The LA Times has a story today about low-income housing—mostly in Northern California—that costs more than $1 million per unit to build. The culprits are the usual ones you'd suspect: state regulations, inflation, supply chain problems, union labor, strict environmental standards, and so forth. I don't doubt that all these things take a toll, but here's a picture the Times ran of one low-income development that's being rehabbed:
Somebody should stop me if I'm wrong, but this looks like some of the most expensive land in the world. It's in the city of San Francisco, right on the waterfront, in between Golden Gate Park and Lake Merced Park. If Zillow can be believed, houses on this strip of land go for nearly $2 million. Go inland two or three blocks and houses are mostly in the low $1 millions.
So why would you build low-income housing here in the first place? Were things different when these units were originally built in the 1970s? This is a matter of genuine curiosity, and I completely understand that housing of any kind in expensive cities is going to be expensive. Still, primo waterfront land seems like an expense that just reduces the number of units you can build and the number of families you can help. Can anyone with real knowledge school me about this?
The land was purchased 50 years ago. It’s a sunk cost, and has nothing to do with the high cost of renovation. There aren’t even any property taxes to consider, because it’s all owned by the city.
Exactly. The city could build public housing in the middle of all its parks and the land acquisition component of such a scheme would be $0. It might not be the best use of the land, but I fail to see how repurposing existing public land has any effect on the construction costs.
I don’t know why in the 1970s low income housing was put right on the beach to begin with, but the land’s value in this particular case is irrelevant to the article’s quote of >$1m per unit. The government already owned the land, so the acquisition costs are approx $0 (depending on whether it needed to be transferred to another entity I guess). Rehabbing existing low income housing - no matter where it is - is usually cheaper than acquiring new land to put it on.
In San Francisco, people do not use the beach for sunbathing as in Southern California. It is usually foggy and 20-30 degrees colder near the beach, so beachfront property is cheaper than inland, where the sun shines and the temps are warmer. Kevin Drum lives in Southern California, where the closer you are to the beach, the more expensive the homes are.
One reason for putting low income housing in expensive areas is so that the people who work in such areas can have a shorter commute to get to their jobs.
+1 July afternoon at Candlestick Park
Also, the fog and salt air do a wonderful job of rusting the local residents' cars.
The Sunset started out as a working class "suburb" within the city limits. People who lived there commuted via trolley to work downtown. A redlining map* from 1937 shows that strip as "third grade" and undesirable:
I wouldn't be surprised if in the 1970's, the existing structures there were dilapidated, and the city was able to purchase the land at an attractive price.
*https://www.foundsf.org/index.php?title=History_of_Redlining_in_San_Francisco_Neighborhoods
If it was redlined, then that totally explains why public or low income housing ended up there. During the “Cities Are Irredeemable Hellholes” era, cities ended up repurposing lots of land for surprising uses, given their views… because “what else are we going to do with it?” and “nobody decent is ever returning to the city.”
My hometown has housing projects with glorious views of the river and a nearby “mountain” (really a tall hill). They sit immediately across from gentrification, but they remain because the city has no money to replace the units elsewhere.
Yeah, but isn't "low income" in San Francisco someone making less than $200K?
Freddie de Boer, Brie-Brie Gray, the staff of the Jacobin, & the residents of CumTown have checked in.
I realize I'm being naive, but the idea of being 'on the waterfront' does nothing for me.
This looks to me like a strip down the middle of a busy highway, the last place anyone would want to live.
Why would any of this dump be expensive?
Busy is relative but that roadway is as much surface street as highway.
That highway isn't very busy. It's literally on the outskirts of the city, and the traffic is mostly tourists and beachgoers. The main drawback of the neighborhood, and the reason that it wasn't originally prime real estate, is that it's one of the areas where San Francisco's famous fog is at its densest, from late May through early September.
It’s busy enough that I’d be worried about kids going out to play.
Thank you, Attiqus, for thinking of the children.
You deserve a pizza party for that.
Then you'd be an idiot. The road comes from nowhere and goes nowhere.
What appears to be a grand total of eight, in-motion vehicles over at least half a mile. On a roadway with speed-humps and stop signs. While I wouldn't send a kindergartner un-accompanied across it at the crossing(s) any appropriately-raised 10 year-old city kid aught to be able to get across that to the beach with no problem.
It isn't busy at all. Those are 2 residential avenues on either side with stop signs at pretty much every intersection. "The Great Highway" is the one closer to the water, but each stoplight on that is a crosswalk and the lights are timed so that the maximum speed is 30 if you want to make the lights. It is always closed to cars on weekends. sometimes closed due to sand blowing over it, and never has much traffic anyway as it is out of the way for anybody going downtown.
As others have mentioned, the city already owned the land. However, how much cost did NIMBYism add?
I was going to try to compare to other cities, but hard to find out size of apts.
Piling-on to the other comments about land value being moot. Only way it might not be would be if you were suggesting the properties be sold to realize the gain and use that money to build even more low income housing elsewhere.
But one million a unit for rehab sounds like serious padding making $600 mil-spec toilet seats look affordable. At one million a unit there damn well better be solar on those roofs in the end, proximity to the ocean notwithstanding.
Speaking of things expensive, the price of CA HSR from San Francisco to San Jose is now up north of $5 billion…
It's mostly because they have to complete the lift of entire environmental review and legal and permitting wrangling that subdivisions do not.
Nimbys are willing to spend alot of money.
They just outspent - by almost 3-1 - to lose by almost 3-1 trying to block the train in Santa Cruz County.
This is repeated everywhere, in the council chambers, the permit office, and courts,
https://santacruzlocal.org/2022/06/07/measure-d/ I presume?
Apparently it's city land, so that's not what's driving it.
I wish it would give us a reference point on what comparable costs would be for market-rate housing like that, excluding land costs. The article mentions that using union labor and really high construction standards costs about $67,000 more than what it otherwise would, and 14% ($140,000) of it is just the costs of litigating and getting through the byzantine legal and financing requirements for it. That gets you to about one-fifth of the $1 million/unit.
One of the studies linked in the piece says that cost per unit is normally around $600,000. So we've still got an unexplained $200,000/unit in various expenses.
It could just be random shake-down crap that you get from local governments like this, like the whole thing with public art mentioned in the piece.
For professional reasons, I am pretty current on construction costs.
Today, in northern CA, a very expensive place to build, you can construct apartment for between $250,000 and $300,000 per unit: this is direct construction cost and excludes land, permits and other soft costs such as architect/engineer etc.
...But you can't, once permit delays and court challenges are calculated in. You end up paying workers to stand around. Or to cover and uncovers and redo work. Alot.
Two points:
1. The type of housing we are building is too fancy. Communal kitchens and bathrooms would materially reduce the costs of construction and on going maintenance. Before someone screams at me, think of it this way: with a fixed pie of funds, would you rather have more low-income housing units or would you rather have fancier housing?
2. The public procurement process in the US is materially higher (three to six times) than Europe. Lots of factors, but the net result is an expensive and slow process.
We need lots of thpesmof housing, and skimping on the housignwe do build just creates white elephants.
Yes, we need apartments without kitchens and some with only beds. But that just means more time being blocked in the permitting and inspection phases.
Boarding homes???
No need for screaming. What I would rather have is housing that homeless people will accept. Since, under our Constitution, they have the right not to accept it. I think.
Looking at the picture again I'm getting some kind of vague memory of this place, or a place exactly like it, from something in the news from a long time ago, ca 70s or early 80s.
Anyone else remember this?
Like it was on 60 Minutes or something.
Aside from the land cost points others have made, it's also true that that area was nothing special in the 70s. It wasn't so much "waterfront property" as "at the far edge of the city" that just happened to be on the ocean. There was an amusement park by the beach that closed in 1972. When I moved to SF in 1979, there was a building along this stretch that had been a VFW hall but at that point was a dilapidated biker bar--now it's a tourist restaurant and brewpub.
I mean, I lived a block from the beach in Venice in 1976, and it wasn't a fancy neighborhood at all. It's changed a lot since then--this part of SF probably hasn't changed as much.
You forget how cheap some urban land was in the 1970s. The heavily subsidized suburbs were the growth centers, and urban residential and manufacturing districts were full of old inexpensive and often dilapidated buildings. Urban renewal projects were tearing down neighborhoods with bulldozers in what is now prime real estate. This went on into the 1980s. That was the decade of urban pioneers creating vibrant new neighborhoods and getting good deals in exchange for putting up with a sense of danger. In the 1990s, cities were chic again and real estate prices soared.
That part of SF was way the hell out, far from the central city and jobs, perfect for subsidized housing. NYC, for example, built subsidized middle and lower class housing out in Far Rockaway, comfortable apartments with views of the ocean and set just far back enough not to get flooded by storms like Sandy. We rented a cheap summer bungalow near there in the 1960s. Sandy wiped out that whole neighborhood of bungalows; it is now a beach park. Far Rockaway has a subway line. I can see the area developing new popularity, particularly if the subways can be upgraded to allow better express service and/or work from home cuts commuting pressure. People will look back and wonder how and why the city built oceanfront subsidized housing in a high end neighborhood.
If you've ever climbed Telegraph Hill, you may have run into one of those explanatory signs. That area, now rather expensive, was modestly priced housing for dock workers through the 1950s. It was an easy walk down the hill to work, and the monied classes had their own hill. Land values, urban or rural, vary so much based on extrinsic factors. Is credit available? Is there transportation? What about utilities, flood control, school district, noxious neighbors?
In theory, you could argue that San Francisco should tear down that lower cost housing, sell the land at a premium, buy land elsewhere and build new housing there. In practice, we all know that this would never work. The developers would get their new high end neighborhood, but the city would be unable to find suitable land and any subsidized housing would get NIMBYed. If anything actually got built, it would get gamed by people with enough money to play games. The people the current site, would move far away and the new people living there would complain about the high cost of help.
I'll bet that each time another tributary was added to that river of regulation and bureaucracy someone was saying "Oh, it's only a wee percentage, and it will save a single (something or other)." And forgot how the Law of Unintended Consequences is always looking to get paid.
And we have, towards the end of the article:
The city of Berkeley is building an apartment building for the homeless downtown, at a cost of over $1M per unit. Apparently the agreement we have made with ourselves is that our children have to move out to Vacaville or Dublin to find housing they can afford, but people camped on the streets must be offered space in Berkeley.
Uhh, no.
The nimbys want to block everything.
And you waltz in and say we should block some times. Well, the nimbys thank you.
What should we do with the people camped on the streets?
The city's also building housing on a couple of BART parking lots. Maybe your children could find places there.
Considering that the cost to build a basic 2 car garage in my midwestern city is $50,000 right now, all I can say is that construction is expensive, and cement costs are especially insane.
Judging form the shadows in that picture, it was taken around mid-day. I hope it was on a weekend or holiday because it looks like virtually no-one was actually working on the project at the time.
I don’t have anything to say about this project, about which I know nothing, but I have long had heterodox opinions about affordable housing. I was briefly an impoverished graduate student many years ago. Not long after, activists started pressing the states to force every town to build affordable housing, including some of the swanky burbs I couldn’t afford even being then gainfully employed. What I didn’t understand was, what would I do in one of those places as a low-income person? If you couldn’t afford a car, public transportation was sparse or nonexistent. Services used by low-income people, likewise. Of course we don’t want to perpetuate ghettoization, but the experience of other ethnic groups in the US has not been that - many were initially concentrated in ethnic neighborhoods, but dispersed as they climbed the socioeconomic scale*. It’s clear that the problem today that perpetuates ghettoes is racism - we need to directly take that on, so that African-Americans can prosper and live where they choose, as the Poles, Italians, Irish and others have done. I understand the argument that moving kids out of inner cities can give them access to better schools, but how much of that has actually taken place in the face of NIMBYism?
Could white folks accept reparations if they were primarily in the form of a comprehensive plan to bring superior education, more employment, better services and better housing to poor majority-minority areas?
*plug here for the Tenement Museum for New York area folks and visitors: https://www.tenement.org/
Prosper? They are organized crime moron. Those negros are gun toting, women slapping thugs. 2 darkies killed a wigger in Columbus Ohio during the last week with AR-15's.
Your type of thinking is the problem. It's toxic and part of the problem.
Five points.
(1) Combatting gentrification means one has to deliberately choose to develop on expensive land, otherwise, one is just giving in to gentrification and the loss of working-class or low-income residential options where people actually work.
(2) Often, these projects are not developed via RFPs, but rather, picked from a prequalified list of developer teams (or some variation of this), which limits the competition.
(3) As noted by the LAT, regulatory baselines boost costs. Zoning that requires per-unit parking and certain height caps will limit the number of units one can fit on a given site. Every code cycle (2 years) the model codes include new provisions that will necessarily increase costs -- residential sprinklers and higher insulation values are the most cited right now.
(4) Construction material prices are still higher than normal, but uneven. Concrete has increased ~25%, wood had, at one point, increased over 200%, and metal had increased as much as 100%. Gypsum wallboards have gone up over 100%, recently.
(5) Whenever you up-develop a site, you increase density which necessarily triggers a load of additional development costs that are referred to as development impact fees (System Development Charges, Residential Impact Fees, etc.), and the worst per-unit case is the medium density of low-income housing.
If you want to lower cost of housing in general, I would:
(1) Cap permit and development fees for multifamily (apartment) residential projects that are less than 1200SF per 3BR, 1000SF per 2BR, 800SF per 1BR, and for all SROs, then boost the fees for everyone else. I'd also add a special luxury development tax on single family homes over 5000SF.
(2) Eliminate the low density residential zones, commonly R10, R7, and R5.
Oh, one more thing. Rehabbing is the most expensive form of residential development there is.
On an up-front cost basis, it is cheaper to demolish and start fresh than to rehab existing structures. Rehabbing triggers requirements to meet certain standards of current model codes, specifically seismic, but with the added time and cost of having to work around multiple overlapping subs working at the same time.
But, most progressive jurisdictions involve some sort of green codes, most commonly LEED. In which case, tear downs are impossible to do and you now have to account for recycling of materials.
I read this article too and the high costs are a combination of current inflation/supply chain/labor cost problems, mostly. Then there are California's byzantine public works financing systems which cost enormous time and legal resources to negotiate and no-one seems to be able to do anything about it, no doubt because each funding agency represents some incredibly powerful labor and/or corporate interest that benefits from it and has various politicians in their back pocket.
Also, public projects like this require that you hire legal, union construction workers. The writer doesn't come right out and say it, but you can't exactly just cruise by the Home Depot and pick up some minimum-wage, cash-under-the-table day laborers to do your roofing here. When you pay people real wages, with real OSHA rules, and workman's comp, etc. shit gets expensive.
Building in this area is just plain expensive for lots of reasons. Some years back I saw a post that it cost about $600 a square foot to build a home here. That figure is now probably quite a bit higher. There is no one cause. Material costs have gone up a lot, labor is tight, zoning codes require all sorts of features which are nice but cost more and cost more to build in. On top of that PG&E is very slow to respond to small projects which can add huge delays.
You get around these issues by building a tract of homes all at once. Then you get teams of workers busy all the time getting lots done very productively building the same design over and over.
Seems like you could see that land in a skinny minute and build a shitload of housing elsewhere.
The $Billionaires do NOT want ordinary people living amongst them - property values will drop .