LCI: NOAH
Naturally Occurring Affordable Housing
Is there such a thing as Naturally Occurring Affordable Housing? Yes!
By remove parking, delays, red tape, risk, and fees, LA has had two successful real life experiments in how to let the market build affordable housing.
There has been a persistent concern that the market (ie, developers, builders) cannot build affordable housing at a significant scale because the economics are not there – builders lose money trying to build affordable housing, so they only build luxury and single family homes.
This has led many in the housing advocacy space, including political leaders, to make the assumption that any new affordable housing must be built with government subsidies. Up until recently, that was essentially true. But new state laws and new data shows that with some small changes, the market can and has built affordable housing – and we can scale the model up if we change our rules and regulations. This is cause for celebration for those who believe in housing for all –– because if the market can build affordable housing at no cost to taxpayers, this saves public dollars to house and support those who need it – so we can imagine a world where everyone is housed.
What happened in the first place? Why can’t our housing market supply affordable units, but manages to build a seemingly endless supply of single family homes (SFHs) in exurbs further and further away from job centers, causing a traffic, climate and quality of life disaster? The answer is in this pie chart which breaks down the cost of building a unit of housing in the state of CA based on studies from the Terner Center at Berkeley and real projects in LA. When a 1BR affordable unit in LA costs $500,000 (or $1.1m), where does that money go? The Terner Center broke it down. The blue wedge is the inescapable cost of land and construction – buying some land, and paying a builder to build a unit (“unit + land”). And if a builder is building a SFH mansion, that’s the entire cost.
Your article helped me a lot, is there any more related content? Thanks!
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