Development costs on Bay Area affordable resi tops $1 million per apartment

Seven projects break mark in San Francisco, San Jose, Oakland, Concord

San Francisco /
Jun.June 22, 2022 09:34 AM
Bay Area costs rising
(iStock)

The cost of building low-income housing in the Bay Area has now pushed past $1 million per unit on a number of projects spread throughout the region.

Seven subsidized housing projects from San Jose to San Francisco to the East Bay have passed the $1 million mark on per-unit costs, the Los Angeles Times reported. Each received state funding in the last two years and are being built or are close to breaking ground.

The soaring cost of affordable housing can be blamed on rising labor and material prices because of inflation, supply-chain problems and worker shortages during the COVID-19 pandemic. A Times analysis in 2020 also pointed to “numerous factors” within the control of state and local governments.

“That is untenable,” Assemblyman Tim Grayson (D-Concord), who is writing legislation aimed at simplifying state affordable housing financing, told the newspaper. “That is not a sustainable model. We have got to do something to reduce the cost.”

In comparison with private-sector development, publicly subsidized low-income housing can have more stringent environmental and labor standards.

Affordable housing projects often face high parking requirements, lengthy local approval processes and a byzantine bureaucracy to secure financing.

Despite promises by Gov. Gavin Newsom and state officials to control costs, there’s been no comprehensive change to the system, with as many as five state agencies doling out funds.

To support housing for low-income residents, federal, state and local governments provide direct financing and tax credits, which reduce what banks and large investors owe the Internal Revenue Service and the state treasury if they help pay for housing projects.

The funding requires developers to cap what tenants pay in rent.

The seven Bay Area projects that now top $1 million per unit would be the costliest built in California and probably the country. Three are in San Francisco, two in Oakland and one apiece in San Jose and Concord. The most expensive is a rehabilitation of 69 public housing units in San Francisco at a cost of more than $1.2 million per apartment.

Another six affordable projects proposed for the Bay Area would exceed $1 million per unit cost.

A UC Berkeley’s Terner Center for Housing Innovation study on the cost to build low-income housing found that projects paying union-level wages could cost $50,000 more per apartment, while projects built to stricter environmental standards cost $17,000 more per apartment.

For each extra funding source, the average per-unit cost also increased by more than $6,000, according to a Times analysis. A major cost comes from developers paying attorneys and consultants to navigate state and local bureaucracies to secure financing.

[Los Angeles Times] – Dana Bartholomew

[contact author email=”[email protected]” text=”Contact Dana Bartholomew”]

[read more title=”Read more”]

[/readmore]


Related Articles

arrow_forward_ios
2855 Pacific Avenue (Realtor, iStock)
Pacific Heights notches top price in SF this year
Pacific Heights notches top price in SF this year
Placeholder image
San Jose to add 400 ‘tiny homes’ for unhoused residents
San Jose to add 400 ‘tiny homes’ for unhoused residents
New builds in Oakland (iStock)
Oakland entitlement, permit processes less than one-third as long as SF
Oakland entitlement, permit processes less than one-third as long as SF
DJM's Rob Miller with 2531 Blanding Avenue (LinkedIn, Google Maps)
DJM Capital deal for Alameda center points to strength of ‘daily needs’ retail in East Bay
DJM Capital deal for Alameda center points to strength of ‘daily needs’ retail in East Bay
Sand Hill Property Co's Peter and Susanna Pau with 1312 El Paseo De Saratoga & 1777 Saratoga Ave (City of San Jose, Sand Hill Property)
Sand Hill Property to redevelop shopping center in West San Jose
Sand Hill Property to redevelop shopping center in West San Jose
San Fransisco home
Bay Area ranks 16th in the U.S. in share of investor bought homes
Bay Area ranks 16th in the U.S. in share of investor bought homes
28955 Mission Blvd in Hayward and Joel Kelly (Google Maps, LinkedIn)
Hayward apartments hit market for $500K per unit
Hayward apartments hit market for $500K per unit
California housing
Rising interest rates start to cut into East Bay resi market
Rising interest rates start to cut into East Bay resi market
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...