The Right and Wrong Way to Build Affordable Housing

The Right and Wrong Way to Build Affordable Housing

Yesterday we wrote about a new study on how Chicago’s 2013 and 2015 upzoning measures increased land prices, but failed to increase housing construction. While there are a variety of ways to incentivize increasing the supply of new housing, one possibility is the creation of government-subsidized affordable housing projects. If the primary cause of the affordability crisis is a restriction on supply, subsidizing new housing construction is a solution that addresses the problem directly.

But these projects are not immune from their own form of rent-seeking. Writing for Reason, Christian Britschgi documents the history of the most expensive affordable housing development in the U.S., at a cost of $739,000 per unit:

The building boasts a yoga studio that advertises itself as the first yoga studio for children in the Los Angeles area, as well as an orthodontist’s office, and a Japanese restaurant where you can order a $34 sushi plate with Halibut, Blue Fin, and Kurodai. It’s a contemporary building with a colorful façade that won an architectural award in 2014. And taxpayers are paying dearly for it.

The $739,000 per-unit price tag is not only higher than in Texas, where affordable housing units cost $126,000 on average, it’s nearly double the median cost of $326,000 in California. And it’s $100,000 higher than the median price of buying an unsubsidized, market-rate home in nearby Los Angeles, one of the most expensive cities in the nation. [Emphasis added]

Tilden’s record-setting per-unit price tag was the result of a confluence of factors that shed light on what’s driving up housing costs nationwide. Those include: Culver City’s status as a fast-growing, tightly-zoned city, where local politicians have shown a preference for attracting commercial development over new housing construction; state requirements that developers pay construction workers high union wages; and a philosophy among affordable housing developers that high-cost neighborhoods are where publicly subsidized housing is needed the most.

The inclusion of such yuppie amenities as a children’s yoga studio and a high-price sushi restaurant make it a curious example of an “affordable housing” project, and the high cost (footed by taxpayers) is the inevitable result of various rent-seeking influences converging on the project to get their cut of the loot.

Now, of course, not all government-subsidized housing ends up as such a boondoggle, but the ability of entrenched interests to lobby on behalf of their bottom line makes this project a case study in what not to do.

San Francisco Mayor London Breed is looking to do things the right way, however, by enabling by-right development for affordable housing projects. From The Bay City Beacon’s Diego Aguilar-Canabal:

Mayor London Breed announced a surprise proposal during her State of the City address last week: a charter amendment to guarantee as-of-right approval for 100% affordable housing, provided it meets local regulations.

“If an affordable housing or teacher housing project is proposed within zoning, then build it. And build it now,” Breed declared. “No more bureaucracy. No more costly appeals. No more ‘not in my neighborhood.’ It’s simple: Affordable housing as-of-right because housing affordability is a right.”

Of course, it’s not just the affordable housing permitting process that needs reform, but streamlining the approval process rather than requiring input from countless rent-seekers would go a long way to make affordable housing a practical reality.

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By |2019-02-08T12:11:47+00:00February 8th, 2019|Blog, Land Use Regulation|