From SoCal Real Estate’s January 2019 issue:
Chelsea Investment Corp.’s Jim Schmid on why affordable housing is critical
By Carrie Rossenfeld
Chelsea Investment Corporation was launched in 1985 in San Diego County’s Imperial Valley, where poverty and unemployment is at some of the highest levels in the nation, the firm’s founder and CEO Jim Schmid tells SoCal Real Estate. Since that time, Chelsea has built some 2000 affordable units in Imperial Valley and has several more in the pipeline for 2019 in both Calexico and Brawley.
Further to its credit, Chelsea was recently named San Diego’s 2018 Builder of the Year by the leadership of the Building Industry Association of San Diego County (BIA), marking the second time in four years the firm has received such a high honor.
We spoke with Schmid about this honor, what he believes led to it, and the challenges affordable builders face in the SoCal market.
SoCal Real Estate: What does it mean to you to be named San Diego’s Builder of the Year?
Schmid: This honor really wasn’t about me; it’s really a direct reflection of the catastrophic shortage of affordable housing in San Diego. It’s an acknowledgement that providing dignified shelter for segments of the population earning well below the median income has to be center stage.
Awareness of the importance of affordable housing has been building within the construction industry. I was the first affordable developer to be elected president of the BIA and last year was the first to be inducted into its Hall of Fame.
We can’t sustain robust economic and civic growth in San Diego without providing housing for all levels of employees. I’m not worried about the CEOs; I’m worried about teachers and police officers and city workers and the people who work in our tourism and service industries. How on earth can they afford to live here on one income and just one job? It will ultimately destroy the fabric of our community, if we can’t provide housing stock for all.
Selecting Chelsea as Builder of the Year is a terrific honor and a testament to the professionalism of our employees across the board.
We’re very proud of the fact that this year, in 2018, Chelsea will have provided 41 percent of San Diego’s County’s housing starts for disadvantaged populations.
What do you think it takes to gain this recognition?
We’ve been at this for a long time, and we’ve watched the affordable-housing industry mature and become an important advocate for more equitable policy at all levels of government. Up until recently, we’ve been a very quiet company, working hard in the trenches to get these projects built and raising the industry bar for best practices in design, construction efficiency, and resident services.
But the factor that has truly distinguished us is our ability to get these complex projects financed, which I credit to the abilities of our president, Cheri Hoffman. Her achievements in finance are unmatched in a field dominated, quite literally, by men. If we had a secret weapon, I’d say it’s Cheri.
Speaking of an industry dominated by men, I’d like to point out that half of our executive team is female, including Cheri, our chief legal officer, and our general counsel. Of our seven project managers, three are female. And in our construction company, Emmerson Construction, three of six project managers are female, which is well above the industry average. Emmerson’s controller and accounting manager are also female.
Aside from financing, what are the challenges affordable builders face in the SoCal market?
Because Southern California is such a desirable place to live, there are substantial pressures on state and local government to regulate development. Over the years, the accretion of regulatory constraints has added enormous cost, complexity and delay to the process of entitling land and obtaining building permits to build housing units.
As you might imagine, over a 50-year buildup of regulations, some of them no longer make sense, some of them conflict with other regulations, some of them are abused by various stakeholders — such as the well-known phenomenon of CEQA abuse — and many have not been subject to a thoughtful cost/benefit analysis.
A distinguished economist by the name of Dr. Lynn Reaser at the Fermanian Institute has concluded that on average, 40 percent of the cost of a new home in San Diego consists of compliance with such regulations. So, clearly, the regulatory regime should be reformed to make the development of housing that is affordable to low- and moderate-income families, including working-class families, a very high priority.
Also, there is a new focus on regional housing reeds assessments that are being developed by regional planning agencies. Such agencies and each region’s constituent communities should be required to develop implementation plans to demonstrate how the required housing can and will be built.
We plan for the development of roads, schools, and sewer and water systems based on forecast demand, so we should do the same for housing. “By-right development” could be an important tool in this effort.