Why San Francisco has the second-highest construction costs in the world

By Roland Li. He is a reporter for San Francisco Business Times. Excerpts:

"San Francisco has the world's second-highest construction costs because of complex, burdensome approvals, a severe labor shortage and easy paths for opponents to delay projects, according to a new report.

The city's average construction costs of $330 per square foot was second only to New York, according to a study last year by Turner and Townsend, a construction consultant. Apartments cost around $425,000 per unit to build, exacerbating the region's housing crisis by requiring high rents or massive public subsidies to make construction feasible.

UC Berkeley's Terner Center for Housing Innovation surveyed developers, contractors, architects and nonprofits building market-rate and affordable residential projects on why costs are so high. Respondents said that city agencies have a complex and unwieldy permitting process, noting “additional hoops and requirements seem to pop up at various stages in the process." They also pointed out that building inspections that aren't standardized and lack of coordination between departments adds time to the process."

"Design requirements such as facade aesthetics, balcony spaces and more expensive materials were also cited by the Terner Center as cost burdens. Those requirements are particularly challenging for affordable projects, which rely on public subsidies to be financially feasible and can't charge high rents to cover extra costs. As a result of the requirements, some affordable projects have had to reduce unit counts, according to the report."

"Another cost escalation is opposition to projects, with almost every major San Francisco development vulnerable to an appeal to the Board of Supervisors or Board of Appeals. The Terner Center noted that while few appeals result in a project getting rejected, they add more delays. Some major projects such as 5M, the Warriors Arena and Treasure Island have also been sued, tying up construction for a year or more."