Why Private Developers Are Rejecting Government Money for Affordable Housing

Complex in Los Angeles for formerly homeless costs less than half as much as buildings financed with public money

By Christine Mai-Duc and Will Parker of The Wall Street Journal. Excerpts:

"State and local governments in California have committed tens of billions of dollars to build more affordable housing. A new complex for some of the neediest low-income people doesn’t use any of it.

By forgoing government assistance and the many regulations and requirements that come with it, SDS Capital Group said the 49-unit apartment building it is financing in South Los Angeles will cost about $291,000 a unit to build.

The roughly 4,500 apartments for low-income people that have been built with funding from a $1.2 billion bond measure L.A. voters approved in 2016 have cost an average of $600,000 each.

Across California, efforts to address the homelessness crisis by building more affordable housing with government money have been plagued by sky-high costs. A recent report commissioned by the city of San Jose found affordable-housing projects that received tax credits cost an average of around $939,000 a unit to build there last year."

"After L.A. voters approved the 2016 bond measure intended to reduce homelessness, the number of people living on the streets grew 60% to 46,260 people last year. California is home to more than 181,000 homeless individuals, roughly a third of the national total.

Publicly funded affordable housing must typically be built with labor agreements that dictate construction wages and working conditions, as well as energy-efficiency standards. Funding often comes from a variety of agencies, each of which has its own set of approvals and regulations that can slow construction and add to costs."