2014 California Affordable Housing Cost Study

Study Excerpts

In response to pressure from legislators, the media, and the general public about affordable housing costing too much per unit, the state agencies (CTCAC, CDLAC, CalHFA, and HCD) commissioned a cost study that was published in 2014. The data studied consisted of 400 projects newly constructed between 2001 and 2011.

Below are some of its pertinent findings (emphasis added), interlaced with my commentary.

”Taken as a whole, these results suggest that there are opportunities to lower costs.”

The opportunity to lower costs creates the opportunity to produces more homes.

“our results suggest that some developers built projects less expensively than others even after controlling for building type, quality, and location. If the techniques used by these developers could be identified, encouraged and even replicated by all developers of affordable housing (perhaps by creating stronger incentives for cost efficiency), costs per unit could be lowered…”

If we don’t incentivize developers to be efficient we miss out on the benefits of their creativity.

“To take advantage of these opportunities to lower the cost of developing multi-family affordable housing in California, additional incentives for producing more units at a lower cost could be incorporated into existing state policies.”

I agree incentives are needed but I propose to incent credit efficiency which promotes both cost efficiency and financing efficiency.

“this analysis suggests that development costs could be lower for affordable housing in California, and that carefully structured incentives in the tax credit award process or other funding processes could lower average costs per unit.”

For an incentive to work it must be built into the 9% tiebreaker, adding or adjusting point categories will not work.

“Therefore, any approach to lowering costs must look across multiple factors, rather than focusing on a single issue.”

While everyone wants simplicity, a truly effective and fair tiebreaker will need to have multiple factors, each of which will need to be carefully structured.