Developer: Harvey’s rules drive up costs
New regulations on how developers put up homes, shopping centers and apartments will make it more expensive to build in Houston, which is already seeing higher costs amid a construction labor shortage and rising land prices, apartment developer Ric Campo said Friday.
“The cost side of the equation is being driven up by new Harvey regulations,” the CEO of Houston’s Camden Property Trust said in an earnings call with investors.
Some of the possible regulatory changes have people in his industry concerned, Campo said, citing the city’s proposal to require builders to put structures two feet above the flood level in a 500-year floodplain.
Developers should be required to raise buildings if they want to build in places likely to flood, said David Crossley, founder of regional research institute Houston Tomorrow, said.
“If you have a 500-year floodplain and if three years it’s flooded, you just have to stop building in that place,” Crossley said. “I don’t see there’s any choice.”
With less land to build on,
prices will, indeed, get higher and developers will build more multifamily projects, Crossley said. “That’s what cities do,” he added. “There’s nothing new to that.”
In the short term, Camden — and other local landlords — have benefited from the storm as thousands of displaced Houstonians are now renting apartments. Camden’s local portfolio is now 97 percent occupied.
Renters who signed leases after Harvey will likely need apartments longer as their homes take longer to repair than expected.
The apartment developer, which owns interests in and operates 156 properties across the country, started construction in the fourth quarter on a $132 million, 271-unit building in downtown Houston.
Company-wide, apartment occupancy was 95.7 percent during the fourth quarter, up from 94.8 percent a year earlier.
Camden this week reported fourth-quarter property revenue of $229.8 million, up from $217 million a year earlier.
Funds from operations, a widely used financial measure of real estate investment trusts, was $114.5 million, up from $105.5 million.
Camden, which rates its markets with a letter grade, gave Houston a B, up from a D last year when the market was glutted and oil prices were down. The company cited strong job growth projected for 2018 and fewer new units coming online over the next two years.
“The good news for Houston is in 2018 we’ll only see 7,000 apartments delivered,” Camden president Keith Oden, comparing that to the some 20,000 new units delivered in each of the last three years.