Our old friend Will Carless has completed an investigative report on building affordable housing in SD.
Click here for the full report, and an excerpt:
It’s here, in one of San Diego’s poorest neighborhoods, that the city will get its newest government-sponsored housing project: the Estrella del Mercado, a 92-unit apartment building that will sit above shops and restaurants and adjacent to a Latino-themed supermarket, all part of the Mercado del Barrio development.
The project has been a long time coming. The community waited for more than two decades while local government agencies put together one deal after another, only to watch those projects fall apart without a single hole being dug or nail being nailed.
The $44 million apartment project will cost an average of $477,743 per unit, 90 percent of which will be paid by taxpayers. That’s twice what private developers say they’re spending to develop high-end apartments in the city today.
A few miles away, in Mission Valley, a private developer said he’s building top-shelf apartments for $225 a square foot. Another developer currently building upscale apartments downtown said his total cost is $275 a square foot.
The Estrella del Mercado apartments will cost $542 a square foot.
Taxpayers have poured almost $600 million into two dozen housing projects in the city of San Diego since 2007. A three-month voiceofsandiego.org investigation showed that, again and again, these projects are wildly more expensive than private developments.
Today, many in the affordable housing industry describe their business simply as “The Game,” in which a core cadre of developers partner with government allies to build increasingly elaborate and expensive buildings in a lucrative, high-stakes competition funded by taxpayers.
“It’s just gotten out of hand,” said Tom Scott, former executive director of the San Diego Housing Federation, a coalition of affordable housing advocates and developers. “We need to re-evaluate where we’re headed with these public policy goals and recognize there’s a need to create as many units as we can, without just warehousing people.”
Far from the ugly concrete towers of the past, today’s affordable housing projects are often the best-designed, most beautiful buildings in their neighborhoods.
Developers and public agencies have been squeezed by increasingly restrictive regulations to construct buildings that aren’t just cheap to rent but also have exclusive features like solar panels, biodegradable carpets and free high-speed internet. They’ve been ordered to build in dense urban neighborhoods, where often the only scraps of land left are expensive-to-develop parcels already spurned by the private sector.
Add in the requirement to pay much higher wages than the market dictates, which can boost a project’s cost by as much as 25 percent, and the net effect of decades of government tinkering has been to add substantially to the cost of building affordable housing.
As local governments scrounge around for spare change to keep basic services like schools, libraries and public safety afloat, tens of millions of dollars remain locked down for the sole purpose of funding the affordable housing game.
Contractors on most government projects are required to pay their workers “prevailing wages,” which in California are set by the Department of Industrial Relations and typically reflect wage levels set by labor unions. On San Diego construction sites, where many workers are not unionized, the requirement to pay prevailing wages can make a big difference both to workers and to project costs.
Unskilled workers on the Mercado del Barrio project construction site, for example, will be paid between $35 and $44 an hour for performing basic tasks like sweeping and digging holes. That’s equivalent to $72,000 to $92,000 a year.
A survey of three local general contractors who do private development showed they pay unskilled workers or laborers more like $14 an hour.
“It’s just absurd to pay $400,000 for a studio. You could be buying every family a 5,000 square-foot house in Eastlake for that,” said Steve Huffman, a real estate broker who regularly sells local apartment buildings.