by David Stanowski
22 December 2007
On 16 August, my article "Housing Supply Too High For More Development" appeared in the Galveston County Daily News. In this article, I argued that Galveston had NOT avoided becoming part of the national housing bubble, and that I was concerned about the effect of the post-bubble fallout on the City.
The article went on to say, "If housing development is not limited, we could be creating ghost towns out of new subdivisions and empty skeletons, instead of fully occupied condominium projects, as Phoenix and Miami are discovering the hard way."
It concluded by saying, "It is now time for Galveston's city council to direct the planning commission to refocus its attention from its usual decision-making criteria so that it includes and considers the supply of proposed new housing units versus the projected demand for them.
If new construction adds to our stock of vacant houses and condos, these units will create a more negative impact on our community than any of the other issues that the planning commission normally considers.
However, projections of the need for new housing units must be done in a reasonable and unbiased manner by the planning commission, rather than by relying on feasibility studies commissioned by developers.
As long as developers can borrow money, they will demonstrate a need to keep building."
This article lead to a call from one member of the Planning Commission inviting me to discuss my concerns with this group. Later, I came to be told that some local real estate interests did not want these views discussed and considered. This resistance, as described in "The Unholy Alliance", has delayed my presentation until 08 January 2008. Today, we have received news that worst-case scenario, from my first article, has already begun.
The Galveston County Daily news is reporting that the Emerald by the Sea condominiums have been pushed into bankruptcy. This uncompleted 113-unit building will be auctioned off next month. Originally, my primary concern was the strong possibility that condo developments would be built, but then only partially occupied, leaving many units vacant. The worst-case scenario would be to have uncompleted condos developments that loom over the city as monuments to our bad luck and misfortune.
The thing that makes the first local casualty of the housing bubble even more of a blow to the economy is its integration with the Piazza Blanca shopping center, with its 65,000 square feet of retail space. Some of its shops have been struggling since the center opened in 2005, some have closed, and Chico's Paradise Cafe looks to be in big trouble.
The problems at this combined residential and commercial complex could hit the economy quite hard, and point to another national problem that has not had an impact on The Island before this development; the decline in the commercial real estate market.
For a glimpse of what is going on in California:
Although today's development, at 500 Seawall, is very bad news for everyone in town, I hope that it can serve as a wake-up call. It was unrealistic and naive to believe that forces in the national and international markets would not effect this city. There were some who have tried to maintain that Galveston had no part in the world-wide housing bubble, because there was no evidence of its presence in our city. That is no longer the case!
I hope that the Planning Commission, the City government, and the local real estate community can all work together to minimize the difficulties that we are all going to have to deal with.
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