From disaster to building boom? Why developers are eyeing Santa Rosa

San Jose Mercury News (CA)

April 09-- Apr. 9--SANTA ROSA -- City officials here hope the answer is a resounding yes.

A year and a half after the Tubbs Fire devastated the city, killing 22 people, burning 3,000 homes and making an existing housing shortage even worse, Santa Rosa's city leaders are trying to turn that tragedy into a catalyst for new development. They're hoping for a flood of building applications that will transform Santa Rosa, bringing high-rise apartments to the city's skyline and injecting new life into downtown. To get there, the city is pulling out all the stops -- waiving development fees and relaxing rules on a scale the Bay Area has never seen, hoping to lure builders north.

"We need the Bay Area to come up here, recognize what we're doing, help us out," said Assistant City Manager David Guhin.

Those tactics already are turning heads, though some experts remain skeptical that Santa Rosa can support large-scale residential development.

In March, the Bay Area Council business association invited dozens of developers, investors, architects, brokers and others in the building industry on a tour of Santa Rosa to scope out the city's potential. The response was overwhelming -- the council filled a bus in 48 hours, and nearly 70 people ultimately joined the trip.

Guhin led the group on a rambling tour of downtown Santa Rosa, pointing out empty land, vacant buildings, parking lots and garages that could be turned into housing.

Many developers walked away with a new appreciation for the area.

"I'm interested," said Wilson Chen of real estate developer and investor APIC. "The city seems very supportive, which is very rare in the Bay Area, so we see good potential here."

Officials estimate Sonoma County has a shortage of 30,000 homes, after more than 5,000 were lost in the Tubbs and other 2017 wildfires. The fires devastated Santa Rosa in particular, costing the city 5 percent of its housing stock and destroying nearly the entire Coffey Park neighborhood.

A year and a half later, communities are bouncing back. In Santa Rosa, the rebuilding process has begun for more than 1,700 of the 3,000 homes lost within the city limits, said Guhin.

"We're way ahead of where we thought we would be at this point," he said.

But rebuilding the homes that burned down -- mostly single-family houses in residential neighborhoods -- isn't enough. The city also needs new rental apartments to house residents who either don't want to rebuild on their fire-ravaged properties, or can't afford to because they were under-insured, Guhin said. In an effort to get that rental housing built, the city is rolling out the red carpet for developers, offering them a long list of perks if they build the type of housing Santa Rosa wants -- tall, multi-family apartment buildings downtown.

Last year officials capped the city's impact fees for downtown developments, charging builders only for the first three stories and waiving the rest. The city also expedited permitting for downtown projects, cutting the time it takes to get approval from 18 months down to six. And Santa Rosa officials are considering raising downtown height limits, now capped at 10 stories, and reducing parking requirements.

The size and scope of those developer incentives are "unprecedented" in the Bay Area, said Matt Regan, senior vice president of public policy for the Bay Area Council.

"They've really done everything that needs to be done to make development possible," he said.

In other Bay Area cities, developers often complain of hefty construction fees and cumbersome regulations.

"Everyone I know in the San Francisco and other Bay Area markets has internalized the trauma of wrestling with city departments," said Alex Ludlum of commercial real estate firm Colliers International, who took part in the Bay Area Council tour. "I sort of feel like I'm in Disneyland when I'm in Santa Rosa."

But some experts wonder if there's enough demand for housing in Santa Rosa to generate the kind of building boom city officials want. The city doesn't have an Apple or Google-sized employer, and it's a long drive from job hubs in San Francisco, San Jose and Oakland.

And Santa Rosa has struggled to build in the past. The city's downtown plan calls for 3,400 housing units. But 10 years after that plan was put in place, just 100 units have been built, Guhin said.

"It does seem as though a tumbleweed might blow down the street at any moment," Ludlum said.

Regan expects what Santa Rosa lacks in demand and red-hot prices, it can make up for with the cost-saving incentives it's offering developers. The only thing missing is awareness, he said. And that was the point of his tour -- getting Bay Area developers to look north.

Another promising sign: The Bay Area Council led developers on a similar tour through Oakland five years ago. Today, the Oakland skyline is dotted with construction cranes and downtown is bursting with trendy new bars and restaurants.

Developers hoping Santa Rosa will be the next hot market still have to win support from the community. For the most part, local residents already seem to be on board with the city's redevelopment efforts, said Michael Allen, who has lived in Santa Rosa since the 1970s and formerly served as a state legislator and on the city's planning commission.

"We need to make the downtown more vibrant, and one way you do that is by increasing the density and the population," said Allen, who now chairs the Coalition for a Better Sonoma County and the Accountable Development Coalition.

As in any city, building a more vibrant downtown raises the specter of gentrification, and the possibility of low-income residents being priced out. It's an issue Santa Rosa city officials are aware of, even if they don't have a ready solution.

"I don't have a specific easy answer to that one," said Mayor Tom Schwedhelm, "but we are very sensitive to that because we do want to have that mix of affordable housing and market rate."

Santa Rosa does not have rent control or rules prohibiting landlords from evicting tenants without cause. Both rules appeared on the ballot but were voted down in 2017.

Lorez Bailey, who runs a community center for teenagers downtown, is excited about the city's plan to revitalize the area. But she's also concerned new development will bring traffic and parking problems, and possibly put pressure on her community center -- Chop's Teen Club -- to find a new home.

"I have a fear of is it going to grow so much that they're going to say we don't want this teen club here?" Bailey said. "I do worry about what that means for us."

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