In recent months, Google, Facebook and Apple have pledged to invest a total of $4.5 billion in land and loans toward stimulating the production of affordable housing in California.
Conor Dougherty, an economics reporter wrote in the New York Times, how those efforts, laudable as they are, won’t amount to much unless the state enacts land-use reforms that make it easier and cheaper to build.
Dougherty, who often writes about housing issues in the Bay Area, wrote that people who have read his article on Twitter “were shocked by one statistic in particular: It costs about $450,000 a unit to build affordable housing in California, according to the Terner Center for Housing Innovation at U.C. Berkeley.”
That’s higher than any state, and while the precise numbers differ, the Government Accountability Office has also called out California for having exceptionally high subsidized housing costs,” he wrote.
That’s not the cost of building a single-family home in a coastal city. It’s the average cost of building a subsidized unit — a modest-sized apartment with bargain finishings in a four-to-five-story building — across the state,” he explained. “And that’s actually a low-ball figure: In expensive and housing-starved cities like San Francisco, the price tag for a single unit of affordable housing is heading toward $1 million.”
In trying to explain the complicated details, he said material costs are going up, land costs are going up, labor costs are going up.
He wrote that those factors need to be added to all the regulatory hurdles and developer impact fees – which in California are about three times the national average – and it adds up to dubious distinctions like San Francisco being the second most expensive place to build in the world.
“Construction is one of the least productive industries, and despite all that’s happened with robots and computers, the building sector is about as efficient today as it was 50 years ago,” Dougherty commented.
Attempting to combat these trends, a number of developers are trying — with mixed success — to build modular housing that can be stacked like Legos, figuring that if they can move a large chunk of the construction process indoors to an assembly line, they can drastically reduce the cost.
But other factors raise prices: “You can’t talk about costs without getting into politics,” he wrote. “Environmental rules, union wages, fees that help fund schools: these are the sorts of priorities that any attempt to reduce construction costs will run into. But it’s a conversation that has to happen, regardless of what side of the political aisle you’re on.”
His commentary points out that the more it costs to build, the more subsidy it requires to make units affordable. The more subsidy it requires, the fewer people are served by it.
“In the end, building a building is building a building. Whether you’re building condos for profit or subsidized housing to advance social equity, the basic process is the same. The higher it costs to do it, the fewer you will get,” he concluded.
We would add that a couple, both making $15 an hour, would be hard pressed to afford a dwelling in California.
The state needs to trim costs where it can, but it will still be a big problem that’s far from being solved.