• Mon. Dec 11th, 2023

    Sacramento’s Struggle: The Challenges of Building Affordable Housing

    ByNuala Hafner

    Nov 20, 2023
    Sacramento’s Struggle: The Challenges of Building Affordable Housing

    Sacramento, California, known as the capital city of the Golden State, is not immune to the affordable housing crisis plaguing major cities on the coast. A recent endeavor to construct an affordable housing development in Sacramento highlights the difficulties and obstacles faced in achieving this commendable goal. The project initially aimed to create a seniors-only housing complex of 43 units located in the heart of the city. However, the final cost of the development reached a staggering $27 million, equating to a per-unit cost of $670,000.

    Comparable undertakings have encountered similar exorbitant costs. In another instance, a nonprofit housing developer planned to build a 140-unit affordable development on Broadway. With an estimated cost of $78 million, challenges revealed themselves as a vacant building had to be demolished. Consequently, the final budget escalated to $94 million upon completion. Mutual Housing California’s proposal to rehabilitate an old hotel into 113 affordable units on Stockton Boulevard is projected to cost $70 million, resulting in an average per-unit cost of $600,000.

    These astronomical figures perplex even nonprofit organizations committed to building affordable housing. Private developers, who are driven by profit, can only rationalize such expenses if they charge market-rate rents for their properties. Building market-rate units in the Sacramento area costs significantly less, with developers quoting expenses as low as $300,000 per unit. The intricate reasons behind this stark contrast are multifaceted, partly due to an intricate web of federal, state, and city regulations involved in constructing affordable housing. Ensuring compliance with these regulations often incurs substantial additional costs, causing projects to surpass their budgets.

    The current situation necessitates a collaborative effort between the business community and legislative bodies to find viable solutions. This entails potential compromises on regulations by the government and the implementation of more substantial or innovative tax incentives to encourage developers. Additionally, the high costs of skilled labor and land acquisition in regions like California contribute to the financial challenges. In many cases, approvals for developments can be delayed for months or even years due to lawsuits from well-funded groups opposing affordable housing in their neighborhoods.

    Until a comprehensive solution addresses these intricate problems, affordable housing will remain a scarce resource not only in California but also across the entire country.

    Frequently Asked Questions (FAQ)

    1. Why does it cost so much to build affordable housing in Sacramento?

    The high costs of building affordable housing in Sacramento are attributed to a combination of factors. These include the complex and extensive federal, state, and city regulations that accompany affordable housing projects, which create additional expenses in terms of compliance. Moreover, the cost of skilled labor and land acquisition in California is considerably high. Lawsuits filed by groups opposing affordable housing also contribute to delays, increasing costs over time.

    2. Are these challenges unique to Sacramento?

    No, the challenges faced by affordable housing providers in Sacramento are not unique. Major cities like Los Angeles, San Francisco, and San Diego also face similar, if not more pronounced, difficulties due to higher average rents and home prices. The struggle to build affordable housing permeates various regions across the country.

    3. What can be done to address the affordable housing crisis?

    Overcoming the affordable housing crisis requires a collective effort from both the business and legislative communities. Potential solutions include compromising on certain regulations to streamline the construction process and providing developers with more significant or innovative tax breaks, such as those offered in designated opportunity zones. Additionally, addressing the high costs of skilled labor and land acquisition is crucial in making affordable housing more financially viable.