Free Minds & Free Markets

At the Most Expensive Affordable Housing Project in America, Every Apartment Cost $739,000 To Build: New at Reason

How subsidies, unions, and housing restrictions drove the record price tag of one L.A.-area development.

Alexis GarciaAlexis GarciaIn September, the Government Accountability Office (GAO) released a report on the costs of affordable housing projects funded by the federal government's Low-Income Housing Tax Credit (LIHTC) program. In a footnote, the report noted that one California development had costs as high as $739,000 per unit.

The report didn't name the development, but GAO provided Reason with a data file listing individual projects, as well as information on their final costs and total number of units. After adjusting for costs-per-unit, the 33-unit, $24.4 million Tilden Terrace, a collection of shops and apartments in the wealthy Los Angeles suburb of Culver City, ended up as the top of the pile.

Tilden Terrace might not look the way you expect from an affordable housing development. 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.

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 irony is that the factors raising the costs for Tilden Terrace are the same factors that drive demand for projects like it in the first place.

High development costs breed rising rents and home prices, pushing low- and even moderate-income people out of market-rate housing and leaving publicly-subsidized affordable developments as the only option. The more projects like Tilden Terrace cost, the more necessary they become, writes Christian Britschgi.

Photo Credit: Alexis Garcia


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