Hope builds in housing industry

One on one

December 09, 1991

One on One is a weekly feature offering excerpts of interviews conducted by The Evening Sun with newsworthy business leaders. Bruce Scherr, head of the Bruce Scherr Development Co. in Reisterstown, was installed as president of the Homebuilders Association of Maryland on Dec. 5.

Q.People often use fluctuations in the housing construction industry as a barometer of whether we're in or out of recession. Can you describe the industry's current climate as you see it and where you see it headed?

A.The industry has been characterized to be in a recession by anybody that you speak with. There have been signs of life lately, however. Housing starts have increased and reports from the field -- the Realtors and new-home agents -- have indicated that traffic is picking up. Which is hopefully a sign that economic recovery is here. If that's a barometer for the rest of the economy, that's good. I've never really believed that it necessarily is a barometer, and I have an economics background.

Q. Why do you feel it isn't a barometer?

A. I think that housing serves a very important function in our economy. But I think there are other variables in the economy that are so convoluted that it's tough to say that any one business is the driving force of the economy, whether it's cars or industrial real estate.

Q. But as far as housing is concerned, is there anything that can be done that will lift the industry out of recession?

A. Yes, there is. You have to create opportunities for builders, if there's a market. You have to look at the supply and demand sides. I'd like to think there's demand for housing out there. There's pent-up demand. There's not enough housing being built due to other constraints -- democratic, legislative, governmental constraints. I think if those barriers were lifted and responsible development were allowed to occur, you'd see more housing starts. There are also ways to stimulate demand. Some of the things that can be done are reducing some expenses, some costs, keeping interest rates as low as they are now. On the other hand there's some fear among buyers that perhaps the economy hasn't bottomed out and things are a little shaky and people aren't willing to spend the kind of money that they have been. And only time will prove that the economy has bottomed out.

Q. I know that as a developer you have an extensive track record building affordable housing. How would you describe the state's record in this area and would you do anything to change it?

A. I think the state's record on affordable housing has been excellent. You have the Community Development Administration, which is very keyed into creating affordable housing. The secretary of Housing is very committed to creating affordable housing, whether it's rental or for-sale housing. I'm personally into providing for-sale housing, but I believe every person deserves their own room, their own house, their own roof over their head. You can't always provide those products or those opportunities unless you have certain forms of economic subsidies or incentives. In the case where Maryland helps out, they have low-interest loans for buyers, low-interest loans for rental programs to developers. A lot of people qualify for loans, but they don't have the cash to go to settlement. Maryland does on the other hand have a very high settlement costs. It's something we have to look into to try and reduce. But the state, in some cases, is able to help out by subsidizing part of the settlement costs. Another area where I think there's been an outstanding job is Baltimore city. And I principally build the affordable product in Baltimore city. I think it's somewhat of a moral obligation of builders. I think everybody deserves a quality place to live. And Baltimore city has been in the forefront of providing all kinds of opportunities to developers, from taking back soft second mortgages for the buyers so that, essentially, the builder gets paid but the buyer has, essentially, a second mortgage to the city until the time that he sells the house. So I get paid for my work -- because I'm a for-profit developer, I have to make a living. The buyer gets what he wants.

Q. Beyond Baltimore City, though, in the suburbs, you hear so much about the NIMBY syndrome -- the Not-In-My-Back-Yard syndrome -- which essentially says that not only are many communities resistant to having affordable housing spring up nearby, but local regulations actually prohibit the kinds of development these communities don't want. How do you overcome that if, as you have said, the demand is there for affordable housing?

A. I suppose that in Baltimore city, people do want their communities revitalized. People seem to feel that they've left the urban environment and they've got their housing well set in a nice, upscale suburban area and they don't want the low-income affordable to stay in the city. And I think that's wrong. But I also feel as these suburban areas and counties develop, they're going to have their own needs for affordable housing and they're going to have to share the burden with Baltimore city.

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