California's Housing Failure

Many posts have discussed differences among the states, with special emphasis on California and Texas.

The High Cost of Producing Multifamily Housing in California

Evidence and Policy Recommendations Jason M. Ward, Luke Schlake

https://www.rand.org/pubs/research_reports/RRA3743-1.html

In this report, the authors present analyses of production cost differences among privately funded, market-rate apartments and publicly subsidized affordable apartments in California, Colorado, and Texas using a sample of cost data on more than 140 completed projects to identify drivers of higher costs in California policy reforms that can lower production costs and increase housing affordability in the state.

Key Findings

• California is the most expensive state for multifamily housing production in every cost category the authors considered.
• Longer production timelines are strongly associated with higher costs. The time to bring a project to completion in California is more than 22 months longer than the average time required in Texas.
• Municipal impact and development fees vary substantially across states; they are $1,000 per unit on average in Texas, $12,000 per unit in Colorado, and $29,000 per unit in California.
• Key drivers of the remarkably high cost of publicly subsidized affordable housing production in California include requirements for affordable housing developers to pay substantially above-market wages and unusually large architectural and engineering fees, likely related to highly prescriptive design requirements.
• Within California, production costs vary substantially across metropolitan regions—the average cost per square foot in San Francisco is roughly 1.5 times the average cost in San Diego.
• Halving the difference in market-rate production costs between California and Texas could reduce rental prices for new apartments in California by roughly 15 percent.
• If California had Colorado’s production costs for publicly subsidized affordable apartments, the roughly $1.25 billion in recent spending by the state’s four largest funding programs would have produced more than four times as many units.