Category : housing

Building Efficiency and Housing Cost

Curran House typical upper floor plan by David Baker Architects. Housing units are shown in blue.

 

One thing I left out of my calculation the housing unit costs the other day in the interest of simplification was the efficiency of the building, but I probably shouldn’t have because it’s a huge factor. David Baker pointed out in a comment:

One thing, if the 800 Square foot is cost for the building overall the apartment size you are talking about is more like 640 (SF), Excluding corridors, stairs, etc.

This is exactly right- the units do not make up the entire building. Once space is subtracted for elevators, lobbies, mechanical equipment rooms, stairs and all of the other things that are necessary to make a building work, the building is usually only about 80% (or less) efficient- the percentage being what portion of the whole is comprised of the housing units.

Efficiency is a big factor on urban sites because there is often little freedom to optimize the dimensions of the building to fit the most number of units into the boundaries of the site while also staying under the height limits set in the planning code. Additionally, there are many code requirements regarding firefighter access and separation distances that further constrain the design.

How can we build cheaper urban housing?

Richardson Housing by David Baker Architects
Richardson Housing by David Baker Architects

There were a number of suggestions from readers, via both the blog comments and Twitter, on how we could build cheaper multifamily housing. Here are a few ideas with my thoughts:

  1. Prefabrication – Most large projects already take advantage of this to some degree. Many contractors pre-frame wood walls in a factory and crane them in to place on site, and things like roof trusses are typically factory made as well. These things can improve the project schedule, which saves money. Prefabricating entire units is possible too- Zeta Communities is a local company that is doing exactly that. They build entire rooms in a factory and crane them into place on site. SmartSpace in SoMA took advantage of this system and is being called the “first prefab micro housing project in the US.” Still, this is a system that only works on particular sites. It limits design freedom on difficult sites which can often result in fitting fewer units on a constrained parcel. It is often easier to use these systems on small sites, but I don’t think it’s going to reduce construction cost enough to make a huge difference.
  2. New Construction Technology – Cross Laminated Timber could reduce costs and construction time. Basically, it’s huge sheets of laminated wood that are cut out in a factory and assembled on site. This technology has already been in use in Europe for a few years and is coming to North America via Canadian manufacturers. Check out Murray Grove in London by Waugh Thistleton Architects.
  3. Smaller Units – San Francisco recently legalized a trial period for microunits, which are apartments that are smaller that what was previously allowed in city regulations. My example in the previous post was an 800 square foot apartment, which is an average size, but you could go a lot smaller (I’ve lived in a place that was a LOT smaller than that myself). Cost per square foot goes up as size goes down- it’s a result of having more bathrooms and kitchens in the same building, but it does create cheaper apartments. I personally don’t think there should be a legal minimum size for residences as long as there are no safety issues- if somebody wants to rent it, that’s their decision. For a lot of people, living in a very small apartment alone is preferable to having roommates.
  4. SROs –Martha Bridegam and I had a chat about these on twitter. There used to be a lot of Single Room Occupancy hotels in San Francisco. There still are some in the Mission and in the Tenderloin (with a sprinkling elsewhere) but they are traditionally where single people people at the lower end of the economic spectrum were able to afford to live. They provided a huge source of affordable housing and kept many people off the streets, and the remaining ones still fill this role. Unfortunately, many of these units were removed from the city when they were declared to be blight during the Urban Renewal era. Yerba Buena gardens stands where many low-income people used to live (they were clustered between the old train depot and Market Street in SoMA). UC Berkeley professor Paul Groth wrote a book titled Living Downtown that I recommend reading that discusses the history of this type of housing. Providing incentives for developers to build modern SRO-type housing in San Francisco (yes, even with shared bathrooms) might be a good way to create non-luxury housing that lower income people and young people on limited budgets would be able to afford. These type of buildings, built without parking and near transit, could be a good way to provide more market-rate affordable housing. I know some people object to this type of development, but it is very similar to a roommate situation and could be equally affordable. It also would not put people renting rooms at the whims of the master tenant, which is often a bad situation.
  5. No/Limited Parking – San Francisco already has just about the most progressive planning code in the US when it comes to parking. It already sets parking maximums that are below 1:1 (i.e. one space per unit) as opposed to most cities that have parking minimums. It also now requires unbundled parking so people buying a condo unit can decide whether or not to purchase a space, which can reduce the cost of buying significantly. Parking spaces cost A LOT. Tens of thousands of dollars each to build, and they are doubly expensive if they are built underground because the cost of building a basement in an urban area is astronomical (most new residential buildings in SF do not have basements unless there is an underground garage). Identifying areas to zone for “no parking” might be a good option for creating more affordable housing, although neighborhood groups are very likely to oppose this. Developers often are forced to add additional parking during the planning process to appease neighbors.
  6. Increasing Height Limits to Increase Density – height limits are set for every part of a city. This is in the planning code and is available online in most places (San Francisco has lots of online maps). Even slightly taller buildings would allow for more density – there are parts of the city where a few more feet would mean one extra floor. This would be a good way to create more units without changing neighborhoods drastically. However, land is usually priced based on how many units fit within the zoning. If parcels are upzoned, expect the price to increase as well. Generally, the increased density still outweighs the penalty of the slightly higher land cost.
  7. Find Other Ways to Fund Subsidized Affordable Housing – the current method of funding BMR units per project puts a big cost burden on the selling price of new units, and is a disincentive to building housing when the market is less-than-booming. There are not many other ways to fund development though, so I’m not sure what this would look like- I would love to hear ideas. With the death of the Redevelopment Agencies at the hands of Governor Brown, California is not handing out money for housing.  Prop C, which passed in 2012, created a fund for affordable housing last year but it isn’t funded yet. Currently the affordable housing requirement for new construction is the biggest source of affordable units.

Please leave your thoughts in the comments.

“Why can’t developers build housing in San Francisco for the people who need it most instead of for the rich?”

Construction at One Rincon from Rincon Green Housing

A question I have heard a lot lately is “why can’t developers build housing for the people who need it most instead of for the rich.” Let’s look at what a typical multi-family development project in a reasonably central part of San Francisco would cost to build (in a very simplified way). I’m assuming an 800 square foot apartment in a five story 100 unit wood-framed building over a concrete first story (very common in San Francisco):

Land cost per unit of housing: $120,000 (current average)

Construction cost per unit (hard costs), which could be up to 30% higher in an all-concrete building: $300×800 s.f.: $240,000 *1

Permits, city fees and professional services fees at 20% of $240,000, but this could easily be doubled on some projects:  $48,000

Subsidy to build affordable BMR units (12% of total unit count) based on a $200,000 per unit subsidy x 12 divided by the remaining 88 units: $27,000 *2

Total cost so far: $435,000

Selling expenses (marketing, legal fees and real estate commissions) at 8%: $34,800

Total bare-bones cost per 800 square foot unit: $469,800

[EDITED ON 1/16/2014 TO CORRECT AN ERROR IN COMPUTING THE TOTAL]

This is VERY SIMPLIFIED and does not include construction financing expenses, contingencies, or developer’s profit, among other things, and on projects that are difficult to get permitted the cost could skyrocket. Google around for sample proformas if you want to get a better idea of project costs.

You’re looking at nearly half a million dollars for an 800 square foot apartment, and that is not even including all the costs that would actually go into a project like this. This is not affordable at all when the median household income is $73,000 in San Francisco, which qualifies for a $310,000 mortgage (play with the numbers here).  How could we bring this down?

  • A clearer entitlements process could bring down the $48,000 figure for permitting/fees/professional services significantly. Remember, this number could easily be $100,000 on some projects.

  • Finding another way to fund the BMR program would reduce the $27,000 subsidy, although arguably the BMR program would be unnecessary if market rate housing were cheaper.

  • Lower real estate prices would mean construction costs would be lower. The cost of expensive San Francisco labor (construction workers have to deal with the high cost of living too) is a big part of that $300/SF figure and real estate cost also factors into the cost of storing materials and construction staging.

  • An easier entitlements process would also mean that there would be more sites available for development, which would presumably drive the cost of land down.

1. This might even be a bit low now, costs are escalating quickly right now. Most of the construction cost goes into things like the structure, foundation and HVAC systems, elevators etc. not the finishes, so the construction cost per square foot is similar across different segments of the market.

2. The Mayor’s Office of Housing handles these sales, you can see what is for sale now here: http://sf-moh.org/index.aspx?page=299 Alternately, a developer can choose to pay a fee to the Mayor’s Office of Housing which will pay for affordable housing elsewhere in the city. These projects are typically built by a nonprofit like Bridge Housing or the Tenderloin Neighborhood Development Corporation.

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