Building a single unit of affordable housing in Sonoma County can now cost over $700,000
In Sonoma County, building a single affordable apartment can now cost over $700,000, an ever-growing price tag that’s making it even harder to put a dent in the region’s chronic housing shortage.
A range of development challenges are driving up that record-high amount, from the rising costs of land and materials during the pandemic to the drawn-out local approval process for many projects.
“With the escalation of construction costs, my presumption is that we need to prepare for those (per-unit) figures to go up,” said Efren Carrillo, vice president of residential development for Burbank Housing, the largest affordable housing developer in the county.
The costs are even higher in larger metropolitan areas, more than $1 million per unit for a half dozen apartment projects in San Francisco, Concord, Oakland and San Jose, the Los Angeles Times reported in June.
Affordable developers like Burbank reserve units for low- and middle-income residents at below-market rates, and typically rely on public subsidies to make projects financially viable. Market-rate developers, meanwhile, sometimes also include a percentage of cost-restricted units in their projects, often in exchange for zoning concessions or instead of paying fees for new affordable housing. In most cases, the cost of living in a unit deemed “affordable” is capped at 30% of a household’s income.
Even before the pandemic sent rents and home prices soaring, half of renters and nearly a third of homeowners in Sonoma County were spending over 30% of their earnings on housing, leaving less money for necessary expenses and making them “cost burdened,” according to researchers with Bay Area Equity Atlas.
If policymakers and developers fail to find ways to spur more affordable home building in the face of rising development costs and scarce public funding, thousands of local residents will likely continue paying too much for housing and remain stuck on yearslong wait lists for the few homes they can comfortably afford.
“The housing affordability crisis is undermining the California Dream for families across the state, and threatens our long-term growth and prosperity,” said Gov. Gavin Newsom last year in a statement introducing a new funding program for affordable housing.
Sky-high costs of materials, land and labor
In 2019, the average cost of building a unit of affordable housing in Sonoma County was just under $500,000, according to an analysis by the Bay Area Economic Institute. But as the pandemic has continued to upend the global economy, that per-unit cost can today reach between $650,000 and $750,000, according to Carrillo with Burbank Housing.
A main reason for the increase, Carrillo said, is the skyrocketing price of building materials due to supply chain issues and other inflationary pressures. For one Burbank project, 3575 Mendocino Ave. in Santa Rosa, that’s sent the estimated price tag for the second phase of construction on the 162-unit project up to $737,000 per unit.
“It forces developers to scramble to fill those financing gaps,” Carrillo said.
Sonoma County’s limited available land, which doubled in value during the past decade and has only become more expensive amid the pandemic real estate boom, presents another underlying challenge to building affordable housing.
To free up more land for development, local jurisdictions are increasingly looking to use public property for affordable homes. In west Santa Rosa, construction is underway on a project to redevelop an abandoned county government complex on College Avenue into 164 low-income apartments.
A state law passed in 2019 also requires government agencies to identify underused public lots for affordable housing. But the state has made slow progress offering up its own surplus property for development, according to a state auditor’s report.
Yet another challenge for affordable home building is the cost of labor, which has surged due to a shortage of construction workers. Unlike market-rate developers, many affordable developers are required to pay workers higher, union-scale wages to receive state and federal subsidies, furthering driving up construction expenses. Backers of such “prevailing wage” rules say the increased pay is key to supporting an essential workforce.
In response to the sky-high building costs, some developers have begun turning to prefabricated “modular” construction companies that assemble units offsite. Modular projects, such as a planned supportive housing site for homeless people in Rohnert Park, can save up to 20% in total project costs by reducing construction times and using materials more efficiently, according to a report by McKinsey and Company.