Why is Affordable Housing So Expensive to Build?

Affordable Housing Can be so Expensive it Impedes Development of Housing

An October 19, 2017 Citylab article, “Why is ‘Affordable’ Housing so Expensive to Build?” reports that “As costs keep rising, it’s becoming harder and harder for governments to subsidize projects like they’ve done in the past.”

“It’s a problem that isn’t going away: the so-called ‘affordable’ housing we’re building in many cities-by which we mean publicly subsidized housing that’s dedicated to low- and moderate-income households-is so expensive to build that we’ll never be able to build enough of it to make a dent in the housing affordability problem.”

Joe Cortright writes that policymakers are arguing that the costs of building affordable housing are “substantial” and not “getting any lower.”

He uses an example of new affordable housing development in California as an example and quotes California Governor Jerry Brown.

“We’ve got to bring down the cost structure of housing and not just find ways to subsidize it,” Brown said in his (state) budget speech.

Cortright’s affordable housing examples cost $600,000 – $800,000 and more per unit to vote.

“Brown’s point is that at that cost per unit, it’s simply beyond the fiscal reach of California or any state to be able to afford to build housing for all of the rent-burdened households. And while the problem is extreme in San Francisco, it crops up elsewhere. In St. Paul, affordable housing-mostly one bedroom units-in a renovated downtown building cost $665,000 per unit.”

Some suggestions for lowering the cost of developing affordable housing include:

  1. Easing the concentration of affordable housing out of urban neighborhoods and
  2. Constructing affordable housing “off-site.”

Cortright concludes:

“Perhaps the central problem of housing affordability is one of scale: the number of units that we’re able to provide is too small. That’s true whether we’re talking about Section 8 vouchers (that go to only about 1 in 5 eligible households), or through inclusionary zoning requirements (which provide only handfuls of units in most cities). The very high per-unit construction costs of affordable housing only make the problem more vexing: the pressure to make any project that gets constructed as distinctive, amenity-rich and environmentally friendly as possible, means that the limited number of public dollars end up building fewer units. And too few units-scale-is the real problem here.”

Full CityLab Article

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