Weak demand for new homes a quandary for CT builders

BY Gregory Seay

HBJ Photo | Bill Morgan
HBJ Photo | Bill Morgan
Ellington home builder Kevin Santini, of Santini Homes LLC, says Connecticut's sluggish economy led to a dip in demand for new houses and slashed his family's production this year to a single, unsold “speculative'' unit at 29 Abbott Road and forced them to focus on townhome construction. Expanding the spec's livable space and piling on amenities into the $699,500 unit at no extra cost, Santini hopes a planned Labor Day weekend open house will draw a buyer.

A housing-development outlier

One development may be bucking Connecticut’s housing slump.

Trademark Acquisitions LLC has proposed building 92 single-family homes in Bristol’s west end.

The developer bought the nearly 56-acre vacant lot along Barlow Street and Farrell Avenue about two years ago and hopes to erect homes priced for young families not looking for a fixer-upper, Mark Ziogas, an attorney representing Trademark, previously told HBJ.

The proposed development dwarfs what is typically seen for similar subdivision projects in Bristol, town officials said.

Home builders Eric and Kevin Santini are plenty busy these days finishing a fresh batch of rental townhouses in their Deer Valley North development in Ellington.

But for the first time in a decade-and-a-half, the Santinis have no new single-family houses on their building schedule — and don't foresee building any in the near term. Their only one for sale is a finished, 3,745-square-foot, five-bedroom, 4-bath dwelling at 29 Abbott Road in Ellington. Built on "spec" in hopes of attracting a deep-pocketed buyer, it sits unsold at $699,500.

Santini Homes, experts say, is far from the only Connecticut home builder sweating out a housing slump that, coupled with rising tariff-related costs for imported lumber and other building materials, higher municipal permit-inspection fees, plus a labor shortage among certain trade skills, has drastically cut new housing starts.

Even with Connecticut recently committing another $62 million in grants to add or upgrade the state's more than 20,000 units of affordable housing, including in five Hartford area communities, home builders/remodelers say they don't see a clear path back to robust demand for new homes anytime soon.

"It's the Connecticut economy,'' said Eric Santini Jr., a principal in the family's decades-old homebuilding enterprise based in Ellington and president of the Home Builders & Remodelers Association of Central Connecticut (HBRACC). "If you don't have strong job creation, you're not going to have housing starts.''

In 2017, when Connecticut gained only 1,800 jobs, cities and towns in the state authorized 4,547 single- and multi-family homes with a total value of $1.2 billion, which was down 17.4 percent and 25.2 percent, respectively, from 2016 and 2015.

There were 296 housing permits issued in the 104 Connecticut municipalities tracked by the U.S. Census Bureau during the month of June, which was down 9 percent from a year earlier. And while the number of permits issued during the first half of 2018 (1,922) is ahead of last year's pace, it is well behind benchmarks set in 2016 and 2015.

Meantime, the number of new housing permits issued annually over the last decade pale in comparison to pre-Great Recession levels, when nearly 10,000 or more permits were authorized in some years.

Southington home builder Tony Denorfia, too, can find little to cheer about beyond that his company will build 14 pre-sold houses priced from $440,000 to $600,000 this year, about the same number as in recent years. However, AA Denorfia Building & Development LLC has capacity to erect 24 units annually, he said.

Typically, Denofria, Santini and other Connecticut builders have counted in years past on a ready-made "move-up'' market of Baby Boomers and the eldest members of Generations X and Y eager to put their growing families into bigger, more amenity-laden homesteads.

But as more Millennials choose to stay with their parents, focus on building their careers and pay off student-loan debt, the old pathways to homeownership have atrophied, builders say.

To take up the slack, Denorfia keeps his crews busy building apartments, like the 45-unit, first-phase of his company's Winding River Apartments going up in Southington.

"Our guys are very busy,'' he said. "Once you lose them, who are you going to replace them with?''

Recruiting/training replacements is one thing, but even if housing demand shot up tomorrow, builders say local town boards' building and zoning review-approval requirements means it would take months before they could even begin carving out lots and installing utilities and paving roads.

HBRACC CEO Eric Person estimates that 25 cents of each dollar of a newly built home is tied up in satisfying local, state and federal rules and building-safety codes.

Meantime, affordable-housing advocates also worry that Connecticut's new-home slump will counteract the state's ambitious efforts at lifting its inventory of owned and rented affordable housing.

Charles Patton III, senior policy adviser and research manager for The Partnership for Strong Communities, a Hartford housing advocacy nonprofit, said Connecticut has the seventh highest rental housing costs in the country. Also, Patton said the 2016 Census counted four in 10 Connecticut citizens age 18 to 34 still living with their parents — the second highest ratio after New Jersey.

"Those Millennials can't enter the rental market,'' Patton said, "and they can't enter the homebuying market.''

That puts the state, Patton said, in a negative "cyclical feedback loop'' in which lower demand means fewer homes get built, pushing more people to rent, driving up those costs and further ebbing the pool of eligible buyers.

Meantime, Santini Homes is staging an open house Labor Day weekend to sell its 29 Abbott Road spec home, to which it added at no cost another 500 square feet of living space, plus other new amenities.