Slow Market Curbs KB Home Development in Louisiana

By Roberts, Deon

Three months after hurricanes Katrina and Rita, national homebuilder KB Home pledged to rebuild Louisiana with 20,000 homes.

State officials hailed KB Home’s plans as good news for a state still reeling from the storms.

But a year later, the Los-Angeles-based publicly traded company appears to be taking a slower, more cautious approach to building in Louisiana.

These days the company uses phrases such as “market driven” when talking about its plans for home construction in the region.

“If the region can support 20,000 units, we have the capacity to do so. It’s largely market driven,” said Clint Szubinski, KB Home’s Gulf Coast region president whose job is handling the purchase and development of land from Baton Rouge to the Florida panhandle.

Proof of the company’s more-measured approach is found on the West Bank of Jefferson Parish. There, in late 2005, KB Home considered building 10,000 homes on 3,000 acres owned by Joseph Marcello, president of Churchill Farms Inc. After commissioning a study of the New Orleans area market last year, the company decided to build only 416 homes on the best 100 acres of Marcello’s property. Marcello said he would not piecemeal his property and refused to sell KB Home less than 500 acres.

“They pulled back,” Marcello said. “They started talking about not taking as much acreage. They wanted to be right next to the (Tournament Players Club) golf course. I’m just not going to sell 50 acres, 100 acres. That just wouldn’t be right for my whole development.”

KB Home is a “pre-sold builder,” meaning it acquires land first but doesn’t build a home until after a buyer selects a lot.

Since Katrina, the company set up Louisiana headquarters in Metairie at 3636 Interstate 10 Service Road and is hiring local people, Szubinski said.

KB Home still plans to build 20,000 homes in the state, he said.

“The big picture plan for KB here in Louisiana is we’re committed to the market statewide and especially on the Gulf Coast,” he said. How soon those homes are built is the question KB Home can’t answer right now.

Post-storm concerns

KB Home is weighing post-Katrina realities. The company has found a “significant amount” of jobs gone from the New Orleans region, Szubinski said.

Another concern Szubinski cited is the slow pace of the state’s Road Home program, which gives up to $150,000 to each eligible homeowner to rebuild.

Szubinski, a New Orleans native, said KB Home has noticed many residents want to return to their old neighborhoods and rebuild their damaged homes rather than move into a new home in a brand new subdivision.

KB Home has also determined the New Orleans area needs not only affordable homes but “attainable homes” priced from $150,000 to $250,000, he said.

There’s a price “cliff” of $300,000 that becomes too hard for the community to afford, he said.

Although the West Bank deal reached a stalemate, KB is busy building homes and searching for land to buy in other parts of the metro area and state.

KB Home has roughly 50 homes under construction across the state and plans to build 300 homes in Louisiana this year, Szubinski said.

In the River Garden community, the redevelopment of the former St. Thomas housing project in the Lower Garden District, KB Home is building 73 single-family homes.

In Baton Rouge, the company is building 850 homes in six subdivisions.

And in Madisonville on the North Shore, the company will build 112 townhouses and 72 single-family homes.

North Shore bound

Szubinski said his company is “aggressively pursuing land” in St. Tammany and Tangipahoa parishes. The company is still interested in buying land in Jefferson Parish, and it’s possible the company might buy from Marcello, he said. Also, the company is “working some significant deals” in St. Charles and St. John parishes, areas where KB Home will have “substantial production in the coming years,” he said.

When asked about the mindset of homebuilding firms in post- hurricane New Orleans, Jon Luther, executive director of the Home Builders Association of Greater New Orleans, said small and large builders are running into a “less than favorable” regulatory climate in the metro area, particularly on the West Bank of Jefferson Parish.

“I’m getting some pretty solid feedback from a lot of my members that they are encountering myriad regulatory obstacles,” Luther said, adding that the regulatory environment appears more favorable on the North Shore. Luther did not cite specific examples.

But Szubinski had nothing but good things to say about Jefferson Parish government. The parish has not built bureaucratic roadblocks, he said, adding that President Aaron Broussard and Councilman Byron Lee have been supportive.

Luther agreed that Broussard and Lee have not complicated the regulatory process. “There are others on the council,” building roadblocks, he said.

In December 2005, the same month KB Home announced plans to build on the West Bank, Parish Councilman Chris Roberts expressed concerns about the company’s reputation nationally and past federal and state investigations into the company.

“Before I would be willing to put my stamp of approval on anything, there’s a lot of questions that are going to have to be answered in particular about the past reputation of this company,” Roberts said at the time.

Szubinski said KB Home’s decision to not purchase the West Bank property should not be interpreted as a lack of commitment to building in the state.

“We plan to stay here for a very long time,” he said. “This in no way means we are backing from the area or not going to be as aggressive. There’s an extreme commitment by the company here.”

(Copyright 2007 Dolan Media Newswires)

(c) 2007 New Orleans CityBusiness. Provided by ProQuest Information and Learning. All rights Reserved.