University of California at Berkeley’s center on real estate and urban economics has taken a look at the costs of building low income housing and found that state-subsidized housing costs between 10% and 32 percent more to build than private housing projects.
Read the AP article at http://www.bakersfield.com/state_wire/v-newsletters/story/4482283p-4520959c.html or read the study at http://urbanpolicy.berkeley.edu/pdf/DQR0903.pdf.
The short story is that state subsidies come with politics, and from politics come requirements that drive up costs. The study gives three examples:
*Higher design standards to blend in and temper neighborhood opposition to lower-income projects.
*Extensive time that nonprofit developers spend chasing other financial sources to put deals together.
*State laws that require the highest prevailing union wages on projects built with public funds.
One of the Berkeley authors argues that state rules are just a means of shifting money from the low-income housing program to unionized construction workers
I would add to the analysis the old empirical observation that private housing development does the most to increase the supply of housing and thereby create affordable housing.
”’Dr. Adrian Moore is the Vice President for the Reason Foundation and can be reached via email at mailto:Adrian.Moore@Reason.org More information on Reason at:”’ http://www.rppi.org
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