11 ms·

Why Is 'Affordable' Housing So Expensive to Build?

135 points by misnamed 9y ago

boulos 9y ago
Because it hasn't been mentioned yet, here in California / San Francisco there's finally a bill being put forward to mandate higher density near transit: https://sf.curbed.com/platform/amp/2018/1/4/16850000/transportation-near-housing-bonus-wiener-ting https://sf.curbed.com/platform/amp/2018/1/4/16850000/transpo... . The challenge really is that people block this kind of development. Most of San Francisco is 2-3 stories with 3-6 units per building. Given the value of the land beneath, that sets a floor on pricing greater than $200k per unit. Then you have to pay for all the legal and development fees to push this through the planning process, and work with the community. The reason developers make small buildings is that they don't stand a chance at getting larger buildings through community input, discretionary reviews and so on. It's not clear to me that this new bill attempts to address that angle. FAR (floor area ratio) isn't nearly the burden the article makes it sound like, but DR (discretionary review) from neighbors certainly is, and often rightly so. Presumably having a transit bonus on the books will encourage planning to tell people "tough shit" if they're trying to oppose larger projects in transit dense areas. Expect bigger projects in SOMA and the Mission :).
puppetmaster40 9y ago
I realize this is a left leaning site and I'll get down-voted, but here is a different pov: -the reasons things like this are both expensive and 'bad is: the GOV. Remember that time when the GOV. had this idea to increase home ownership? And '08 was the outcome. That was funny. After GOV f-ted that up, part II: we the tax payers paid the banks. Lots of laughs that was. - Here is NY creating jobs: http://www.lohud.com/story/news/politics/politics-on-the-hudson/2017/06/07/new-york-job-creation-investigation-big-break-for-business/10174540 http://www.lohud.com/story/news/politics/politics-on-the-hud... What would happen if, now hear me out.... the GOV just went away; lets say something far right: and reduce regulation. Like how many stories you can build in Bay Area. It be like, market would fix it by self. And we would have cheap and affordable housing. Instead, the left uses the gov. against their neighbours. No? So for the leftists, just recite your 'narcissist prayer'.
ksec 9y ago
A few things to add and few already mentioned in other comments. 1. We need to compare price per Square Foot or Square Metre. Not One / Number Bedroom housing that (Strong Words Deleted) used when comparing. I pointed this out in the previous Founder salary article when they mention New York has a slightly more expensive One Bed Room Flat rent then Hong Kong or Tokyo. Well, the NY One Bed room flat's bathroom is properly bigger then the actual one bed room flat in Hong Kong. 2. When we say building cost, i tend to separate building and finishing. As mentioned in other comment, construction costs around the world isn't that far apart. After all metals, cements, etc are pretty much the same level of pricing everywhere. The Cost of material dont differ much, it is the labour cost that has higher variation, but even so the difference in labour cost of developed countries Vs the differences in total cost of the apartment / housing is negligible. 3. While we have tech and Automation to make building cost cheaper, finishing cost scales linearly with the area you are selling. Floors, Electric Wires , Waters, Pipes, etc all these are still labour intensive. And we have no way of bringing this cost down. 4. Not that any of the above matters, because when we have limited supply of land due to politics, prices of land will shoot up. The only places I know that is immune to this blood sucking property investment bubble is either Germany or places where population density is very low. 5. Take Hong Kong for example, you could literally buy up every single Flat on sale in the market, protest on every government land proposal due to environmental concern or what ever, and you have a Housing Market that only goes up. The creation of fiat currency and money supply with limited land means in some places in the world we are forever slave of rent or mortgage.
EADGBE 9y ago
This really does stems down to the lack of building something affordable, even in affordable cities. Most people have it in their heads they need something much better/bigger than they actually do. Every new house built is larger than traditional smaller/starter homes. My 30-year-old 1200 sqft home isn't produced anymore here. I'd say, on average this has turned into a 1600 sqft, 3-car, multi-level (or more) home. New starter homes (in traditional terms) are really just for senior-age targeted clientele which forgo more bedrooms for a larger bedroom size (empty nesters target possibly?). We're having fewer and fewer kids (on average - I've got 3, which presents its own issues in the house hunt), but we're needing more and more square footage for everything. There's a slight adjustment for this by what seems to be a reduced lot size, but this is only marginal, and allows maybe one or two houses on the street than previous standard lot size 40-50 years ago. Every apartment complex that goes up has to be "posh" and include shopping underneath. (There's very little multi-family units going up, most are 30 years or older). Most of the rents for a 1 or 2 bedroom in these developments in already the cost of my 15-yr mortgage. This is just what I experience, but it seems relatively the same, in every suburb surrounding my relatively large city, including inside city limits itself.
hbgl 9y ago
The bottom line is that affordable housing is expensive because it is provided by a central planner.
schmidtc 9y ago
I was expecting this article to provide some insight in regards to the title. It does not. The article should be titled, “Here Are Some Examples of Expensive ‘Affordable’ Housing Projects”.
deleted 9y ago
[deleted]
IkmoIkmo 9y ago
I was expecting something else... Let's be frank, affordable housing typically isn't expensive. Construction costs around the country and indeed the developed world aren't too far apart. In the US it's about $100-200 per square foot, in Western-Europe it's €1000-1500 per square metre. The problem isn't really in construction, typically. Of course, there's always room for improvement everywhere, in construction too. But the big culprit are land prices. Take the Mission, they quote units costing $600k each, not affordable housing. But you're talking about a place where you need to pay $1.5m to just buy the piece of land on which you then build three small $100k units, for an average of $600k each. Completely different story from the $100k unit in 'Portland', which was actually Gresham, east of Portland, where the average square foot price to buy land+home is <$200. Oh and the units were 375 square foot... $100k is expensive, if anything. The author completely ignores the market realities, again, mostly of expensive land prices. And this creates the debate as to whether we should subsidise such housing. After all, if you put the same quality house in another city with cheaper land, you could build 4x as many homes, or twice as many that are twice as big or twice as luxurious. Why should we subsidise a fraction of our poor people to live in the most expensive place on the planet with public money that could go towards helping a larger fraction of people? That's a though question to answer, I find... and I struggle with it, especially because I'm one of those guys who's in favour of these subsidies. Economic segregation is damaging in many ways, plenty of sociological studies have shown. It's important to keep our cities accessible to everyone and create a healthy mix of people from all socioeconomic backgrounds, as opposed to rich enclaves and poor ghettos. But, finding the balance is hard. I don't live in the US but we have similar problems here in Western-Europe with subsidised housing, at the end of the day it's an issue of land prices skyrocketing, it doesn't have as much to do with construction costs as we tend to think. And it's really hard to find the right balance of using public money to buy expensive land for a small group of people.
- maybe-not-in-ux 9y ago
  Depends entirely on where you live. In the East Bay, it's $345-375 per square foot, not including land costs.
- nitwit005 9y ago
  I think we've just hit the "give up" point in some areas. Even if you can find the money, you have to question who is benefiting, as you end up helping out these employers who offer low pay and benefits. The SF bay area seems to have finally hit that point where the restaurants and so on are being forced to raise their wages because they can't hire people, and that generally seems like a good thing. It's better if the wages reflect the costs.
notatoad 9y ago
I don't see an answer in the article, but are there any comprable unsubsidized housing projects that can be compared to? Is housing simply that expensive to build, or is this a problem of beaurocracy or other inefficiencies specific to subsidized housing? The quote about reducing the regulatory burden for but only for affordable housing to cut down on the cost seems telling - essentially admitting that at least some portion of the regulations in place aren't necessary and are simply a waste of money.
- dragonwriter 9y ago
  > The quote about reducing the regulatory burden for but only for affordable housing to cut down on the cost seems telling - essentially admitting that at least some portion of the regulations in place aren't necessary and are simply a waste of money. It is not such an admission, because it could just as well view the regulation as generally beneficial but in tension with the goal of providing affordable housing. You are viewing desirability of regulation in an unreasonably context-blind and binary manner.
octaveguin 9y ago
A solution to the housing a problem never mentioned is intentional communities. They seem to solve a good portion of the problems. Here's why they make sense: 1. They can be cheap because they can be built in places with low land prices and low regulations. These are the chief factors in why housing is so expensive. 2. They can solve desirability by building together that stuff that makes a city desirable - other people, businesses, walkability, modern design. 3. They're more feasible than ever because remote work is so practical that you don't have to live in the middle of a city for a job. 4. A model for bringing people who have this goal together has been recently validated on a large scale (kickstarter type systems). So I'm left wondering - am I just not seeing the projects or why have I not heard of them?
- fragsworth 9y ago
  > remote work is so practical Remote work isn't actually feasible for most people. It's feasible for software engineers, and some other high-paid jobs, that don't have much of a problem paying high rent prices.
- dragonwriter 9y ago
  > They can solve desirability by building together that stuff that makes a city desirable - other people, businesses, walkability, modern design. The things that make a city desirable (and supportable) are largely natural features of its location, which you either can't currently practically engineer (pleasant weather) or which are very expensive to engineer (like access to fresh water supply). Places that are currently unpopulated and have low land prices are usually lacking these things.
  - mch82 9y ago
    How come people continue to live in flood planes, hurricane zones, or the Northeast? Massive Winter Storm Hits Northeast - https://www.npr.org/sections/thetwo-way/2018/01/04/575643483/blizzard-conditions-possible-as-massive-winter-storm-hits-northeast https://www.npr.org/sections/thetwo-way/2018/01/04/575643483...
    - 9y ago
coldcode 9y ago
Housing is often not an issue so much as land is. Even billionaires have trouble finding land in the Bay Area, but there are many cities in the center of the country with lots of land where building basic housing would be cheap. The other issue is having the land and housing near enough to a supply of jobs. Look at Detroit, you can get incredible deals but the jobs are no longer there.
- panic 9y ago
  We have plenty of land, though! The similarly-sized Tokyo metropolitan area (5,419 square miles, 37.8 million people) has over six times the density of the 9-county Bay Area region (6,966 square miles, 7.68 million people).
- dragonwriter 9y ago
  > there are many cities in the center of the country with lots of land where building basic housing would be cheap. Because the places are either (or both) unattractive to live for environmental/geographic reasons or have an economy that can offers few (if any) additional decent paying jobs and can support few (if any) additional people without jobs. Prices reflect the market’s assessment of value, and usually there is a reason for that assessment.
agrarianjustice 9y ago
As a thought experiment, what would happen if a city like San Francisco required you to own the home or condo you lived in, and provided financial guarantees. So any non-owner occupied residence was illegal. And then the city paid a variety of contractors to build studio apartments which would rent for $500/month without any commitments, deposit or credit score. With 2-4BR for families. The thought is the city, community & companies build up immense value for real estate owners. It's somewhat unfair to create this fantastic system we have in the Bay Area, where all these smart hardworking people gravitate to work on new, sometimes transformative ideas but then we channel lots of the profits to early real estate holders who effectively got lucky. While unnecessarily adding a ton of stress to people's lives. Of course, it would never be implemented. But the basic idea is that all apartment rentals would be through an open system via local government and all condos & homes would require the owner to live in them.
- T2_t2 9y ago
  That would be an unmitigated disaster. For a start, what is the value of all rental properties in the bay area? Lets say it is 15%. So the government either needs to come up with 15% of the value of ALL rented houses, or steal them in some unfair way. And can I claim my kids and wife live and own their own houses? What if they are 15? Can I own 5 houses? Starting this alone would be a massive disaster - either economically (fair price paid), morally (lets steal rental properties) or pragmagtically (can we guarantee people won't cheat?). If by a miracle this hump could be got over, it would also lead to massive problems of supply. 100% of new developments having to be sold to owner occupiers, or be paid for by the government, would make it hard to impossible for either side to build much more supply. I can't start a new development unless I am sure I can sell 100% to owners, or the government buys some of the units. Hello massive corruption! Lastly, https://pics.me.me/the-30-second-guide-to-government-spending-buying-something-using-your-25857769.png https://pics.me.me/the-30-second-guide-to-government-spendin... is an example of how people buy. A Government run rental market would have ridiculously impractical houses, as now governments would have the ability to manipulate the housing market for votes. "X government built practical, affordable no frills units, but you hate them. We'll build you all places you love". Disaster number, what, 7? It is just a disaster from every possible, conceivable angle.
baron816 9y ago
Not only is affordable housing a right, but affordable housing in a new construction building, with easy access to transportation, free gym membership, free parking, doorman service, etc. is a right too. Plus, the building must be built with inflated union wages, because it needs to be a “good jobs” program. And better get it LEED certified while we’re at it. We also need to make sure any affordable development doesn’t change the “character” of the neighborhood, because single family ranch style homes in America are so very rare and precious. Most importantly, it can’t create a shadow of any kind.
CharlesMerriam2 9y ago
I think 'Affordable Housing' is one of the topics where people gloss over the basics. * Affordable Housing returns are always below market-rate housing. * Requiring a percentage of building to be affordable housing is a tax. Builders have an interest in avoiding taxes. * Acquiring an affordable housing unit is a long term benefit. Those advocating for housing have an interest in acquiring benefits. * Long term housing prices are driven by regional economics. * Short term housing prices are can be manipulated. Solving manipulations like the simultaneous remodeling of large complexes; raising rates with too little notice to effectively move; or jumping rates by high percentages in a year have different solutions. Thinking in these terms separates concerns of equity in society; the high cost of service workers in congested areas; the rise of empty buildings; the gouging of existing tenants; and subsidized housing for some workers. Recognize this debate has been going for a while. On could argue that providing cheap housing for the Phoenician immigrants would make Athens better for Athenians, or that people like Plato need an affordable place to live to make our city-state great!
CapitalistCartr 9y ago
We can build affordable housing easily here in Florida; we rarely choose to. We can build 800sq. ft. (75 sq. m.) apartments in 3 story buildings for about $40,000, not counting land. But we don't. Because most Americans don't want to live in 800 sq. ft. and most builders want to cater to the middle standard deviations of the population. They make more money selling to people who make more money.
wpietri 9y ago
I was expecting more to the article than I got. It doesn't really answer the question. I don't even think it asks the question well. E.g., is the question really "why is affordable housing so expensive?" or is it "why is housing so expensive?" They hint that publicly funded housing might be more expensive, with a mealy-mouthed "the case has been made". But they give just one apples-to-oranges comparison, and, worse, one hypothetical comparison. Where's the statistical data? It also doesn't look at all at why we need affordable housing. E.g., with rapidly spiking inequality (in the US generally, and especially in SF), demand for affordable housing is going up. In talking like we can't afford it, it doesn't put numbers to that, either. For example, in 2015 the US spent $71 billion on the mortgage interest tax credit, 90% of which went to households making over $100k/year. If we stopped subsidizing the housing of rich people, could we afford to subsidize the housing of poor people? And might that giant subsidy be part of why housing is so expensive? So A+ title, D+ content.
- T2_t2 9y ago
  I agree about your assessment of the article, but I think you've missed the question of the right abstraction. Why does SF/Bay area need affordable housing? Sure, the world needs affordable housing, but why does the Bay Area? Why is the right level for affordable housing the region, and not the state or the country or, heck, in the other direction the suburb or street? Why is this city region the correct abstraction? We've reached a point where certain places - London, NYC, San Francisco, Singapore, Hong Kong and perhaps even Shanghai - are so large and economically important that the idea they should include affordable housing, when there are alternatives that are much more financially effective, seems a little off to me. I'm not sure why anyone would want to live in affordable housing in SF, when everything is so expensive. Wouldn't it make more sense to move whole family groups to Portland, for the same prices as one of those families could live in SF? Not even that far, to Oakland maybe, or the outskirts. And why is the right abstraction one house? A policy of whole family moves, or community moves so people keep their connections, would seem like a more sensible idea. People stay in areas that are awful often because they don't want to lose those connections - which I 100% get. So why not move groups of people - willingly - so they have the best of both worlds?
bluedino 9y ago
Land is cheap. Even in high priced areas there are always parcels ripe for redevelopment. There are two reasons: one is that the units are built out more luxurious than they need to be. At least 30-40% higher. The second is union labor (or prevailing wage) you're spending three times the amount on labor as hiring local, cheaper labor.
- albertgoeswoof 9y ago
  > Even in high priced areas there are always parcels ripe for redevelopment. Please tell me where these are, I’d love to know so I can redevelop them and make a few million.
- sjg007 9y ago
  Finishing costs are cheap. Builders do this to command a higher selling price.
pcurve 9y ago
I'm sorry, charging $700k for units like pictured here isn't anything out of ordinary considering some units will have up to 4 bedroom. https://www.eastbaytimes.com/2017/10/11/emeryville-affordable-housing-project-breaks-ground/ https://www.eastbaytimes.com/2017/10/11/emeryville-affordabl... It's not exactly located in cheap area either. https://www.google.com/maps/place/3706+San+Pablo+Ave/@37.8322188,-122.2799415,16.42z/data=!4m6!3m5!1s0x80857e11bbfaf877:0xbbaa197891b68995!4b1!8m2!3d37.828093!4d-122.278539 https://www.google.com/maps/place/3706+San+Pablo+Ave/@37.832... Building up makes sense, but considering complete lack of undeveloped land in this area, that's not really feasible. In some countries, residents of a city block can work with real estate developers to build-up, and as long as 80%-85% agree, the project proceeds. Not sure if equivalent mechanism exists in CA.
notadoc 9y ago
$700,000 per unit? Or even $100k? For "affordable" housing? Meanwhile, in Mississippi.... regular brand new houses (not "affordable" housing) are actually affordable at $150k, or less than a down payment in any west coast US city. https://www.zillow.com/ms/new-homes/ https://www.zillow.com/ms/new-homes/ Or check out a brand new 2200sq ft house in Indiana for $200,000 that would sell for about $2.5 million in the Bay Area, or about $1.5 million in Seattle or Portland https://www.zillow.com/community/harrison-lakes/2095745355_zpid/ https://www.zillow.com/community/harrison-lakes/2095745355_z... Sometimes I wonder why people aren't more willing to move to new states. I realize that Indiana and Mississippi aren't particularly "cool" and certainly not trendy, but what matters more in life? Being in a trendy spot, or actually being able to afford a reasonable lifestyle?
- conanbatt 9y ago
  There are houses way cheaper than those in Indiana in Costa Rica. Why arent people moving from Indiana to Costa rica??? I dont get it!
  - notadoc 9y ago
    Why not Morocco, Bangladesh, or Bolivia? The price per square foot with the exact same materials, finishes, construction quality, etc - not including cost of land - is 1/5 or less in a state like IN, MS, WI, MN, etc than CA, WA, OR, why is that? These states are in the same country with the same first world amenities.
    - richardknop 9y ago
      But it is the same principle inside a big country like US which is really vast geographically. Look at Europe. Properties in Eastern Europe are still a lot cheaper yet most university educated young people are migrating from east to west. So obviously they value the economic and career opportunities in those big metros in Western Europe and even though flats there cost 2x or 3x they still go. Just because you can buy cheap house in Mississippi is not going to cause young doctors, engineers, lawyers, other professionals and graduates from top schools to start migrating there. It's just not worth it for them, they are looking at their long term career prospects and can do the math.
ivm 9y ago
In Chile we have an incremental building program: you get half a house constructed and finish the other half by yourself. The cost per unit was less than $10k in 2002. https://99percentinvisible.org/episode/half-a-house/ https://99percentinvisible.org/episode/half-a-house/
pdx6 9y ago
In Brown we trust, along with Scott Wiener; these are the only two politicians doing anything to address housing prices. In San Francisco, the Mayor's Office of Housing (SFMOH) has created a complicated program of silent second liens to enable 'low' and 'moderate' income residents purchase regular condos at below market rate. Units built strictly for income bands and subsidized, or 'affordable units', run into a problem of funding; it is either developers who elect not in include below market rate units (BMR) and pay into the fund or churches building their own structures such as Mercy Housing. But what about the land? I don't think that has to be the major cost, at least in San Francisco. There are a plenty of vacant lots owned by the city, and in a recent case the feds sold land for $1 to the city for pre-fab condos near the court house for 'formerly homeless'. Indeed, if you have an apartment, you are no longer homeless. And this is where we start talking about the real expense -- union labor. The pre-fab units clock in at under 250k each, but they are built over in Vacaville with non-union labor. Anything else needs highly paid craftsmen which goose a market rate unit over 700k+. If the lot needs to be abated for pollution, usually for former gas station sites, the price goes even higher plus delays. Want steel framing for going over 7 stories? The price goes up. Not that SF Planning's zoning will allow 7 stories, even near BART. The solution to affordable housing is to just build more housing -- just regular housing. Built it tall, 100 stories or more, and right on top major transportation lines like BART stations -- on all 4 street corners. We'll need to overcome labor costs and zoning before we can get there.
lj3 9y ago
There's a great reddit post where an LA architect specializing in multifamily residential units explains why all of the new units being built in LA are luxury condos instead of low cost housing. tl;dr: city specific zoning laws. To be fair, the post is specific to LA, but it makes me wonder what legal hoops developers have to jump through to build in other cities and how expensive those hoops are. https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_architect_in_la_specializing_in_multifamily/ https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_ar...
nautilus12 9y ago
Increase taxes to build affordable housing. Hand the contract over to a developer. Developer builds $700,000 units. The model is not economically sustainable. Increase taxes. Rinse repeat. Now even the middle income people can't afford to buy a $300,000 house, and have to move into the affordable housing. Housing developers are living like kings. Welcome to the USA, where taxes are spoken for before they are even levied.
conanbatt 9y ago
The best way to increase worker's income, reduce housing costs and eliminate all the ridiculous laws around housing regulation and property taxes is to replace sales tax and prop taxes for land value taxes. As soon as the political gain to block construction dissapears, developing anything will be much cheaper and changes into policy will come with popular demand both by renters and landlords.
monkeypizza 9y ago
Check out this video explaining why you can buy new detached homes in Tokyo for about 300k usd. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w * Land owners have an absolute right to develop their own land - neighbors can't block you. * You can build a 60 m^2 x 3 floor house on 100m^2 of land, or more. So basically they build way denser, and reduce opportunities to block/rentseek.
bostonscott 9y ago
The central problem is the motive. Low income individuals do not have such a powerful lobby that they're able to compel States to create laws that require affordable housing. It's the real estate/development/construction lobbies. They are very powerful and affordable housing is a big business. Everyone has to get their cut.
beager 9y ago
It seems to me like one of the big problems with "affordable" housing in desirable areas is that everyone who has bought an "unaffordable" house is now in on the con, and "affordable" housing threatens to correct (read: deflate) the value of the very expensive thing that they have bought. I'm not a homeowner, but being near NYC, if I manage to get myself into buying a home, I would probably be inclined to support any measure that ensures that the demand for my home—and therefore its price—continues to rise at as great a rate as possible to make sure that I wasn't on the hook for a large depreciation on my mortgaged property. This is the reverse of my current desire, which is for housing to be affordable enough for me to get into so I don't have to rent and can provision that part of my income toward building wealth and not someone else's wealth. The moment I become a homeowner, those motivations flip. If the median home price were closer to the median income in a given area, I surmise that the desire from homeowners for increased demand and value would abate, because homeowners would stand to gain or lose less in their house vis a vis their income. Instead, you have folks who may gain more value in their homes in one year than they would make in salary. And conversely, price correction at such a great disparity to median income would mean that you now owe the bank a year or more's salary more than what your home is worth.
- closeparen 9y ago
  Someone who qualifies for an affordable housing program wouldn't come close to affording your market-priced home, and in practice, creating even 2,000 such units over 15 years is a campaign-centerpiece, career-making accomplishment. To contribute to demand, you have to be able to make a realistic bid. I make well over area median income and I couldn't come close to that. You really think someone at 50% of AMI could? The position, "I'm not a NIMBY, I just don't like greedy developers getting whatever they want. I would support this project if it were affordable housing" is a common tactic for people who are ostensibly liberal to appear less craven about their home values then they actually are. Issuing building permits to 100% of the tiny drip of funded affordable housing projects won't change a thing, and they know it.
- pixl97 9y ago
  >who has bought an "unaffordable" house is now in on the con, Yep, people are using houses as investments instead of just places to live. When a person is invested in something they will willingly engage in behavior that leads to harmful outcomes to everyone, even themselves long term. A corollary of this is summed up in this famous statement “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” -Sinclair
ggm 9y ago
How much of the build cost is land cost? How much of the build cost is local compliance costs? How much of the cost is market adjusted price, and not actually cost per se?

135 points by misnamed 9y ago

Because it hasn't been mentioned yet, here in California / San Francisco there's finally a bill being put forward to mandate higher density near transit: https://sf.curbed.com/platform/amp/2018/1/4/16850000/transportation-near-housing-bonus-wiener-ting https://sf.curbed.com/platform/amp/2018/1/4/16850000/transpo... . The challenge really is that people block this kind of development. Most of San Francisco is 2-3 stories with 3-6 units per building. Given the value of the land beneath, that sets a floor on pricing greater than $200k per unit. Then you have to pay for all the legal and development fees to push this through the planning process, and work with the community. The reason developers make small buildings is that they don't stand a chance at getting larger buildings through community input, discretionary reviews and so on. It's not clear to me that this new bill attempts to address that angle. FAR (floor area ratio) isn't nearly the burden the article makes it sound like, but DR (discretionary review) from neighbors certainly is, and often rightly so. Presumably having a transit bonus on the books will encourage planning to tell people "tough shit" if they're trying to oppose larger projects in transit dense areas. Expect bigger projects in SOMA and the Mission :).

puppetmaster40 9y ago

I realize this is a left leaning site and I'll get down-voted, but here is a different pov: -the reasons things like this are both expensive and 'bad is: the GOV. Remember that time when the GOV. had this idea to increase home ownership? And '08 was the outcome. That was funny. After GOV f-ted that up, part II: we the tax payers paid the banks. Lots of laughs that was. - Here is NY creating jobs: http://www.lohud.com/story/news/politics/politics-on-the-hudson/2017/06/07/new-york-job-creation-investigation-big-break-for-business/10174540 http://www.lohud.com/story/news/politics/politics-on-the-hud... What would happen if, now hear me out.... the GOV just went away; lets say something far right: and reduce regulation. Like how many stories you can build in Bay Area. It be like, market would fix it by self. And we would have cheap and affordable housing. Instead, the left uses the gov. against their neighbours. No? So for the leftists, just recite your 'narcissist prayer'.

ksec 9y ago

A few things to add and few already mentioned in other comments. 1. We need to compare price per Square Foot or Square Metre. Not One / Number Bedroom housing that (Strong Words Deleted) used when comparing. I pointed this out in the previous Founder salary article when they mention New York has a slightly more expensive One Bed Room Flat rent then Hong Kong or Tokyo. Well, the NY One Bed room flat's bathroom is properly bigger then the actual one bed room flat in Hong Kong. 2. When we say building cost, i tend to separate building and finishing. As mentioned in other comment, construction costs around the world isn't that far apart. After all metals, cements, etc are pretty much the same level of pricing everywhere. The Cost of material dont differ much, it is the labour cost that has higher variation, but even so the difference in labour cost of developed countries Vs the differences in total cost of the apartment / housing is negligible. 3. While we have tech and Automation to make building cost cheaper, finishing cost scales linearly with the area you are selling. Floors, Electric Wires , Waters, Pipes, etc all these are still labour intensive. And we have no way of bringing this cost down. 4. Not that any of the above matters, because when we have limited supply of land due to politics, prices of land will shoot up. The only places I know that is immune to this blood sucking property investment bubble is either Germany or places where population density is very low. 5. Take Hong Kong for example, you could literally buy up every single Flat on sale in the market, protest on every government land proposal due to environmental concern or what ever, and you have a Housing Market that only goes up. The creation of fiat currency and money supply with limited land means in some places in the world we are forever slave of rent or mortgage.

EADGBE 9y ago

This really does stems down to the lack of building something affordable, even in affordable cities. Most people have it in their heads they need something much better/bigger than they actually do. Every new house built is larger than traditional smaller/starter homes. My 30-year-old 1200 sqft home isn't produced anymore here. I'd say, on average this has turned into a 1600 sqft, 3-car, multi-level (or more) home. New starter homes (in traditional terms) are really just for senior-age targeted clientele which forgo more bedrooms for a larger bedroom size (empty nesters target possibly?). We're having fewer and fewer kids (on average - I've got 3, which presents its own issues in the house hunt), but we're needing more and more square footage for everything. There's a slight adjustment for this by what seems to be a reduced lot size, but this is only marginal, and allows maybe one or two houses on the street than previous standard lot size 40-50 years ago. Every apartment complex that goes up has to be "posh" and include shopping underneath. (There's very little multi-family units going up, most are 30 years or older). Most of the rents for a 1 or 2 bedroom in these developments in already the cost of my 15-yr mortgage. This is just what I experience, but it seems relatively the same, in every suburb surrounding my relatively large city, including inside city limits itself.

hbgl 9y ago

The bottom line is that affordable housing is expensive because it is provided by a central planner.

schmidtc 9y ago

I was expecting this article to provide some insight in regards to the title. It does not. The article should be titled, “Here Are Some Examples of Expensive ‘Affordable’ Housing Projects”.

deleted 9y ago

[deleted]

IkmoIkmo 9y ago

I was expecting something else... Let's be frank, affordable housing typically isn't expensive. Construction costs around the country and indeed the developed world aren't too far apart. In the US it's about $100-200 per square foot, in Western-Europe it's €1000-1500 per square metre. The problem isn't really in construction, typically. Of course, there's always room for improvement everywhere, in construction too. But the big culprit are land prices. Take the Mission, they quote units costing $600k each, not affordable housing. But you're talking about a place where you need to pay $1.5m to just buy the piece of land on which you then build three small $100k units, for an average of $600k each. Completely different story from the $100k unit in 'Portland', which was actually Gresham, east of Portland, where the average square foot price to buy land+home is <$200. Oh and the units were 375 square foot... $100k is expensive, if anything. The author completely ignores the market realities, again, mostly of expensive land prices. And this creates the debate as to whether we should subsidise such housing. After all, if you put the same quality house in another city with cheaper land, you could build 4x as many homes, or twice as many that are twice as big or twice as luxurious. Why should we subsidise a fraction of our poor people to live in the most expensive place on the planet with public money that could go towards helping a larger fraction of people? That's a though question to answer, I find... and I struggle with it, especially because I'm one of those guys who's in favour of these subsidies. Economic segregation is damaging in many ways, plenty of sociological studies have shown. It's important to keep our cities accessible to everyone and create a healthy mix of people from all socioeconomic backgrounds, as opposed to rich enclaves and poor ghettos. But, finding the balance is hard. I don't live in the US but we have similar problems here in Western-Europe with subsidised housing, at the end of the day it's an issue of land prices skyrocketing, it doesn't have as much to do with construction costs as we tend to think. And it's really hard to find the right balance of using public money to buy expensive land for a small group of people.

maybe-not-in-ux 9y ago
Depends entirely on where you live. In the East Bay, it's $345-375 per square foot, not including land costs.
nitwit005 9y ago
I think we've just hit the "give up" point in some areas. Even if you can find the money, you have to question who is benefiting, as you end up helping out these employers who offer low pay and benefits. The SF bay area seems to have finally hit that point where the restaurants and so on are being forced to raise their wages because they can't hire people, and that generally seems like a good thing. It's better if the wages reflect the costs.

notatoad 9y ago

I don't see an answer in the article, but are there any comprable unsubsidized housing projects that can be compared to? Is housing simply that expensive to build, or is this a problem of beaurocracy or other inefficiencies specific to subsidized housing? The quote about reducing the regulatory burden for but only for affordable housing to cut down on the cost seems telling - essentially admitting that at least some portion of the regulations in place aren't necessary and are simply a waste of money.

dragonwriter 9y ago
> The quote about reducing the regulatory burden for but only for affordable housing to cut down on the cost seems telling - essentially admitting that at least some portion of the regulations in place aren't necessary and are simply a waste of money. It is not such an admission, because it could just as well view the regulation as generally beneficial but in tension with the goal of providing affordable housing. You are viewing desirability of regulation in an unreasonably context-blind and binary manner.

octaveguin 9y ago

A solution to the housing a problem never mentioned is intentional communities. They seem to solve a good portion of the problems. Here's why they make sense: 1. They can be cheap because they can be built in places with low land prices and low regulations. These are the chief factors in why housing is so expensive. 2. They can solve desirability by building together that stuff that makes a city desirable - other people, businesses, walkability, modern design. 3. They're more feasible than ever because remote work is so practical that you don't have to live in the middle of a city for a job. 4. A model for bringing people who have this goal together has been recently validated on a large scale (kickstarter type systems). So I'm left wondering - am I just not seeing the projects or why have I not heard of them?

fragsworth 9y ago
> remote work is so practical Remote work isn't actually feasible for most people. It's feasible for software engineers, and some other high-paid jobs, that don't have much of a problem paying high rent prices.
dragonwriter 9y ago
> They can solve desirability by building together that stuff that makes a city desirable - other people, businesses, walkability, modern design. The things that make a city desirable (and supportable) are largely natural features of its location, which you either can't currently practically engineer (pleasant weather) or which are very expensive to engineer (like access to fresh water supply). Places that are currently unpopulated and have low land prices are usually lacking these things.
- mch82 9y ago
  How come people continue to live in flood planes, hurricane zones, or the Northeast? Massive Winter Storm Hits Northeast - https://www.npr.org/sections/thetwo-way/2018/01/04/575643483/blizzard-conditions-possible-as-massive-winter-storm-hits-northeast https://www.npr.org/sections/thetwo-way/2018/01/04/575643483...
  - 9y ago

coldcode 9y ago

Housing is often not an issue so much as land is. Even billionaires have trouble finding land in the Bay Area, but there are many cities in the center of the country with lots of land where building basic housing would be cheap. The other issue is having the land and housing near enough to a supply of jobs. Look at Detroit, you can get incredible deals but the jobs are no longer there.

panic 9y ago
We have plenty of land, though! The similarly-sized Tokyo metropolitan area (5,419 square miles, 37.8 million people) has over six times the density of the 9-county Bay Area region (6,966 square miles, 7.68 million people).
dragonwriter 9y ago
> there are many cities in the center of the country with lots of land where building basic housing would be cheap. Because the places are either (or both) unattractive to live for environmental/geographic reasons or have an economy that can offers few (if any) additional decent paying jobs and can support few (if any) additional people without jobs. Prices reflect the market’s assessment of value, and usually there is a reason for that assessment.

agrarianjustice 9y ago

As a thought experiment, what would happen if a city like San Francisco required you to own the home or condo you lived in, and provided financial guarantees. So any non-owner occupied residence was illegal. And then the city paid a variety of contractors to build studio apartments which would rent for $500/month without any commitments, deposit or credit score. With 2-4BR for families. The thought is the city, community & companies build up immense value for real estate owners. It's somewhat unfair to create this fantastic system we have in the Bay Area, where all these smart hardworking people gravitate to work on new, sometimes transformative ideas but then we channel lots of the profits to early real estate holders who effectively got lucky. While unnecessarily adding a ton of stress to people's lives. Of course, it would never be implemented. But the basic idea is that all apartment rentals would be through an open system via local government and all condos & homes would require the owner to live in them.

T2_t2 9y ago
That would be an unmitigated disaster. For a start, what is the value of all rental properties in the bay area? Lets say it is 15%. So the government either needs to come up with 15% of the value of ALL rented houses, or steal them in some unfair way. And can I claim my kids and wife live and own their own houses? What if they are 15? Can I own 5 houses? Starting this alone would be a massive disaster - either economically (fair price paid), morally (lets steal rental properties) or pragmagtically (can we guarantee people won't cheat?). If by a miracle this hump could be got over, it would also lead to massive problems of supply. 100% of new developments having to be sold to owner occupiers, or be paid for by the government, would make it hard to impossible for either side to build much more supply. I can't start a new development unless I am sure I can sell 100% to owners, or the government buys some of the units. Hello massive corruption! Lastly, https://pics.me.me/the-30-second-guide-to-government-spending-buying-something-using-your-25857769.png https://pics.me.me/the-30-second-guide-to-government-spendin... is an example of how people buy. A Government run rental market would have ridiculously impractical houses, as now governments would have the ability to manipulate the housing market for votes. "X government built practical, affordable no frills units, but you hate them. We'll build you all places you love". Disaster number, what, 7? It is just a disaster from every possible, conceivable angle.

baron816 9y ago

Not only is affordable housing a right, but affordable housing in a new construction building, with easy access to transportation, free gym membership, free parking, doorman service, etc. is a right too. Plus, the building must be built with inflated union wages, because it needs to be a “good jobs” program. And better get it LEED certified while we’re at it. We also need to make sure any affordable development doesn’t change the “character” of the neighborhood, because single family ranch style homes in America are so very rare and precious. Most importantly, it can’t create a shadow of any kind.

CharlesMerriam2 9y ago

I think 'Affordable Housing' is one of the topics where people gloss over the basics. * Affordable Housing returns are always below market-rate housing. * Requiring a percentage of building to be affordable housing is a tax. Builders have an interest in avoiding taxes. * Acquiring an affordable housing unit is a long term benefit. Those advocating for housing have an interest in acquiring benefits. * Long term housing prices are driven by regional economics. * Short term housing prices are can be manipulated. Solving manipulations like the simultaneous remodeling of large complexes; raising rates with too little notice to effectively move; or jumping rates by high percentages in a year have different solutions. Thinking in these terms separates concerns of equity in society; the high cost of service workers in congested areas; the rise of empty buildings; the gouging of existing tenants; and subsidized housing for some workers. Recognize this debate has been going for a while. On could argue that providing cheap housing for the Phoenician immigrants would make Athens better for Athenians, or that people like Plato need an affordable place to live to make our city-state great!

CapitalistCartr 9y ago

We can build affordable housing easily here in Florida; we rarely choose to. We can build 800sq. ft. (75 sq. m.) apartments in 3 story buildings for about $40,000, not counting land. But we don't. Because most Americans don't want to live in 800 sq. ft. and most builders want to cater to the middle standard deviations of the population. They make more money selling to people who make more money.

wpietri 9y ago

I was expecting more to the article than I got. It doesn't really answer the question. I don't even think it asks the question well. E.g., is the question really "why is affordable housing so expensive?" or is it "why is housing so expensive?" They hint that publicly funded housing might be more expensive, with a mealy-mouthed "the case has been made". But they give just one apples-to-oranges comparison, and, worse, one hypothetical comparison. Where's the statistical data? It also doesn't look at all at why we need affordable housing. E.g., with rapidly spiking inequality (in the US generally, and especially in SF), demand for affordable housing is going up. In talking like we can't afford it, it doesn't put numbers to that, either. For example, in 2015 the US spent $71 billion on the mortgage interest tax credit, 90% of which went to households making over $100k/year. If we stopped subsidizing the housing of rich people, could we afford to subsidize the housing of poor people? And might that giant subsidy be part of why housing is so expensive? So A+ title, D+ content.

T2_t2 9y ago
I agree about your assessment of the article, but I think you've missed the question of the right abstraction. Why does SF/Bay area need affordable housing? Sure, the world needs affordable housing, but why does the Bay Area? Why is the right level for affordable housing the region, and not the state or the country or, heck, in the other direction the suburb or street? Why is this city region the correct abstraction? We've reached a point where certain places - London, NYC, San Francisco, Singapore, Hong Kong and perhaps even Shanghai - are so large and economically important that the idea they should include affordable housing, when there are alternatives that are much more financially effective, seems a little off to me. I'm not sure why anyone would want to live in affordable housing in SF, when everything is so expensive. Wouldn't it make more sense to move whole family groups to Portland, for the same prices as one of those families could live in SF? Not even that far, to Oakland maybe, or the outskirts. And why is the right abstraction one house? A policy of whole family moves, or community moves so people keep their connections, would seem like a more sensible idea. People stay in areas that are awful often because they don't want to lose those connections - which I 100% get. So why not move groups of people - willingly - so they have the best of both worlds?

bluedino 9y ago

Land is cheap. Even in high priced areas there are always parcels ripe for redevelopment. There are two reasons: one is that the units are built out more luxurious than they need to be. At least 30-40% higher. The second is union labor (or prevailing wage) you're spending three times the amount on labor as hiring local, cheaper labor.

albertgoeswoof 9y ago
> Even in high priced areas there are always parcels ripe for redevelopment. Please tell me where these are, I’d love to know so I can redevelop them and make a few million.
sjg007 9y ago
Finishing costs are cheap. Builders do this to command a higher selling price.

pcurve 9y ago

I'm sorry, charging $700k for units like pictured here isn't anything out of ordinary considering some units will have up to 4 bedroom. https://www.eastbaytimes.com/2017/10/11/emeryville-affordable-housing-project-breaks-ground/ https://www.eastbaytimes.com/2017/10/11/emeryville-affordabl... It's not exactly located in cheap area either. https://www.google.com/maps/place/3706+San+Pablo+Ave/@37.8322188,-122.2799415,16.42z/data=!4m6!3m5!1s0x80857e11bbfaf877:0xbbaa197891b68995!4b1!8m2!3d37.828093!4d-122.278539 https://www.google.com/maps/place/3706+San+Pablo+Ave/@37.832... Building up makes sense, but considering complete lack of undeveloped land in this area, that's not really feasible. In some countries, residents of a city block can work with real estate developers to build-up, and as long as 80%-85% agree, the project proceeds. Not sure if equivalent mechanism exists in CA.

notadoc 9y ago

$700,000 per unit? Or even $100k? For "affordable" housing? Meanwhile, in Mississippi.... regular brand new houses (not "affordable" housing) are actually affordable at $150k, or less than a down payment in any west coast US city. https://www.zillow.com/ms/new-homes/ https://www.zillow.com/ms/new-homes/ Or check out a brand new 2200sq ft house in Indiana for $200,000 that would sell for about $2.5 million in the Bay Area, or about $1.5 million in Seattle or Portland https://www.zillow.com/community/harrison-lakes/2095745355_zpid/ https://www.zillow.com/community/harrison-lakes/2095745355_z... Sometimes I wonder why people aren't more willing to move to new states. I realize that Indiana and Mississippi aren't particularly "cool" and certainly not trendy, but what matters more in life? Being in a trendy spot, or actually being able to afford a reasonable lifestyle?

conanbatt 9y ago
There are houses way cheaper than those in Indiana in Costa Rica. Why arent people moving from Indiana to Costa rica??? I dont get it!
- notadoc 9y ago
  Why not Morocco, Bangladesh, or Bolivia? The price per square foot with the exact same materials, finishes, construction quality, etc - not including cost of land - is 1/5 or less in a state like IN, MS, WI, MN, etc than CA, WA, OR, why is that? These states are in the same country with the same first world amenities.
  - richardknop 9y ago
    But it is the same principle inside a big country like US which is really vast geographically. Look at Europe. Properties in Eastern Europe are still a lot cheaper yet most university educated young people are migrating from east to west. So obviously they value the economic and career opportunities in those big metros in Western Europe and even though flats there cost 2x or 3x they still go. Just because you can buy cheap house in Mississippi is not going to cause young doctors, engineers, lawyers, other professionals and graduates from top schools to start migrating there. It's just not worth it for them, they are looking at their long term career prospects and can do the math.

ivm 9y ago

In Chile we have an incremental building program: you get half a house constructed and finish the other half by yourself. The cost per unit was less than $10k in 2002. https://99percentinvisible.org/episode/half-a-house/ https://99percentinvisible.org/episode/half-a-house/

pdx6 9y ago

In Brown we trust, along with Scott Wiener; these are the only two politicians doing anything to address housing prices. In San Francisco, the Mayor's Office of Housing (SFMOH) has created a complicated program of silent second liens to enable 'low' and 'moderate' income residents purchase regular condos at below market rate. Units built strictly for income bands and subsidized, or 'affordable units', run into a problem of funding; it is either developers who elect not in include below market rate units (BMR) and pay into the fund or churches building their own structures such as Mercy Housing. But what about the land? I don't think that has to be the major cost, at least in San Francisco. There are a plenty of vacant lots owned by the city, and in a recent case the feds sold land for $1 to the city for pre-fab condos near the court house for 'formerly homeless'. Indeed, if you have an apartment, you are no longer homeless. And this is where we start talking about the real expense -- union labor. The pre-fab units clock in at under 250k each, but they are built over in Vacaville with non-union labor. Anything else needs highly paid craftsmen which goose a market rate unit over 700k+. If the lot needs to be abated for pollution, usually for former gas station sites, the price goes even higher plus delays. Want steel framing for going over 7 stories? The price goes up. Not that SF Planning's zoning will allow 7 stories, even near BART. The solution to affordable housing is to just build more housing -- just regular housing. Built it tall, 100 stories or more, and right on top major transportation lines like BART stations -- on all 4 street corners. We'll need to overcome labor costs and zoning before we can get there.

lj3 9y ago

There's a great reddit post where an LA architect specializing in multifamily residential units explains why all of the new units being built in LA are luxury condos instead of low cost housing. tl;dr: city specific zoning laws. To be fair, the post is specific to LA, but it makes me wonder what legal hoops developers have to jump through to build in other cities and how expensive those hoops are. https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_architect_in_la_specializing_in_multifamily/ https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_ar...

nautilus12 9y ago

Increase taxes to build affordable housing. Hand the contract over to a developer. Developer builds $700,000 units. The model is not economically sustainable. Increase taxes. Rinse repeat. Now even the middle income people can't afford to buy a $300,000 house, and have to move into the affordable housing. Housing developers are living like kings. Welcome to the USA, where taxes are spoken for before they are even levied.

conanbatt 9y ago

The best way to increase worker's income, reduce housing costs and eliminate all the ridiculous laws around housing regulation and property taxes is to replace sales tax and prop taxes for land value taxes. As soon as the political gain to block construction dissapears, developing anything will be much cheaper and changes into policy will come with popular demand both by renters and landlords.

monkeypizza 9y ago

Check out this video explaining why you can buy new detached homes in Tokyo for about 300k usd. https://www.youtube.com/watch?v=iGbC5j4pG9w https://www.youtube.com/watch?v=iGbC5j4pG9w * Land owners have an absolute right to develop their own land - neighbors can't block you. * You can build a 60 m^2 x 3 floor house on 100m^2 of land, or more. So basically they build way denser, and reduce opportunities to block/rentseek.

bostonscott 9y ago

The central problem is the motive. Low income individuals do not have such a powerful lobby that they're able to compel States to create laws that require affordable housing. It's the real estate/development/construction lobbies. They are very powerful and affordable housing is a big business. Everyone has to get their cut.

beager 9y ago

It seems to me like one of the big problems with "affordable" housing in desirable areas is that everyone who has bought an "unaffordable" house is now in on the con, and "affordable" housing threatens to correct (read: deflate) the value of the very expensive thing that they have bought. I'm not a homeowner, but being near NYC, if I manage to get myself into buying a home, I would probably be inclined to support any measure that ensures that the demand for my home—and therefore its price—continues to rise at as great a rate as possible to make sure that I wasn't on the hook for a large depreciation on my mortgaged property. This is the reverse of my current desire, which is for housing to be affordable enough for me to get into so I don't have to rent and can provision that part of my income toward building wealth and not someone else's wealth. The moment I become a homeowner, those motivations flip. If the median home price were closer to the median income in a given area, I surmise that the desire from homeowners for increased demand and value would abate, because homeowners would stand to gain or lose less in their house vis a vis their income. Instead, you have folks who may gain more value in their homes in one year than they would make in salary. And conversely, price correction at such a great disparity to median income would mean that you now owe the bank a year or more's salary more than what your home is worth.

closeparen 9y ago
Someone who qualifies for an affordable housing program wouldn't come close to affording your market-priced home, and in practice, creating even 2,000 such units over 15 years is a campaign-centerpiece, career-making accomplishment. To contribute to demand, you have to be able to make a realistic bid. I make well over area median income and I couldn't come close to that. You really think someone at 50% of AMI could? The position, "I'm not a NIMBY, I just don't like greedy developers getting whatever they want. I would support this project if it were affordable housing" is a common tactic for people who are ostensibly liberal to appear less craven about their home values then they actually are. Issuing building permits to 100% of the tiny drip of funded affordable housing projects won't change a thing, and they know it.
pixl97 9y ago
>who has bought an "unaffordable" house is now in on the con, Yep, people are using houses as investments instead of just places to live. When a person is invested in something they will willingly engage in behavior that leads to harmful outcomes to everyone, even themselves long term. A corollary of this is summed up in this famous statement “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” -Sinclair

ggm 9y ago

How much of the build cost is land cost? How much of the build cost is local compliance costs? How much of the cost is market adjusted price, and not actually cost per se?