Colorado Builders Confident Fire Victims Home Demands Will Be Met

Homebuilders in the High Park and Waldo Canyon burn areas are confident they can meet the demand to rebuild homes. But finances – their own and that of fire victims – could complicate those efforts.

“I don’t think people need to worry about whether the Colorado Springs industry can handle those rebuilds,” said Joe Loidolt, president of Classic Homes in Colorado Springs. “We have capacity.”

But contractors who survived the housing downturn are in a weaker financial position than a few years ago. And many of the banks that were most willing to lend to them in the past are gone or hobbled.

Builders and their subcontractors aren’t able to float the costs of a project or wait out delays in payments, as they might have been five or six years ago, said Phil Benstein, director of the NoCo Rebuilding Network, a consortium of contractors and others who educate fire victims on rebuilding.

Some insurers and mortgage lenders withhold a substantial percentage as a final payment when the house is completed.

“That absolutely doesn’t work for me,” said Lee Barker, a custom homebuilder who lost his home in the High Park Fire. “The last four years have been brutal. I don’t have the pockets to carry that. It has to be a monthly draw.”

Colorado Springs custom homebuilder Scott Hente, vice president of Robert Scott General Contractors, said he and his business partner have credit lines they can draw on.

“We are being able to structure a series of payments that the homeowner and the insurance company can live with,” he said.

There are limits, however, to how long their subcontractors can wait to get paid.

“They won’t hang out for weeks or months,” he said.

By some estimates, about two-thirds of victims of a disaster find themselves underinsured, which can force them to draw on other types of financing to fill the gap.

Don Childears, chief executive of the Colorado Bankers Association, said he isn’t aware of any bank initiatives to support reconstruction in the fire zones. But bank lending in the state remains competitive, and the insurance money represents a solid promise, he said.

“If the insurance money is only a matter of timing, then I think banks would be anxious to help once they understand the issue,” he said.

Builders said they are willing and able to move faster than the homeowners and their insurance providers to rebuild the more than 600 homes lost in the state’s two most destructive fires on record.

Rebuilding all the homes lost would represent a 26 percent jump in construction activity, measured against the 2,269 single-family permits pulled in Larimer and El Paso counties last year, according to the U.S. Census Bureau.

Enough homes were lost to give nearly all of the 616 active homebuilders in the state at the end of last year a property to build.

Classic Homes pulled the first permit in the Waldo Canyon burn zone, and that house is already framed, rising like a green shoot from the nearby ruins on Yankton Place.

Hente restored the damage to his own home quickly but said he hasn’t found many neighbors doing the same.

“I thought everybody would be chomping at the bit, but few are,” he said. “Some tell me quite honestly they have to work through the trauma, the emotions.”

Two years after the Four Mile Canyon Fire in Boulder County consumed 169 homes, homeowners had completed 29 and pulled permits on another 29.

Estimates are that only 111 of the 259 homes destroyed in the High Park fire will be rebuilt, Benstein said.

The ability of production builders to work in the Waldo Canyon fire area should result in a higher share of the 346 homes destroyed there getting rebuilt. Even so, there will be multiple lots left open.

Hente said nine permits have been pulled three months on in the Waldo Canyon area. He will probably pull the 10th. Loidolt said Classic is close to pulling another, as well.

Most of the homes consumed in Waldo Canyon had their foundations destroyed, which adds to the cost but also allows a homeowner to scrape off and start with a new design.

“The foundations are just horrible,” Hente said, adding that they crumble when a backhoe touches them.

Classic, a production builder, offers 40 plans customers can choose from, saving them the hassle of having to design a plan and get it through permit approvals, Loidolt said.

Hammering out insurance settlements, crafting blueprints, lining up permits and hiring contractors stretch out the process. Working at altitude, as in the High Park area, delays rebuilding because of the shorter construction window and logistical issues.

“A lot of those properties lost in the mountains were cabins,” said Dotti Weber, executive officer of the Home Builders Association of Northern Colorado. “Waiting is an option for those people.”

What should be a two-year process will probably take four or five, building experts said, better allowing contractors to handle the extra demand.

That is assuming there aren’t other summers like 2012’s. Nearly 50,000 Colorado homes worth an estimated $12.5 billion are at a very high risk of damage or destruction by wildfires, according to a report from CoreLogic.

A continuing drought, vast stretches of beetle-kill forest and more people living in fire zones could cause the number of lost homes to grow in the years ahead.

“This isn’t over yet, not by a long shot,” Barker predicts.