brian Dowling, redevelopment and housing manager for Commerce.

If the developers had to pay for the land, they could not build homes priced at $140,000 to $170,000 and still make a profit, Dowling said. “It would be very hard.”