It amazes me that no one raises this cost per sf as an issue. The cost of $600 per sf to build affordable housing is a distortion. It is so high because government-subsidized projects do not have to conform to the private marketplace or to the normal marketplace forces that moderate most private business activity.
The government pays for a large share of these projects with a variety of tax credits and financing incentives so there is little incentive to bring costs down. In addition, these programs carry huge development soft costs which don’t exist in market rate housing.
[Soft costs are expenses incurred during a real estate project that are not directly related to the physical construction of the building itself, but are necessary for the project’s completion, including things like architectural fees, legal fees, permits, marketing costs, environmental studies, and project management fees.]
Without the massive subsidies low-income apartments would need to rent for around $5000 per month just to break even. (Without massive subsidies, affordable housing on Glendale Middle Road or Pine Street is out of reach.) The true cost is much higher if you add in the cost of the state, local, and federal agency oversight and administration which private apartments do not have. But this is part of our social safety net system for which the size and cost is frequently debated but it continues to be well funded.
Private home or apartment construction costs in Berkshire County, exclusive of land costs, are running in the range of $200 to $400 per square foot depending on size and quality or extent of rehab. It varies because size and quality vary.
Over the past 40 years since I have been active in this business the cost of building has risen due to natural inflation and building code changes. The latter has added enormously. Code requirements include extra fire rating, sprinkler systems in multi-family units, energy code requirements for windows and insulation, fresh air systems, environmental testing and remediation in rehab, material quality requirements, utility connection fees to towns, and reports to certify new code compliance. The cost per square foot generally goes down as the size of a unit goes up because base costs for kitchens, bathrooms, and heating and cooling systems which are part of any dwelling unit get spread out over a larger area.
However, it’s nowhere near what is happening in the financially artificial world of government regulated housing. If you ask local builders and architects, or a developer like me, we will be on the lower side and work hard at it because that’s what we must do to make a project financially feasible.
