Floridas construction industry has had a rough time the past three years, but some builders have hope for a turnaround, despite the numerous challenges facing the industry.
After the halcyon days of the boom times during the 2000s, the industry was duly humbled by the burst of the housing bubble, shedding jobs as quickly as home prices dropped and foreclosures skyrocketed.
Three years on, the industry is still hurting, and suffering from the pain of a new foreclosure crisis when it was recently discovered that some mortgage handlers were using faulty or fraudulent paperwork to speed foreclosures through the courts.
Turning the building industry around could be the key to lifting Floridas economy and creating jobs. Even during the down year of 2008, when foreclosures were high and the bubble was bursting, Floridas construction industry had $41.9 billion worth of economic output, according to the U.S. Department of Commerce, constituting 5.6 percent of the states economy.
Builders realize a return to the heady boom times is not on the cards, but are hoping to turn the crisis into an opportunity to reduce or eliminate cumbersome regulations and fees that prolong or delay growth. They see an ally in Gov.-elect Rick Scott and the new Legislature.
I think (Scotts) going to be very focused on the economic revitalization. I think hes going to do everything he can to help small businesses grow, said Rick Watson, a lobbyist for Associated Builders and Contractors.
ABC, incidentally, has the largest network of commercial and industrial contractors in the state of Florida, with five chapter offices serving more than 1,200 companies in every major construction market.
The process for obtaining permits and getting projects off the ground was a source of complaints for the construction industry, even during the boom times, and now builders are counting on Scotts business acumen to streamline the bureaucracies that can sometimes inhibit growth.
The permitting process and application process for commercial jobs takes a lot longer than in Georgia, Alabama, the Carolinas, Watson said.
While Republicans have controlled the Florida Legislature for the past two decades, the midterm elections increased the GOP lead, giving the party veto-proof majorities in both chambers and what Senate President Mike Haridopolos, R-Merritt Island, called the most conservative Senate in recent times.
That means it will be easier for influential legislators like Rep. Gary Aubuchon, R-Cape Coral, to cut down on bureaucratic rules and processes that repel potential businesses and slow growth.
The House has created a new subcommittee this year on rulemaking. We as a House tend to focus more than we have in the past on that, said Aubuchon, who also owns Aubuchon Homes, a residential construction company.
In fact, the Florida Legislature wasted no time in placing new restrictions on rulemaking, overriding a veto by Gov. Charlie Crist of HB 1565 that requires legislative approval of new or modified rules that cost $200,000 or more per year.
The woeful housing market, though, is still weighing down demand, leaving the construction industry stagnant. The new foreclosure scandal led some mortgage companies to impose a moratorium on foreclosure proceedings for a period of time in October, and some companies have halted foreclosures during the holiday season so as not to evict anyone in a Scrooge-like fashion.
That has dampened demand, since 25 percent of third-quarter home sales were foreclosed properties, according to Realty Trac, a California-based company that tracks foreclosed homes.
Home sales have already slackened nationally since the $8,000 first-time homebuyer tax credit expired in June. Sales of existing single-family homes in Florida dropped 21 percent in October from the previous year, and the median sales price dipped 3 percent to $136,000, according to the Florida Association of Realtors.
Weve got a large backlog of residential units that are going to have to be worked through. I think Florida is still the epicenter of the foreclosure crisis, Watson said.
But if the market is instantly responding to the housing crisis, local governments are slower to act. Aubuchon gave the example of Lee County, his home, where impact fees have remained at $15,000 through the crisis. That fee, which used to take up less than 5 percent of the median sales price of $321,000 in 2006, today takes up 15 percent now that sale prices have plummeted.
As home builders look to curtail costs, impact fees now represent a greater and greater proportion of that, Aubuchon said.
Ultimately, the free market will be the main driver of the construction industrys rebound. Aubuchon thinks state and local governments can aid that process, though, by creating a regulatory-friendly environment.
Its not any one thing, but its certainly a combination of things -- rulemaking, impact fees, those are government extensions into the private sector. We can play a role by addressing those issues, Aubuchon said.
As growth returns, Watson is hopeful that the traditional trajectory of commercial real estate markets following residential markets wont hold true to form.
With expansion comes an opportunity for commercial construction. I hope that the governor and the Legislature will focus on building up the businesses that are already here and bring in new businesses as well, Watson said.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
