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Monday, March 17, 2008 | In response to my previous letter, Tom Scott wrote:

I’d like to see Mr. Schnaubelt’s documentation that “affordable housing typically costs from 2 to 3 times more to build than market rate housing.” Affordable housing developers pay the same price for land and construction that every other market rate developer pays. There are additional costs for the complex financing and regulatory agreements, but they add 1-2 percent onto the developments costs. In the cases where prevailing wages are required it adds 20 percent to the costs. These do not add up to “2 to 3 times” what market rate developers pay.

The last time I documented the figures was in 2003 in a letter to the housing commission, part of which was published by the San Diego Daily Transcript as follows:

(Between) January 1, 2002 (and March 2003) 19,572 rental units were sold in San Diego (Source: CoStarCOMPS, 118 pages). The median selling price was $86,700 per unit, meaning nearly 10,000 units sold for less than $86,700.

In Housing Commission Report (HCR02-041) dated May 10, 2002, the commission is helping to facilitate, build or fund low-income units at 39th and Polk Ave. costing $199,278 per unit. In CCDC Memorandum (Agenda #556) dated June 6, 2002, the city is helping to facilitate, build or fund low-income “homeless” units at 9th and F St. costing an estimated $247,088 per unit.

Only 191 of the 19,572 apartment units sold for more than the estimated costs of the 39th & Polk project and only 53 (La Jolla, Mission Beach) of 19,572 sold for more than the estimated cost of the 9th & F Street project. How can they cost more than double the median selling price of privately built, for-profit rental units? What sense does it make to provide brand new housing, the most expensive consumer item in our economy, to low-income households? How can city-funded apartments cost more than 19,000 of the privately purchased rental units in San Diego since the beginning of 2002, and claim to be low-cost housing? No wonder the city is facing a budget crisis!

I stress that those apartment buildings that are less than one year old and cost less than government built housing are among the most expensive apartments in San Diego—luxury apartments for the most affluent renters.

Mr. Scott is wrong in his claim that everyone pays the same for land, construction, and architectural costs. Last report I saw, the Davis-Bacon Act in San Diego adds an estimated 30 percent to construction costs and unless eminent domain is used and abused, the government typically pays more for land. Space does not allow me to address carrying costs, governmental delays, overhead and change orders that also add substantially to the overall cost. Since July 2007 the median priced apartment in San Diego sold for $117,500 among 1,368 apartment units.

Footnote: (By 2005, a report indicated a project at 14th & J Street had risen to $317,000 per unit, or 3.6 times $86,700).

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