Sonoma County's construction sector makes cutbacks amid coronavirus pandemic

Ten years ago, Michael Wolff started his Santa Rosa homebuilding firm during the throes of the Great Recession, which sent the construction sector into a spiral, wiping out half of the jobs in the industry statewide over two years.

Wolff was able to navigate through that challenge by carving a niche for environmentally friendly projects at affordable prices. A subsequent building boom came along as a result of the continuing local housing shortage, which was exacerbated by the 2017 wildfires in Sonoma County.

But the economic shock caused by the novel coronavirus has taken the struggle to survive to another level for contractors.

“It’s damn near strangling the life out of me right now,” said Wolff, a Petaluma High School graduate who got into construction after serving in the U.S. Marine Corps.

He laid off some employees and forced two framing crews to burn vacation time because of the diminishing work, as the county’s stay-at-home order has allowed certain construction to continue, while other building was supposed to stop. One saving grace has been home rebuilding from the 2017 fires is permitted and lenders have largely financed those projects.

That stable work, however, is no longer a sure thing. A house rebuild job Wolf was supposed to do soon for Christopherson Builders - whose homes typically sell for more than $1 million - has been put on hold by a skittish couple.

“It was a sure thing … that will hopefully still be a sure thing, but we are waiting,” Wolff said.

His wariness is shared by many others in the vital residential construction sector, a linchpin for local economic growth given the lack of affordable housing. For example, a report last year by the California Housing Partnership found Sonoma County needed 16,296 more affordable homes to rent to meet current demand.

However, the uncertainty of the crumbling U.S. economy during the coronavirus pandemic has local residential and commercial developers and builders reexamining the near-term future and how bad it may be by year’s end. Most experts agree the country has entered a recession that one local economist predicted could vault local unemployment to near an unthinkable 20%.

Stockham Construction of Cotati temporarily laid off almost 400 people last month as a result of work drying up, according to a filing with the state Employment Development Department.

Keith Woods, CEO of North Coast Builders Exchange, the main trade group that represents the local sector, doesn’t know yet whether to expect pent-up demand to lead to a sharp building rebound or a slow recovery because of the carnage of job losses and business closings.

For now, optimism is hard to find in the building industry, although some residential and commercial construction has been allowed to continue. Building involving emergency maintenance, wildfire home recovery, housing projects in which at least 10% is income-restricted units, public works and health care projects are among construction work deemed essential and permitted to keep going. Meanwhile, most commercial projects, including hotels, nonemergency renovation and repairs and residential construction with no affordable housing was halted.

Enforcement of the public health emergency order on construction projects has been inconsistent, however. A Press Democrat reporter earlier this month witnessed crews working at a Santa Rosa hotel project and workers still on the job at a Sebastopol commercial building site.

Woods acknowledged there have been some complaints about certain contractors not abiding by the public health emergency directive, but called it “a real minority” of the ?industry.

There is a lobbying campaign to allow more construction, especially since rebuilding from the 2017 wildfires continues to make progress. Napa County loosened its restrictions on April 22 to permit all construction if builders follow safety protocols. Local builders and elected officials such as those in Rohnert Park are hoping that may soon be the case in Sonoma County.

Farrow Construction of Santa Rosa has about 50 fire home rebuilding projects keeping its crews working, though some subcontractors have temporarily shut down because they do much more work on conventional building, said John Farrow, company founder.

What comes after these projects are wrapped up in the fall remains unclear for Farrow and other contractors. In the aftermath of the Great Recession, Farrow focused on hospitality and hotel construction that allowed his business to grow by 300% with local and national projects. But that work isn’t expected to be a safety net this time because the virus-induced economic peril has paralyzed the tourism industry.

“We see hospitality as significantly impacted right now, and because of that, it is going to be significantly challenging for guys like me … to work in other segments until … we find a vaccine or cure for this thing or figure this out or properly navigate this COVID-19 issue,” Farrow said.

Even if Dr. Sundari Mase, Sonoma County’s health officer, allows all construction to resume, her action may not ease economic concerns of investors and lenders that finance local building activity.

For example, Farrow is a developer and partner in a planned 153-room Reverb Hotel project in Cotati. But Poppy Bank recently pulled the financing and no local bank has filled the void. An apartment complex in Petaluma and a plan for single-family homes in the posh Fountaingrove area of Santa Rosa he wanted to develop also have been placed on hold.

“When I put my developer hat on, this is a problem,” Farrow said of construction investors and lenders in retreat.

Another big concern that could put contractors in further jeopardy is the potential for more homeowners to start defaulting on their mortgages like they did 10 years ago. That would force lenders to repossess houses and trigger a retraction in the homebuilding market, Farrow said.

Finally, home remodeling and renovation work, typically a big share of residential construction, could slow as property owners cut spending for a variety of reasons including job losses during the pandemic.

A bright light for the building industry has been public works projects. Ghilotti Construction of Santa Rosa has mainly kept busy with its Highway 101 widening project in Petaluma and emergency repairs on the same highway in Willits.

However, even Ghilotti Construction hasn’t escaped the wrath of the virus. The company’s grading and paving work on the Montage Healdsburg housing project, has been placed on hold, said Willie Ghilotti, company co-owner.

“We were almost at the end of completing the project,’’ but had to stop, he said.

The slowdown has actually been helpful for designer and homebuilder Orrin Thiessen, who is three to five months from completion of his Graton affordable housing project of eight rowhouse-style residences - most with granny units.

“The projects that are going, there is a better supply of workers and subcontractors and materials delivery are better,” said Thiessen, who is rebounding himself after emerging from the bankruptcy he filed almost a decade ago involving his previous development business.

Still, he senses lenders will pull back on construction funding in the near future even for affordable housing projects given the grim economy.

“Everybody wants affordable housing. Getting it financed is the issue. I don’t think the crisis we are having is going to help that. If anything, it’s going to make it worse,” Thiessen said.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com.