Monday, June 12, 2017

Peter's POV - May 2017


It looks like the City of San Francisco is adding a new tourist attraction to the city's landscape. The Golden Gate Bridge, China Town, The Embarcadero, The Fisherman's Wharf, Pier 39, Lombard Street just to name a few, will be joined with a new attraction so even more tourist can cram into the already jam packed city.

What I'm talking about?

The Millennium Tower, which was built just about 8 years ago, decided that the Leaning Tower of Pisa in Italy gets too much attention and fame. The Millennium Tower, which has sunk into the ground a bit and is leaning these days, had set its sights on usurping the tower at Pisa as the most leaning tower on earth. You know here in America if you are not the biggest, the strongest or the best, then nobody gives a hoot. That’s why we call the championship games in baseball the Word Series, the basketball finals the World Championship, although everybody knows that in other countries people play pretty good baseball and basketball too. So The Millennium Tower wanted to be the Most Leaning Tower on earth. The way things go, it has outdone the Leaning Tower of Pisa bigly... (Big-League Ha-ha-ha)

Everybody knows that The Leaning Tower of Pisa, the free standing bell tower, has been tilting ever since it was built in the 14th century. Over approximately the past 800 years the top of the structure has moved horizontally about 13 feet or 154 inches to be exact. In the past almost 10 years the Millennium Tower has leaned about 15 inches on top. If it continues like that, in the next 100 years it will reach the displacement of The Tower of Pisa. After that? It will have the title: The World Champion of The Leaning Towers! We will be the best in the world again! (You don't have to worry about what will happen 800 years from now, but theoretically the horizontal displacement would be about 100 ft.)

What has really happened?

The 58 story concrete condominium building, said to be the heaviest building west of the Mississippi, was built on a landfill. There are two ways to build on a landfill to avoid excessive and uneven or differential settlement, which can create this type of leaning. Use a "Mat" foundation, which is a massive concrete footing occupying the entire foundation area of the building to spread the vertical-gravity load, (excessively used in the low lying, marshy areas in Texas) or use deep piles to reach the underlying bedrock for firm support. Neither system was used. The piles supporting the building did not go deep enough into the bedrock, in this case about 200 feet below the surface. Instead, the builders relied on piles that were driven into firmly compacted sand and mud about 60 to 90 feet below.

Who is at fault?

If the structural engineer followed the soil or geotechnical engineer's recommendations and did not make calculation mistakes, it appears that the geotechnical engineer is on the hook.

In the meantime, values of the condominium properties are plunging and the lawyers are circling like vultures in the San Francisco sky...


A very strange thing happened lately to our office.

Most of you know that there is a state law for structural observations for certain phases of construction, performed by the design structural engineer. This structural observation has nothing to do with the city's inspector coming to the site and signing the job card. This structural observation program was designed to protect the owner of the job, that the contractor builds the structure exactly as it was designed by the structural engineer and approved by the city's plan checker and doesn't leave out any important element from the construction. It also protects the contractor by shifting the responsibility to the structural engineer, should any problem surface long after the building was finished, because he approved every phase of the construction. It is a win-win situation.

When we finished a small residential project lately, the contractor noticed the mandatory structural observation schedule on the plans. He immediately demanded the removal of those, saying that he knows how to build a building and he doesn't need anybody to check his work. He said he knows the city building inspector and he - the inspector - will approve his work, so he doesn't want the structural engineer coming to the site during construction. We tried, unsuccessfully, to explain to him that if we do not comply with the state law and don't indicate the necessary structural observations on the plans, we could be legally liable. We also told him, that if he doesn't want us to perform these observations, then don't call us, we will not go on our own, only when it is requested.

Unfortunately we didn't come to an agreement, we did not remove the observation schedule, but he didn't pay us for the work either. We did not have a choice, but had to go to court to have the court decide. The question really was: As a professional, can we do less than the law requires, even if it is with the knowledge and the request of the client?

What do you think what was the court decision?

P.S. Of course, the law was upheld. We won and even got paid, although it looks like - not surprisingly - the contractor will not use our services in the near future...


You really think housing is pricey in America? Be glad you're not in Hong Kong! Are prices are getting out of control? Maybe so if you consider that a dilapidated fixer-upper in San Francisco can fetch easily over a couple million dollars, but if you fantasize about going abroad to get more home for your buck/euro/yen, make sure you choose wisely.

A recent study of more than 300 metropolitan housing markets in nine countries by research group Demographia found U.S. Housing markets to be the most affordable, beating out Canada, the United Kingdom, Ireland, Japan, Australia, New Zealand, Singapore, and China (well, just Hong Kong).
To rate affordability, researchers used a metric called "median multipliers", which is the median housing price divided by the median housing income. Basically it's how many years' worth of household income you'd need to buy a home. A market is rated "unaffordable" with a calculated value of above 3.0 and "severely unaffordable" if it's above 5.1.

There was a lot of variation among the 88 markets surveyed in the U.S., from a bottom-scraping 2.1 in Detroit to 9.2 in San Francisco, but the average rating stands at 3.4 and even if you're counting only major markets (with population over 1 million) the rating is still 3.6.

But that's remarkably livable compared to Hong Kong, at the other end of the scale with a median multiple of 17, a record high in the 11 years of the survey. Put into starkly human terms, even if you could direct all your household income toward buying a house, it would take 17 years before you can afford one. By the way, Hong Kong also had the smallest homes in the study, with an average size of a new home at just 484 square feet.

Working 17 years for a home of 484 square feet? I think we should stop crying foul for our home prices "going thru the roof..."

Monday, January 30, 2017

Peter's POV - January 2017


This is really earth shattering news!

A short time ago Governor Jerry Brown signed SB 1069 and AB 2299, known as the Accessory Dwelling Unit (ADU) State Law, effective January 1, 2017. These laws are a significant change to the State's ADU regulations. The new laws require that local jurisdictions allow ADUs by-right under certain mandatory development standards, and require that local jurisdictions, if seeking to establish additional regulations, do so via an ordinance facilitating the ministerial creation of ADUs, consistent with state law.
A few important points of this new law:
  • ADUs are allowed on any lot zoned for single-family or multifamily use that contains an existing, single-family dwelling.
  • Detached ADUs are limited to a maximum size of 50% of existing living area, excluding garages.
  • Detached ADUs are considered an "accessory building" and are subject to the setback requirements set forth in the local building code.
  • No setbacks shall be required for an existing garage that is converted to an ADU, including when existing space above or adjacent to a garage is converted to an ADU.
  • For newly constructed ADUs above a garage, setbacks from the side and rear lot lines shall be the lesser of such setbacks as required by the Zoning Code or 5 feet. The ADU can extend beyond the footprint of the garage but maintain a five foot setback.
  • One parking spot per ADU is required and may be provided as tandem parking on an existing driveway and within the required front yard.
  • When a garage, carport or covered parking structure is demolished or ceases to exist, in conjunction with the construction of an Accessory Dwelling Unit, the replacement parking spaces may be located in any configuration on the same lot as the Accessory Dwelling Unit, including, but not limited to uncovered spaces, tandem spaces, in required setback areas or by the use of mechanical automobile parking lifts.
  • Parking is not required for an Accessory Dwelling Unit if:
  1. It is located within one -half mile of public transit stop
  2. It is located in a Historic District
  3. It is part of the existing primary residence or an existing accessory structure
  4. When there is a car share vehicle located within one block of the ADU
  • Unit is not intended for sale but can be rented out.
  • Starting January 1, 2017, applicants may apply for permits for the construction of ADU that meet the State standards above. These standards will remain effective until every City adopts its own ADU Ordinance in compliance with the State Law.
  • ADU can be attached or detached from the existing SFD
  • Maximum increase in floor area does not exceed 1,200 square feet attached to the SFD
  • Total area of a detached ADU does not exceed 1,200 square feet.
I believe this new State Law will spur a brand new construction boom, because it will offer a full second unit on the same lot, unlike the previously constructed “granny unit” without a kitchen and a full bathroom. And renting it out will help with the home owner financially. Of course, it is to be expected that different cities will try to manipulate this law to their liking, but I think the essence cannot be changed much.

Great news for the New Year!!!


With the recent rains early January, it seems that the great drought is over, at least temporarily. For almost 5 years we had less than average rain every single year, putting an enormous pressure on people and utility companies as well. Is it climate change, or just like in the Bible, that many meager years will be followed by many fat years? I don't know. (I think it was seven fat years followed by seven meager years, but you get the point.) None the less, with the growing population and the pressure to produce even more food for California and the Nation as well, it is an imminent problem to produce more water and produce it in a more predictable way. I think everybody agrees with me that we should set priorities on how we spend or allocate state collected tax money to accommodate this.

Of course, I'm no expert in this field, but consider this: Northern California doesn't have any significant water shortage, it is mainly Southern California suffering from water shortage. Actually we have plenty of water in the Pacific Ocean but unfortunately it is pretty salty. Other countries like Israel and Saudi Arabia have very similar problems but they have a solution -- de-salinate the ocean water. I know it is more expensive then harvesting fresh water from rivers and fresh water lakes, but if there is no water in the reservoirs then what do you do?
Let's just play with the numbers for a second.

Consider this: the newly built Carlsbad Desalination Plant provides approx. 7-10% of the entire San Diego county water supply needed. How many people live and work in San Diego County? About 3.5 million people. 10% of 3.5 million people is 350,000 people. California’s entire population is about 35 million people. 350,000 is 1% of 35 million. So about 100 similar de-salination plants would be needed for the entire state of California if we use only de-salinated water. Approx. 70% of Californians live in Southern California. That would reduce the numbers to 70 plants. Of course we still have the available reservoirs, rivers, aquifers, the traditional sources for fresh water in our state. Here comes a little guessing game. In a severe drought condition how much of these traditional sources will still be providing water? 50%? 40%? 30%? I don't know, but let’s use a worst case scenario and say only 30% of the needed water will be available by the traditional way. That would reduce the needed de-salinating plants to about 50.

The cost of the Carlsbad plant was about 1 billion dollars (one billion with a B). That is a lot of money. 50 of those of course would be 50 billion. Let me repeat it: it is a lot of money. In comparison, the entire state budget for the fiscal year of 2016-2017 is a little more over 150 billion dollars. But if only 2 of these plants would be built in a year, the state water shortage problem would be solved in about 25 years for good. Probably you noticed that I didn't mentioned any concerns of the environmental activists, like tiny fish will get caught at the intake on the ocean floor and concentrated salt will be put back into the already salty ocean. Really?

One more statistic. The proposed California bullet train is budgeted to cost about 67 billion dollars but skeptics predict it will cost close to 100 billion dollars at the end. I'm all for public transportation but if the question is to choose between survival or just another way to get to San Francisco, my choice is very simple. Or we may need that bullet train when we down south want a drink of water.

What do you think?


During this latest election cycle, we've heard a lot about adult children living in the basement of their parents’ homes. How does this situation affect the real estate market and construction industry?

The job market for young adults has been improving gradually since 2010, yet the number of young professionals living with their parents is continuing to climb. As recently as this year, about 26 percent of millennials - those aged 18 to 34 - are living with their parents, according to the Pew Research Center. The trend is most pronounced among 25 year olds. Why is that?

The truth is that most of the millennials would love to move off on their own rather than back under their parent's roof, but due to all of the college loans and difficulty finding a job, or at least a job with a decent salary and benefits, they are forced to move back home. If it weren't for the astounding tuition costs, other staggering expenses and their salaries incapable of offsetting these rising expenses, you could be sure that a lot more millennials would choose their own independence over reverting to a place of inadequacy.

But financially speaking, the growing number of young adults living with their parents threatens their parents' retirement financially and psychologically. Baby boomers who support adult children are much more likely than other baby boomers to report moderate to high financial anxiety. So is it time for baby boomers to show some "tough love"? Many say that baby boomers shouldn't allow their adult children to move back home, even when they struggle to find a job or manage their money. If they do absolutely have to move back home they need to pay rent and the terms need to be inked on paper.

On the other hand, taking care of children in need, even if they are young adults, is making a stronger family. You know, what goes around comes around. When parents force their unprepared children out on their own, what can the parents expect when they themselves are in need of care and support in their later years? This is a country of lonely elderly people and when I see an RV with a bumper sticker that says "We are spending our children's inheritance,” I can only think "there goes a couple whose children won't answer their calls someday!”

So what is the solution?

I'm not in favor of big federal programs, but this is an area where careful consideration of federal money for housing can be applied in the form of low down payments and lower interest rates. The higher the education of the individual young adult is, the more likely that he or she will be able to pay the loan back, so interest rates and down payments would be tied to excellence in education.

I think it would stimulate harder studying and construction of new housing for young adults as well.

Am I dreaming only?