Affordable homes face a perfect storm: local opposition, high costs and now COVID-19.
When developer Ginger Hitzke first proposed an affordable housing complex on a parking lot in Solana Beach, she envisioned building 18 new homes for low-income families and adults at a cost of $414,000 per apartment.
More than a decade later, her project has shrunk in size by nearly half and become more than twice as expensive.
At $1.1 million per apartment, the Pearl is the priciest affordable housing project in the state and, probably, the country. It also serves as an alarming example of how political, economic and bureaucratic forces have converged to drive up the cost of such housing at a time when growing numbers of Californians need it.
“I have sticker shock,” Hitzke said. “It’s insane.”
California leads the nation in the cost of building government-subsidized apartment complexes for low-income residents. A Times analysis of state data found that apartments cost an average of about $500,000. In the last decade, the price tag has grown 26%, after adjusting for inflation.
The high price of land and the rising cost of construction materials are part of the reason. But The Times also found that factors within the control of state and local governments are also to blame, including opposition from neighbors and rules that compel developers to meet labor and environmental standards that often exceed what’s required for luxury condominiums.
All this has complicated California’s efforts to alleviate its homelessness and affordable housing crises, driven by a shortage of 1.3 million homes for low-income households, sky-high rental prices and a poverty rate to match.
With the COVID-19 pandemic already leading to significant job losses, particularly in the low-wage hospitality and service industries, experts believe the demand for affordable housing is only going to grow. The economic damage also is likely to severely depress government tax revenue, leaving less money available to finance new construction.
That will put more pressure on California to overhaul the way it builds low-income housing, said Carolina Reid, faculty research advisor at UC Berkeley’s Terner Center for Housing Innovation and author of a new study on the cost to build low-income housing.
“Every single one of the actors in it, from cities to developers to construction workers, is going to face stress from the coronavirus for years,” Reid said. “This public health crisis adds more urgency to making the reforms we had already needed.”
In recent years, voters across California have approved billions of dollars to build homes for low-income families and homeless people. But those plans often have failed to meet public expectations because those billions build fewer and fewer apartments.
In addition to the Pearl, The Times found six other affordable housing developments in California — all in the Bay Area — that have eclipsed $900,000 per apartment to build as well. Half opened in the last year, and the rest are under construction.
Building costs have soared far from the coast as well. In Imperial County, one of the state’s poorest, the cost has climbed 70% in the last decade. And in Fresno County, the average price for affordable housing has doubled to $376,000 per apartment, an amount a third higher than a median single-family home.
Indeed, what developers in California pay to build affordable housing is more than what they do for market-rate homes for the broader population, another UC Berkeley study found. California was the most expensive place to build in the country, according to a recent report from the U.S. Government Accountability Office, which compared the state to New York City and 10 other cities and states. If building were as cheap here as everywhere else, about 12,000 more low-income families could have received homes between 2011 and 2015, The Times found.
Why do these homes cost so much to build? One reason is regulations that require developers to pay construction workers union-level wages. Another is California’s labyrinthine finan
Even if state officials are able to streamline bureaucracy and local officials are able to fend off naysaying neighbors, other drivers of California’s high housing costs remain tied to goals embraced by key Democratic constituencies: labor unions and environmentalists.
Many state and local funding programs require low-income housing developers to pay union-level wages to construction workers. In Los Angeles, for example, these rules require developers to pay plumbers $51 an hour compared with their $24-an-hour median wage in the region.
The UC Berkeley report found that projects paying union-level wages can cost $50,000 more per apartment. A Times analysis reached similar findings.
California labor leaders cite other research, including their own, concluding that the cost impacts are much lower. Beyond that, they contend that construction workers should earn enough money when building low-income housing so that they won’t need low-income housing themselves. State lawmakers often repeat that argument.
To have the best chance of winning tax credit funding, low-income housing developers also must build their projects to environmental standards that exceed even what the state requires of developers of new luxury condominiums. That includes using solar power for most of their electricity or certifying their energy efficiency with LEED or other third parties.
The thinking is state-funded affordable housing should be “the most superior, energy-efficient buildings in the world,” said Doug Shoemaker, a senior vice president at nonprofit developer Mercy Housing. “I’m not sure that that last bit of benefit really is worth the cost.”
The UC Berkeley study found that projects built to stricter environmental standards cost $17,000 more per apartment than those that aren’t.
The Pearl’s funding requirements called for the building to be LEED-certified and for Hitzke to pay union-level wages for construction workers. The initial budget had left room for a profit. But as early as 2013, Hitzke realized that she wasn’t going to make any money on the deal.
Now it looks like the Pearl won’t happen at all.
In December, the state informed her that it was planning to pull her funding because the project hadn’t broken ground. In March, Hitzke met with city officials to tell them she wanted out of her development agreement.
“I am thrilled to be done with this thing,” Hitzke said. “It’s done nothing but kill me. But at the same time, I tried to do everything I could to get it done.”
Zamora and his family, meanwhile, are still waiting. When he drives by his old community these days, he feels only disappointment.
“It’s sad to see the place so desolate,” Zamora said.
Source: latimes
