Demographics and Market Conditions Analysis

MEMORANDUM

DATE April 12, 2021

TO Rowland Hickel, Dan Breedon, and Paula Daneluk, Butte County Department of Development Services

F ROM Steve Gunnells, PlaceWorks

SUBJECT Butte County Upper Ridge Community Plan – Demographics and Market Conditions Analysis

Introduction

This chapter provides an overview of demographic and economic trends and conditions and describes how these may influence growth and development in the Upper Ridge Community Plan Area (Plan Area). Unless stated otherwise, most of the data presented in this chapter represent the Magalia census-designated place boundary. Although there is a slight difference between the boundary of the Magalia CDP and the Plan Area, these differences do not show up in the underlying data. Therefore, this chapter uses the two designations interchangeably.

ACCOUNTING FOR THE CAMP FIRE

The November 8 to November 25, 2018 Camp Fire was the deadliest and most destructive wildfire in the US in over 100 years. The creation of the Community Plan is, in part, a response to the fire, but it is not, in and of itself, a wildfire recovery and reconstruction plan. Nevertheless, a discussion of demographic and market conditions cannot escape at least two ways in which the Camp Fire will influence long-term market potential for development in the Plan Area.

The first issue is the pace at which and percentage of displaced individual and households return to permanent housing in the Plan Area. County data indicates that there were approximately 5,800 homes in the Plan Area prior to the fire. From CalFire data it appears that 2,200 homes were damaged or destroyed. Based on these data, this analysis assumes that at least 37 percent of residents were forced to find temporary housing. The question becomes how many of those displaced can and will return to permanent housing in the Plan Area. Even if one assumes that most, if not all, residents desire to return to the community and return to a normal life, there are roadblocks and challenges facing them.

While it may not be possible to predict how many people will return with any degree of certainty, experiences from other disaster recoveries can provide a basis for a rough order-of-magnitude estimate for planning purposes. In the aftermath of Hurricane Katrina, the population of New Orleans was 44

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percent of its pre-hurricane population one year later and still only 78 percent after six years of recovery. In the case of Hurricane Andrew, the lack of housing opportunities within an acceptable distance to jobs led some households to permanently relocate elsewhere, with the population declining 18 percent in south Dade County, 33 percent in Florida City, and 31 percent in Homestead. Finally, after the Whittier earthquake, 50 percent of households reported complete economic recovery one year later, but four years later 21 percent still reported no or little economic recovery.1 The potential market demand presented in this chapter is based on a generalized assumption that 75 percent of displaced individuals and households will return to permanent housing in the community Plan Area.

It is important to note what this assumption is and what it is not. It is an assumption about what the future reality may be. Based on published research about recovery and reconstruction following natural disasters elsewhere, it is reasonable to assume that some survivors will choose to relocate to permanent housing elsewhere, whether to avoid living in an area with hazard risks or to capitalize on economic opportunities in another community. It also reflects that some households simply do not have the resources—social support from friends and family and financial support from savings, insurance, assistance, and employment—that are needed to live in temporary housing arrangements for several years until permanent housing can be fully rebuilt. The assumption is not a statement of what should be. It in no way suggests that any displaced household should not be allowed to return to permanent housing in the Plan Area.

The second issue is the influence of the Camp Fire on the pace of new residents moving to the Plan Area. It is possible that statewide public perception of the community as a natural disaster area may reduce the in-migration of new residents that would have been expected to occur prior to the fire. As that public perception subsides over time, it is possible that the pace of in-migration may increase. Prior to the fire, much of the Plan Area was, in essence, built out. With the assumption that up to 25 percent of the community’s households may relocate to permanent housing elsewhere in Butte County and beyond, the Plan Area will have the physical capacity to accommodate more new residents than it had prior to the fire. The potential market demand presented in this chapter uses a range of growth rates to represent the uncertainty in the long-term growth and development potential.

REGIONAL ANALYSES AND REPORTS

Three other regional studies have relevance to the update to the Upper Ridge Community Plan. First, the North Valley Community Foundation published The Impacts of Camp Fire Disaster on Housing Market Conditions and Housing Opportunities in the Tri-County Region in September 2020. This report documents how the displacement of households resulted in a lack of housing opportunities and rising rental rates in communities outside of the burn scar across Butte, Glenn, and Tehama counties. Importantly, the report indicates that 60 percent of affected homeowners were underinsured with a funding gap over $100,000 needed to rebuild. The analysis of the challenges hindering housing construction and reconstruction complement the findings in the regional economic analysis (the third study, described below).

The second study is the Butte County Association of Governments’ Post Camp Fire Regional Population & Transportation Study, which was being completed at the time this analysis was prepared. The report estimates changes in the population, housing, and employment forecasts used in the 2024 Regional

1 Information about recovery and reconstruction after other disasters is taken from Lindell, Michael K., 2013. Recovery and reconstruction after disaster. In Bobrowsky, Peter T. (ed), Encyclopedia of Natural Hazards. Dordrecht, Netherlands: Springer, pp. 812–824.



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Transportation Plan and Sustainable Communities strategy. It provides new forecasts for 2025, 2035, and 2045, reflecting the impacts of the Camp Fire.

The third relevant regional report is the Camp Fire Regional Economic Impact Analysis, published January 2021, by 3Core, the private nonprofit Economic Development District serving Butte, Glenn, and Tehama counties. The report provides an analysis of the regional economy to support short-term decision-making by businesses and public agencies. It looks at conditions in 2018, prior to the fire, post-fire conditions in 2020, and short-term projections for 2025. The report indicates that agriculture is the backbone of the regional economy. However, it also indicates that 80 percent of the regional economy serves the needs of local residents and businesses, that this increases to 95 percent in Paradise before the fire, both of which are more than the portion of the statewide economy, 75 percent, that serves local residents and businesses. The report estimates that 14 percent of the countywide housing stock was destroyed in the Camp Fire, but the impact was even more devastating on the Ridge, 30 percent of the housing, and in Paradise, 95 percent of the housing. The report summarizes the fire and recovery, stating, “Rebuilding Paradise’s economy will be inexorably tied to rebuilding housing and repopulating the community.” The report also offers several recommendations relevant to the topics covered in this analysis:

+ A key tenet of the Region’s forthcoming economic development strategy should focus on ways to support and stimulate housing production to counteract the significant loss of housing in the Region from the Fire and the economic implications of a restricted housing market.

+ Given the pre-Fire composition of the…economies, recovery…will rely on both housing production and economic development policies and programs to sustain various business sectors [primarily retail and other local-serving sectors].

+ Challenges related to shortages in construction labor, high building costs, a large number of underinsured individuals or difficulty in obtaining or renewing insurance, long wait periods for disbursements from insurance and the post-Fire PG&E settlement funds, reduced land values, and a greater awareness of the risk of wildfire present challenges that will require regional jurisdictional collaboration and targeted policies and programs.

DATA LIMITATIONS

It should be noted that there is a margin of error inherent in the data that is available for unincorporated areas. And in some cases (for example, the population and housing data from the California Department of Finance) the only data available covers the entire unincorporated area of Butte County, without breaking it down by individual communities. This agglomerated data is limited in its usefulness for understanding the Plan Area and for understanding some impacts of the Camp Fire. Nevertheless, as described in the text, the analysis estimates the data for the Plan Area, thus introducing an additional margin of error.

Furthermore, the Census Bureau data (which is published for the Magalia CDP boundary) is based on a running five-year survey in order to reduce the margin of error. However, this means that there are no data that reflect the facts on the ground since the Camp Fire. Indeed, there is almost no hard demographic and economic data that represents the impact of the Camp Fire and the pace of the recovery. For the most part, the analyses presented in this chapter reflect the conditions prior to the fire with a qualitative assessment of post-fire economic conditions.



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Demographics

POPULATION

Figure 1 shows the population for the Plan Area from 2010 to 2018, as estimated by the US Census Bureau. The Census Bureau estimates that the Plan Area had a population of 11,640 in 2010, and grew from 11,310 in 2015 to 12,670 in 2018. The data estimates show changes from year to year, although each annual change lies within the margin of error. Importantly, the data are based on rolling five-year averages. Looking at the differences over five years (2012–2017 and 2013–2018), the data indicate that the project-area population was growing about 1.8 percent per year prior to the Camp Fire. This growth rate is typical for a moderately growing community.

The specific change in the number of residents since the Camp Fire is not altogether clear from available data. According to the CA Department of Finance’s estimates for January 1, 2018 and January 1, 2020, the countywide population decreased by 16,000 people, or 7.1 percent, and the population residing in unincorporated areas of the county decreased by 13,500, or 16.6 percent. However, large parts of unincorporated Butte County were unscathed by the Camp Fire, so the actual population decrease in the areas directly impacted by the fire is likely much larger than 16.6 percent. According to the CA DOF estimates for the Town of Paradise (because it is incorporated, DOF provides specific estimates for the area of the town), there was 82 percent decrease in residents occurring with an 87 percent decrease in the number of housing units. For the Plan Area, the Camp Fire destroyed about 50 percent of the housing units. If the Plan Area has a proportionate decrease in the number of residents, then the 2020 population would have been about 6,600, representing a 48 percent decrease from 2018 to 2020.

Figure 1: Total Population; Magalia CDP; 2010 to 2018

Source: PlaceWorks, 2020, using data from the US Census Bureau’s 2010 to 2018 American Community Survey, 5-Year Estimates.

AGE

In 2017, the median age of Plan Area residents was 48.0 years old. This was about the same as in the Town of Paradise (49.2 years old) but significantly higher than the median age countywide (36.9 years old).

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The share of the population that was under the age of 18 was 17.5 percent in the Plan Area. This was about the same as in Paradise and slightly below the share countywide (20.2 percent). The share of the population age 65 and older was 23.6 percent in the Plan Area. This was slightly lower than the share in Paradise (25.1 percent) but significantly higher than the share countywide (17.3 percent). The share of the Plan Area’s population was lower than the countywide share in every age group under the age of 55 and higher in every age group from 55 years old and older.

RACE AND ETHNICITY

In 2017, the Plan Area’s population was somewhat less diverse than the population living throughout the unincorporated area of Butte County and the countywide population. Figure 2 shows the race and ethnicity of the resident population in the county and in the Plan Area in 2017. Racially, Whites2 accounted for 91.1 percent of the Plan Area’s residents, 83.5 percent of the population throughout the unincorporated areas, and 82.2 percent of the countywide population. Ethnically, Hispanics of any race accounted for 8.4 percent of the Plan Area population, 13.8 percent of the population in unincorporated areas, and 15.7 percent of the population countywide.

Figure 2: Share of the Population by Race and by Ethnicity; Butte County and Community Plan Area; 2017

Source: PlaceWorks, 2021, using data from the 2017 American Community Survey, 5-Year Estimates.

2 The Census Bureau uses the following racial classifications, which are self-reported by survey respondents: One race – White; One race - Black or African American; One race - American Indian and Alaska Native; One race – Asian; One race - Native Hawaiian and Other Pacific Islander; One race - Some other race; Two or more races - White and Black or African American; Two or more races - White and American Indian and Alaska Native; Two or more races - White and Asian; and Two or more races - Black or African American and American Indian and Alaska Native.

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White alone All other races,alone or in

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Butte County Total Butte County, Unincorporated Area Magalia CDP

Race Ethnicity



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HOUSEHOLD SIZE AND TYPE

Figure 3 shows the share of households by major type of household in 2017. The Plan Area had a smaller share of households (10.3 percent) that were married-couple families with children at home3 than the county as a whole (15.5 percent) and the unincorporated areas (15.8 percent) had. The Plan Area also had a higher portion of households (20.8 percent) that were single-parent households than the county as a whole (16.4 percent) and the unincorporated areas (15.1 percent) had. For the other major types of households, the share of total households in the community Plan Area was in between the share across the county and in the unincorporated areas of the county.

In 2017, the average household size in the Plan Area was 2.51 residents per household. This is slightly lower than the average size county wide (2.54 residents per household) and the average size across the unincorporated areas of the county (2.62 residents per household). The smaller household size reflects both the age of residents (a lower proportion of the Plan Area population that is under the age of 18) and the household types (fewer married couples with children and more single-parent and single-person households).

Figure 3: Share of Total number of Households by Household Type; Butte County and Community Plan Area; 2017


3 The designation “children at home” refers to children under the age of 18. Thus, households without children at home could actually be a married couple or single parent with one more children who are age 18 or older living at home.

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Butte County Butte County, Unincorporated Area Magalia CDP



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HOUSEHOLD INCOME

In 2017, the median household income in the Plan Area was $45,700 per year. This was somewhat lower than the median household income in the Town of Paradise ($48,800 per year) and the median income countywide ($46,500 per year). Detailed income data is not available, but the lower household income in the Plan Area may have been due, in part, to slightly fewer married-couple families, slightly more single-parent families and higher proportion of residents (relative to the county as a whole) age 65 and older.

NUMBER OF HOUSING UNITS

In 2017, the Plan Area had 5,500 housing units according to the Census Bureau’s American Community Survey. Over the five years ending in 2017, the number of housing units grew about 0.15 percent per year, adding about 16 new housing units each year. The Plan Area’s housing growth was somewhat lower than the countywide growth in housing, which was about 0.5 percent per year.

About half of the existing housing was destroyed or damaged by the Camp Fire. As of December 2020, the County had issued 332 residential building permits inside the burn area, of which 116 had received a final inspection. In addition, there were 37 residential permits issued to survivors of the Camp Fire on parcels outside of the burn area.

Press reporting suggests that some survivors have moved out of the county, even out of state. The decrease in countywide population between 2018 and 2020 supports the narrative of some out-of-county relocations. At the same time, some survivors have moved back to the community Plan Area, while others remain in temporary housing situations. There is no way to know how many survivors will ultimately move back to the community.



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HOUSING TYPE

Figure 4 shows the percentage of housing for each major type of housing4 in 2017. The majority of housing (60.0 percent) was single-family detached housing, which was lower than the share in the unincorporated areas of the county (70.6 percent) and the share countywide (62.8 percent). The Plan Area had very little single-family attached housing (0.2 percent of all housing) and multifamily housing (0.23 percent of all housing). In contrast, mobile homes accounted for a substantially larger share of all housing (37.5 percent) in the Plan Area across all unincorporated areas (24.4 percent) and countywide (13.0 percent).

Figure 4: Share of Total Housing by Type of Housing; Butte County and Community Plan Area; 2017


4 There are very specific definitions for housing type. However, the data in the American Community Survey are self-reported by survey respondents and, even with direction from the survey administrator, may not always be accurate.

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TENURE

As shown in Figure 5, more households in the Plan Area (77.7 percent) owned their homes than households in the unincorporated areas (74.8 percent) and the county as a whole (59.0 percent). The Plan Area’s home ownership rate was substantially higher than the rate statewide (54.8 percent) in 2017.

Figure 5: Housing Tenure; Butte County and Community Plan Area, 2017


DEMOGRAPHIC IMPLICATIONS FOR THE COMMUNITY PLAN

Although there is a substantial amount of work investment needed for the community to recover from the Camp Fire, it is reasonable to assume that many of the residents that have been displaced will eventually return. In this sense, the demographic characteristics described above will likely remain true. However, the Community Plan provides an opportunity to consider what the community should be like over the long term.

One approach is to plan for the community to continue as it has in the past, to capitalize on the strengths that attracted those who were once new residents in the Upper Ridge. A different approach would be to ask whether the community plan should seek to attract a broader range of residents, to be a community with more kids and more middle-age residents, with more racial and ethnic diversity, with more rental housing opportunities. Neither approach is right, and neither is wrong. Both approaches warrant consideration as the Community Plan is developed.

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Economic Analysis

The local economy in the Magalia CDP is best understood as a part of the larger economy in the area, including the Town of Paradise, and the regional economy, which covers all of Butte County. This section describes the local economy, using data from Paradise and the county to provide regional context. The data presented in this section are derived from the Quarterly Census of Employment and Wages data, which is, in turn, derived from data from the state Unemployment Insurance program. Generally, these data cover over 95 percent of workers, but they do not include the self-employed.

JOBS AND EMPLOYMENT

In 2018, the Plan Area had about 650 jobs, or 51 jobs per 1,000 residents. Paradise had 240 jobs per 1,000 residents, and countywide there were 360 jobs per 1,000 residents. About 27.3 percent of Plan Area residents were employed, compared to 32.6 percent of Paradise residents and 37.6 percent of residents countywide.

STRUCTURE OF THE ECONOMY

Economist typically describe a local or regional economy based on the number of jobs in each of the 20 major economic sectors. For simplicity, this report groups these into five major groups of economic sectors.5 Figure 6 shows the employment in each major group of economic sectors for the county, Paradise, and the Plan Area in 2018.

For all three areas, employment in two of these groups (education and health care and local-servicing sectors) accounted for the majority of jobs—79.1 percent in Magalia, 87.6 percent in Paradise, and 70.2 percent countywide. In contrast, these sectors account for 57.1 percent of jobs statewide.

Another way of looking at employment in these sectors, which primarily serve the needs of local and nearby residents, is analyzing the number of jobs per 1,000 residents. Education and health care provided 25.7 jobs per 1,000 residents in the Plan Area, 147 jobs per 1,000 residents in Paradise, and 128 countywide. The local-serving sectors of the economy provided 15.3 jobs per 1,000 residents in the Plan Area, compared to 64 jobs per 1,000 residents in Paradise and 136 jobs countywide. Thus, these two groups accounted for the majority of the jobs in the Plan Area, even though the number of jobs was still small relative to the population.

This is not surprising. Unincorporated communities, especially those adjacent to a larger, incorporated jurisdiction, rarely have a complete economy. Residents in such areas are typically quite accustomed to go to town for most of the goods and services they need.

5 The goods-producing group of sectors includes: Agriculture, forestry, fishing and hunting; Mining, quarrying, and oil and gas extraction; Construction; and Manufacturing. The base-services group of sectors includes: Utilities; Wholesale trade; Transportation and warehousing; and Administration & support, waste management and remediation. The knowledge-based group of sectors includes: Information; Professional, scientific, and technical services; and Management of companies and enterprises. The education and health care group of sectors includes: Educational services; and Health care and social assistance. The local-serving sectors include: Retail trade; Finance and insurance; Real estate and rental and leasing; Arts, entertainment, and recreation; Accommodation and food services; Other services; and Public administration. The available data for employment does not include fam labor. Employment in public education is counted in the educational services sector, not public administration.



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Figure 6: At-Place Employment by Major Group of Economic Sectors as a Share of Total Employment; Butte County, Paradise, and Magalia; 2018

Source: PlaceWorks, 2021, using data from the US Census Bureau’s Longitudinal Employer-Household Dynamics Program.

COMMUTING

An unsurprising consequence of having fewer jobs per capita in unincorporated communities is the need for employed residents to commute to work. In 2018, 94.2 percent of the employed residents in the Plan Area commuted somewhere else to work. Somewhat surprisingly, though, 69.0 percent of the jobs in the Plan Area employed someone who commuted in from outside of the community. For comparison, 75.1 percent of the residents of Paradise commuted to work somewhere else, which is not high relative to many California communities. Countywide, 31.8 percent of residents commuted to work in another county.

In 2017, the average commute time for employed residents in the Plan Area was 32 minutes, compared to 22 minutes for residents in Paradise and 20 minutes for residents countywide.

Because there were relatively few jobs in the Plan Area, there was a net exodus of employed residents in each sector commuting to jobs in other communities. The sector that had the highest number of net out commuters was health care and social assistance, which employed 615 Plan Area residents in other communities. Similarly, 285 residents commuted to jobs in education in other communities, as did 185 construction workers. There were also 290 residents commuting to retail jobs and 270 commuting to jobs in accommodation and food services.

Of the community’s employed residents in 2017, 5.8 percent worked in the Plan Area, 23.5 percent worked in Paradise and 23.4 percent worked in Chico. It may be logical to assume most of the Plan Area residents working in the community and in Paradise most likely lost their jobs or had severe disruptions resulting from the Camp Fire.

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ECONOMIC IMPLICATIONS FOR THE COMMUNITY PLAN

It is not uncommon for unincorporated communities to have limited economic activity. Nevertheless, the community planning process may want to consider if more shopping, dining, and entertainment opportunities and employment opportunities are warranted or if having these available nearby in Paradise is sufficient.

Of course, just wanting more economic activity is rarely sufficient. Consideration should also be given to the types of economic development efforts that would be needed to attract new businesses or support new entrepreneurs and the resources required for such efforts.

Because nearly a quarter of the community’s employed residents were working in Paradise prior to the fire, recovery of their livelihoods will depend on the pace of economic recovery in Paradise.

Market Demand

With the disruptions and displacements caused by the Camp Fire, a conventional market demand assessment is not particularly feasible nor necessarily desirable. Instead, this section applies some market analysis and forecasting to provide an idea of the long-term potential for growth and development that the updated community plan may consider.

HOUSEHOLD FORECAST

As discussed in the Introduction section, it is estimated that the Camp Fire destroyed or damaged 37 percent of the residential structures in the Plan Area. The forecast for the number of households residing in the Plan Area assumes that 75 percent of the displaced households will return to permanent housing in the Plan Area by 2025.

The analysis then considers two growth scenarios. Over the five years before the Camp Fire, the number of households residing in the Plan Area increased at a rate of 0.6 percent per year. The analysis provides one projection for the number of households using this historical rate of growth. For the second projection, the analysis projects the growth in households across the unincorporated areas of the county and assumes that 15.2 percent of that growth would occur in the Plan Area, based on its average 15.2 percent share of existing housing in the unincorporated potions of the county. The second projection represents a household growth rate of 0.8 percent per year.

Figure 7 shows the estimated number of households in the Plan Area from 2010 to 2017, the assumed displacement and return of Camp Fire survivors, and two projections for long-term household growth. Based on these assumptions and projections, it could take until 2037 to 2042 for the number of households to return to the 2017 level.



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Figure 7: Number of Households, Census Bureau Estimates and Projections; Community Plan Area; 2010 to 2050

Source: PlaceWorks, 2021, using number of households data from the US Census Bureau’s Longitudinal Employer-Household Dynamics Program and from the CA Department of Finance.

HOUSING

According to the Census Bureau’s American Community Survey, vacant housing accounted for 11.7 percent of the total number of housing units in the Plan Area in 2018. This is slightly above the vacant rate, 11.2 percent, that the CA Department of Finance estimated for the unincorporated areas of Butte County.

Applying an 11.7 percent vacancy rate to the low range household projection (historical growth rate) and the high range household projection (regional growth rate) shown in Figure 7 generates projections for the number of housing units that can be expected to be constructed through 2050. The projections are provided in Table 1.

The analysis indicates that about 1,630 new housing units can be expected to be constructed through 2025 to provide permanent housing for households displaced by the Camp Fire. Some of these households may already be living in temporary housing in the Plan Area. In this regard, the projections in Table 1 are not a net increase in housing. The projections represent the number of new homes built, and if existing temporary housing is removed from the Plan Area, then the net increase would be lower.

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Table 1: Projections for New Housing Construction; Community Plan Area; 2019 to 2040

Low Range High Range

2019 to 2025 1,630 1,630

2025 to 2035 300 420

2035 to 2045 320 460

2045 to 2050 170 250

Total 2019 to 2040 2,400 2,800

Average per Year 78 89

Source: PlaceWorks, 2021.

NONRESIDENTIAL DEVELOPMENT

The Camp Fire impacts the potential growth in employment and non-residential development in two ways. First, the fire destroyed many commercial buildings. As with housing, it has taken and can be expected to continue taking time for rebuilding to occur. Secondly, and more importantly, the displacement of more than a third of the community’s households has reduced the demand for local businesses. As discussed in the Structure of the Economy section, the community’s local economy was predominantly engaged in providing goods and services for local residents. As discussed above, it can be expected to take until 2035 to 2040 for the community to return to the number of residents living in the Plan Area prior to the fire. Thus, it can be reasonably expected to take as long to return to the level of economic activity that existed prior to the fire.

However, several of the largest business, including Dollar General, Rite Aid, and Sav-Mor, were not destroyed in the Camp Fire and remain in business. It could take several years for the growth in households to support growth in local businesses, and nonresidential development can be expected to lag behind the construction of new housing. Based on the per capita employment in 2017 (see the Structure of the Economy section) and the average projected number of households, Table 2 projects the amount of commercial building space for local-serving businesses that would likely be supported by Plan Area residents from 2019 to 2040.

Table 2: Estimated Supportable Building Space for Local-Serving Commercial Businesses; Community Plan Area; 2019 to 2040

Year Supportable Building Space

(GFA, sq. ft.)

2019 36,500

2022 52,700

2030 55,600

2040 58,300




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Transfer of Development Rights

During the preliminary discussion for the community planning processes, one issue that has arisen is rebuilding homes or building new homes in wildland urban interface areas, remote or hard to reach properties, and areas prone to extreme fire characteristics (top of ridgelines, slopes, canyon areas, areas prone to high wind, etc.) versus focusing new housing construction in parts of the Plan Area that are less prone to fire hazards. Transfer of development rights (TDR) is a quasi-market-based approach that is used in communities across the US to address development in environmentally sensitive areas and areas with high hazard risks. This section provides a general overview of TDR programs and how this approach might be used for the Upper Ridge Plan Area. If there is interest in further consideration of a possible TDR program, additional planning, analysis by fire behavior experts, economic analysis, and community engagement would be needed.

TDR PROGRAMS EXAMPLES

A transfer of development rights program allows for the transfer of the right to develop a residential dwelling from one area (the sending area) to another area (the receiving area). A simple example is provided by the Collier County (FL) TDR Program. The county (2,305 square miles, with a population of about 385,000) is located in southwest Florida, and its largest city is Naples.

In 2004, Collier County designated approximately 41,000 acres of land with high environmental value as a sending area. Generally, development in this area is restricted to no more than one dwelling unit per 40 acres. As incentive to encourage property owners in this area to not develop their property, the county’s TDR program grants them one TDR credit for each five acres that they own. The property owner can only get this credit if they sever the development rights and sell them to a property owner/developer in the receiving area. A property owner with a forty-acre parcel could build one house to live in or sell. Or the property owner could sell eight development rights credits (one for each five acres). If the owner sells the credits, they maintain ownership of the land and can still use it for agriculture and other permissible uses.

The county also designated approximately 28,000 acres of land with less environmental value as the receiving areas. Generally, land in receiving areas is limited to one dwelling unit per five acres. However, property owners in the receiving area can develop one additional single-family detached housing unit for each TDR credit they purchase from a sending-area property owner, to a maximum of one unit per acre.

Collier County’s TDR program is nationally recognized as a success. To date, the program has protected 6,554 acres of the 41,000-acre sending area. Developers have used about 4,000 TDR credits for new development.

Figure 8 on the following page shows the application of the Collier County TDR Program for the Rural Fringe Mixed-Use District (RFMUD). On the map, the thick blue line is the boundary for the RFMUD. The yellow portions of the RFMUD are the sending areas—parcels from which development rights may be severed and sold to developers. The blue areas are the receiving areas—parcels on which residential density may be increased with the purchase of development rights. The blue cross-hatched areas show where development rights were used from the program’s inception in 2004 through June 2019. Of the 12,236 acres in the sending area, 61 percent have enrolled in the TDR Program. There are 4,439 development rights that have been sold and 4,155 development rights have been used for new housing development.



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Figure 8: Collier County TDR Program Example–Rural Fringe Mixed-Use District



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At the other end of the complexity spectrum is the Kings County (WA) TDR program. Kings County stretches from the Seattle metropolitan area on the west and the Cascade Mountains and Wenatchee National Forest on the east. Although the original TDR program only applied to sending and receiving areas in the unincorporated areas of the county, it has since expanded the program in partnership with incorporated jurisdictions. Now, new housing units in Seattle, Kirkland, and other cities often pay for preservation of Sugarloaf Mountain and other open spaces in the eastern part of the county. In addition, the County has obtained grants and invested its general fund to purchase and retire development rights (open space land gets preserved but now new housing units are built with the TDR credits).

USING TDR IN THE UPPER RIDGE COMMUNITY

There is a wide variety of ways to use a TDR program. However, there are a few key elements that would be needed.

The county would need to identify areas where the public health, safety, and welfare would be served by limiting new housing. Additional input from fire behavior experts would be needed to help define these areas. The sending area could be restricted to parcels on which a home was destroyed by the Camp Fire or it could more broadly apply to houses destroyed by fire and parcels that were unbuilt at the time of the wildfire.

In some TDR programs, the jurisdiction (usually a county or a state) downzones the sending area in conjunction with establishing a TDR program. In such cases, the ability to sell development rights can be viewed as a form of compensation for the downzoning. However, it is not necessary to downzone the sending area. As the Collier County example shows, it is possible to keep existing zoning in place and simply offer additional TDR credits as a market incentive to reduce development in the sending area.

The county would also need to identify areas with the capacity to accommodate new housing. The receiving area could be one or more areas already planned and zoned for residential development. However, to be effective, the TDR program must provide for an increase in density over the density established by zoning. Allowing a developer to increase density reduces the land cost per dwelling unit, which is the mechanism that creates economic value and allows a developer to purchase TDR credits.

There is a physical limit to how far density can be increased because residential development in the Plan Area is served by on-site septic disposal systems. In addition, a large part of the Plan Area is existing subdivisions where increased density is not possible. Because the land area that could accommodate increased density will likely be limited, the county could consider an alternative: allow TDR credits to be used to construct homes on parcels that are zoned or planned for nonresidential development. Considering the length of time it may take before household growth supports new nonresidential development, this approach may be beneficial to commercial property owners.

Figure shows an example of how a TDR program for the Upper Ridge might work.



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Figure 9: Example of a Possible TDR Program for the Upper Ridge


CONSIDERATION OF A TDR PROGRAM

If there is interest in further considering a TDR Program, there are several steps that would follow.

Sending Area Capacity Analysis. The county would need to analyze the capacity of the potential sending area to generate TDR credits. This may be fairly simple if the TDR program is only going to apply to parcels with a dwelling unit destroyed by the Camp Fire. If, however, the TDR program is also going to apply to future homes constructed in the sending area, then the analysis needs to determine how many potential housing units are represented by the sending area.

Receiving Area Capacity Analysis. Similarly, the county would need to estimate the number of housing units that the receiving area could realistically accommodate with and without the TDR program. This analysis could also consider multifamily housing in addition to single-family detached housing, if there is an interest to incentive new multifamily housing in the Plan Area.

Financial Analysis. The county would need to analyze the value to a sending-area property owner of selling their land for the construction of a new house versus selling the development rights. To be effective, the TDR program should create a financial incentive for the sending-area property owner to sell the



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development rights. And at the same time, the county would need to analyze the financial feasibility of developing in the receiving area under existing zoning versus the financial feasibility of purchasing development rights and developing additional housing.

The final step in the financial feasibility analysis is to determine the conversion ratio, i.e., how many housing units are allowed in the receiving area for each TDR credit purchased from a sending area property owner.

Administration. At a minimum, the county would need to establish a certification process to certify the number of TDR credits a parcel in the sending area generates. This can be done up front or done on a case-by-case basis as requested by sending area property owners. The certification process would also need to provide for tracking and recording when TDR credits are severed from a sending area property, transferred to a receiving area property, and used for construction of a new home.

Finally, the sending area properties, the receiving area properties, and the transfer and certification program would have to be amended into the zoning ordinance.

Demographics and Market Conditions Analysis

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