Sonoma County business leaders say housing still top issue for 2018

As business leaders look ahead to 2018, the effects of the devastating October wildfires are still largely on their minds.

No matter the sector, all local businesses were affected by the fires given the huge scope of the damage: billions of dollars in losses; the destruction of more than ?5,000 residences in Sonoma County; and the death of more 40 people across the region.

The fires caused the lack of affordable housing in the area to truly become a crisis, which is a major concern for employers who want to recruit and retain a talented workforce. There is a fear within the business community that they could lose workers or customers if the rebuilding process is delayed or prolonged, threatening the strong growth in the local economy over the last decade after it emerged from the recession.

“For the county to continue its growth, it must rebuild quickly and efficiently and get the shadow of the fires behind us,” said Robert Eyler, an economics professor and director of the Center for Regional Economic Analysis at Sonoma State University. “The outlook for the county economy in 2018 is tricky due to the unknown amount of construction that will be engaged to help with reconstruction in Santa Rosa and beyond.”

The Press Democrat this month asked a few local business leaders and analysts to give their outlook for 2018. The answers, provided via email, have been edited for brevity and clarity.

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Brett Martinez, president and CEO of Redwood Credit Union in Santa Rosa:

What is the biggest obstacle that is emerging in the quest for rebuilding after the fires? I think the biggest challenge will be how many homes can we build and how fast can we rebuild them. I am starting to hear some good news about people who have committed to a price that was not as bad as originally expected, and the rebuild timeline is fairly quick. If this becomes more of the norm, that will be good news.

Are you worried about recruiting and retaining employees given the cost of housing? Short term, yes, but I think it will work itself out in the long term. This is still an amazing place to live and raise a family. Retention has always been a concern (with regard to the cost of housing), but since the fires, recruitment from out of the area could pose big problems. It’s very difficult to recruit great employees if they can’t find a place to live.

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Claudia Vecchio, president and CEO of Sonoma County Tourism:

Where will hotels get the workers given such a tight local labor market? The labor market was already tight prior to the fires. We will pull from the same labor market that we have in the past, and we are working with local schools and education systems to raise awareness of hospitality as a professional industry, either full time or as part-time or seasonal employment.

Do you have any concern about tourists not showing up in the spring as a result of the fires? We are confident tourists will return to Sonoma County in the spring. While the fires certainly impacted immediate travelers’ decisions to visit the area, other destinations facing similar situations have rebounded fairly quickly. While we believe this will happen here, we’re being proactive in getting the word out now and investing in programs that drive immediate and long-term visitation.

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Rick Laws, senior vice president in Santa Rosa for real estate brokerage Pacific Union International:

What is the outlook for residential real estate and what factors could hinder the market in 2018? More than two months have passed since the firestorms. Assessing the full impact of the disaster will take many years, but already county home sales show strength. November home sales increased by 13 percent from a year earlier and were up 23 percent from October. Nevertheless, while sales and median home prices have picked up, the inventory of available homes has continued to fall - notably due to a 37 percent increase of canceled and withdrawn listings. Many pulled listings may have been for homes burned or damaged or leased by insurance companies to provide housing for fire victims.

So, the outlook for Sonoma County residential real estate is very positive. An analysis suggests demand will remain high. The median home price, previously forecast to increase 3 percent, likely will rise 12 percent next year due to inventory constraints and increased buyer demand. While the number of homes sold each year has been decreasing, we forecast a minimal increase of perhaps 1 to 3 percent in 2018 due to migration to more affordable states like Oregon or Washington. Many owners who have been considering selling may decide that 2018 presents a unique opportunity to sell and move on.

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John Jordan, CEO of Jordan Winery in Healdsburg:

How significant will a tight housing market be on recruiting and retaining workers in the aftermath of the fires? Housing costs have always been a challenge for employers and employees alike and the fires certainly haven’t helped.

What effect will legalized cannabis in California have on the wine industry? Cannabis and wine are not competitors, but time will tell.

What are the most important trends in the wine industry over the next year? Consolidation of wholesalers continues to be a significant issue. It presents greater challenges to smaller wineries.

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Natalie Cilurzo, co-owner of Russian River Brewing Co. in Santa Rosa:

Next year will be big for Russian River Brewing Co. with the opening of the new brewpub in Windsor. What has been the biggest challenge so far in construction?

Finding available and affordable contractors and subcontractors even before the fires. However, working with the town of Windsor has been an absolute pleasure and the least stressful part of the whole project.

How many people will you hire at the new facility in Windsor? Are you concerned about finding enough qualified candidates?

We expect to hire about 100 new employees, most of whom will be in hospitality and packaging. We will host a job fair and advertise heavily for the positions early next summer. With unemployment being so low, the cost of living high, and a lack of housing, finding enough qualified employees is challenging even now.

How big of a concern is it for your workers to find affordable housing in the area? Has that been a challenge?

Lack of affordable housing has been a tremendous challenge for us and our employees. We have lost many employees who moved to other states due to the housing situation in Sonoma County and California. This lack of affordable housing continues to drive up the cost of living. Once a potential new hire from out of the area does the math on a comparative salary to what they were making at their last job, we sometimes lose the candidate.

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Keith Woods, chief executive officer at the North Coast Builders Exchange, a Santa Rosa trade group:

What is the outlook for home construction in Sonoma County? The future of homebuilding in the North Bay is extremely bright, but it’s painful to realize that much of it is due to the devastation brought on by the wildfires. The over ?5,000 destroyed homes in the region will keep virtually all local residential contractors and construction workers busy not only in 2018, but for the next five years and likely longer. That, however, is a good news/bad news story.

The good news is that the long-term prospects for building opportunities locally are unlimited and cause for optimism in the industry. The bad news is that most contractors were busy before the fires, trying to meet the pent-up demand for housing that was created after seven years of record-low homebuilding. Those contractors may not be able to rebuild quickly.

What steps are building leaders taking to greatly increase the number of homes built after the wildfires? Several actions are underway by NCBE and others in construction to accelerate housing activity: 1) NCBE is polling local contractors to determine their willingness to take on increased homebuilding. We will then connect homeowners with contractors. 2) Strong support and encouragement by builders is being given to efforts underway by cities and counties to expedite and streamline their permitting processes. 3) When homeowners plan to rebuild, NCBE is giving advice on what they should know before hiring a contractor. Our “Ten Tips” on rebuilding are offered on the NCBE website: www.ncbeonline.com. 4) A hands-on, skill-building training program called the North Bay Construction Corps begins its second year in January to prepare high school seniors for construction jobs starting next summer. Some badly-needed new workers injected into the workforce will get more homes built sooner.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell. You can reach Staff Writer Robert Digitale at 707-521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit.