Drivers of Rising Housing Construction Costs: city permitting processes, design and building code requirements, workforce regulations and ordinances, procurement requirements, and environmental regulations

Perspectives: Practitioners Weigh in on Drivers of Rising Housing Construction Costs in San Francisco. Carolina Reid and Hayley Raetz | Terner Center for Housing Innovation Blog, January 2018. https://ternercenter.berkeley.edu/blog/archives/2018/01 > http://ternercenter.berkeley.edu/uploads/San_Francisco_Construction_Cost_Brief_-_Terner_Center_January_2018.pdf

To provide just one example from a review of LIHTC cost certifications, in 2000, it cost approximately $265,000 per unit to build a 100-unit affordable housing building for families in the city, accounting for inflation. In 2016, a similar sized family building cost closer to $425,000 per unit, not taking into account other development costs (such as fees or the costs of capital) or changes in land values over this time period. As a result of these cost increases, developers need more subsidy for every unit, at a time when public resources for affordable housing have been dwindling.

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[...] Macroeconomic conditions (including the cost of capital), labor market cycles and lack of skilled subcontractors, and trade policies (that influence the price of materials) all influence the cost of building.

But construction costs in San Francisco are also driven by local decisions and processes that are within the control of city agencies. Interviews and focus groups identified four local drivers of rising construction costs: city permitting processes, design and building code requirements, workforce regulations and ordinances, procurement (small and local business) requirements, and environmental regulations.