California Article

Why Does It Cost $750,000 to Build Affordable Housing in San Francisco?

Why Does It Cost $750,000 to Build Affordable Housing in San Francisco?

The New York Times’ Thomas Fuller reports on why affordable housing costs so much more to build in San Francisco.

Building affordable housing in California costs on average three times as much as Texas or Illinois, according to the federal government.

The reasons for California’s high costs, developers and housing experts say, begin with the price of land and labor in the state. In San Francisco a construction worker earns around $90 an hour on average, according to Turner & Townsend, a real estate consulting company.

But non-construction costs also weigh heavily.

Not taking into account the price of land, around one quarter of the cost of building affordable housing goes to government fees, permits and consulting companies, according to a 2014 study by the California Department of Housing and Community Development.

For a building to be defined as affordable housing it typically obtains tax credits and subsidies. A single affordable housing project requires financing from an average of six different sources — federal, state and local agencies, said Carolina Reid, a researcher at the Terner Center at the University of California, Berkeley, and an author of a forthcoming analysis of affordable housing costs.

She called the process “death by a thousand cuts.”

Senator Brian Jones, a member of California’s State Senate, remembers laboring over an affordable housing project when he was on the City Council of Santee, Calif., near San Diego.

“It literally took us on the City Council six months to get all of our attorneys, all the developer’s attorneys, all the federal government’s attorneys, to agree on the paperwork. And that was just the financing,” Mr. Jones said.

“I walked away from that process and told the developer I cannot believe this project is going to employ more attorneys than construction workers to get built.”

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