Lawyers Help Builders Decipher New Green Building Codes
By: Mark Larson

Real estate owners and developers have huge challenges to survive one of the toughest economic times in the country’s history.

But growing green building environmental laws and regulations arriving through state and local legislative channels during the past two years coupled with severe water supply issues have given them another set of challenges to deal with.

“A lot of local jurisdictions are looking into green building,” said Jeffrey Chine, a land use, environment and real estate attorney in San Diego. “They’re either implementing state standards or are adopting their own green building ordinances.”

As the economy improves and development starts ramping up, says Chine, compliance with new green building laws will be a challenge for builders.

During the building market slump, the state Legislature has been very active passing green building legislation. Builders resuming their projects when the economy recovers, says Chine, will have to digest a lot of building code changes.

“They’re going to find it’s a completely different world they’re living in,” said Chine of the law firm Allen Matkins Leck Gamble Mallory & Natsis LLP.

For one, extra costs of green building could backfire, he adds, since history shows not all home and building buyers want to pay the higher costs that are passed onto them because of green building features.

Chine, who helps identify green building requirements for client projects, notes one positive: Such projects are fast tracked by the city and county of San Diego, as well as other cities in the county.

Water Wrangling

Meanwhile, drought conditions in San Diego make the water supply a big issue for developers, Chine notes. Some areas of San Diego County such as Rainbow Municipal Water District are not issuing new water meters because of it.

It remains to be seen if the state’s new water laws will ease the local supply problem. But local water supplies need more diversity, says Chine. A current trend in coping with the problem is the issuing of “water offset” credits, which are issued to project developers taking part in off-site water conservation that demonstrates an overall zero net gain in water use. The pursuit of such offsets have gained momentum during the past year, says Chine, after second-stage drought conditions were declared by the San Diego County Water Authority and local water agencies began following suit.

Another huge blow to San Diego’s water supply came with a Jan. 13 court order that will end its importation of water from the Imperial Valley. Los Angeles-based attorney Malissa McKeith says the decisions will likely be challenged with appeals, but she doesn’t expect them to prevail over the ruling. She says this could impact San Diego’s ability to grow if it doesn’t find other sources of water to replace what has come to be an estimated 30 percent of its water supply. San Diego’s use of about 650,000 acre feet a year of water is in line to be cut by the estimated 200,000 acre feet of annual water that has come from Imperial Valley.

The recent ruling found the water diversion harmful to agriculture around the Salton Sea. Receded levels of the huge inland body of water created dust and harmful air pollution to citrus and palm tree growers, says McKeith. Other negative ripple effects she cites were economic impacts on tourism and homebuilding in Imperial County and Coachella that weren’t analyzed when the water transfer began in 2003.

McKeith contends the legal cost of negotiating the project when it was first proposed in 1997, and its subsequent years of legal defense, cost San Diego, Imperial, Coachella and Metropolitan water districts “hundreds of millions of dollars.” The Imperial Valley water transfer to San Diego was battled in court for years, costing the Imperial Irrigation District a reported $1.7 million for the 2007-08 period alone.

For San Diego, “Desalination and reclaimed water may prove to be less costly than fighting over the ag water,” says
McKeith. She contends there’s documentation that low-flow toilets statewide would alone save 600,000 acre feet of water annually.

Over the last three years, during the implosion of the economy, some builders went out of business, while others just pulled back to stand on the sidelines.

“Now,” says Chine, “some developers believe the economy has bottomed out. They’re moving forward to get projects approved.”

The motivation, he says, is to avoid waiting too long when prices go up and competition increases.

New home inventory in San Diego has been absorbed, says Chine, and high demand for housing adds to the already high cost of living in the region.

And now, with infill development gaining popularity in San Diego as a preferred green mode of building, Chine notes that such projects bring higher densities to existing neighborhoods. And, he adds, that is likely to trigger more cases of grass roots opposition, which often cause delay and add costs to projects.

Challenges To Projects

San Diego attorney Everett DeLano, who often represents environmental, neighborhood or homeowner groups in lawsuits against proposed developments in their areas, says he’s seen a different tact among developers whose projects are being challenged in court.

“Five years ago, when developers got approvals they wanted to start building right away,” says DeLano, and if they drew legal protests, there was more willingness to settle cases. Now, with building halted almost everywhere because of the economy, DeLano says, they’re more willing to fight court challenges to their projects. And that’s keeping him busy. “In a way, everybody’s hunkered down for a fight now,” he said.

The lull in building imposed by the slumped economy has also been used by some infill developers to use government stimulus funds to do toxic cleanup needed on their San Diego building sites.

San Diego attorney Suzanne Varco of Opper & Varco LLP says the grants are capped at $1.5 million per project. She has two clients getting federal money totaling $1.5 million and $1.3 million, respectively, and four others getting state funding. Two of them are getting $1 million and the other two are getting $700,000 and $200,000, respectively. Five of the projects are in the downtown area and the other two are in outlying areas.

With soil remediation and other needed action done during the lull in the economy, says Varco, the sites will theoretically be clean by the time the economy makes building feasible.

“Then they can just go out and dig and build,” she said.