"New apartments to help low-income families."
That was a June 22 headline in The Bee heralding the Village One Town Center apartments being developed by the Stanislaus County Housing Authority, with help from the city of Modesto. And in times like these, those are welcome words indeed. But wait! Affordable? $360,000 per unit! Are you kidding me? Sure, the rental rates are affordable, but who in the world was sitting still when the bids came in on this project? At sizes of only 930 to 1,150 square feet, these units come out somewhere above $325 per square foot. Wow! Custom houses in Del Rio are being built cheaper than that. A more recent story talked about the new homes completed by Habitat for Humanity. A quick check with Habitat Executive Director Anita Hellam indicated that those homes came in at $65 to $70 per square foot. Admittedly, those are partially built by participants in the program, but surely that saves no more than $20 to $25 per foot. Figure $100 per square foot and we are still less than one-third of the "affordable" units in Village I.
Many reasons, I suppose, could be offered as elements of cost that would drive this to such a high total, such as prevailing wage, costly financing, less density on the lot than was originally proposed. But, in the end, it seems to me a clear case of government doing tasks that would be better left to the private sector. As developers and builders, we don't make laws, nor do we administer functions of the government. On the same hand, government clearly should not be building and developing housing that the private sector could better construct. As private developers, we first have to pencil out a project -- in other words, make sure that it is financially feasible. Sounds to me like this one was never penciled -- and if it was, who decided to go ahead at those costs? That project would never fly in our business.
Hard building costs for residential housing run about $65 per square foot today. Add permits, infrastructure and school fees, land, and the overhead and financing costs and the typical semi-custom subdivision home will cost no more than $150 per square foot, including profit for the builder. (An ad in a recent Sunday Bee offered new homes in Livingston for $99 per square foot.) And, according to several sources, this project did not even have to pay the full development and infrastructure fees, at least upfront like all the rest of us developers. Those could add $30 to $40 per square foot to the end cost. Recently I purchased a new rental house in a new subdivision in Ceres. The house is just over 1,000 square feet and I paid $140,000 for it. That works out to less than 40 percent of the cost of these "affordable" units. And most people would prefer to live in a single-family detached house instead of an apartment complex.
I suppose that the argument could be made that the units in question are right next door to a neighborhood shopping center. Well, my rental house is just a few blocks from shopping, and for the price differential I could hire a car and driver and still be ahead. Perhaps the most surprising aspect of the entire story -- no irate letters to the editor, no questioning editorials, no outcry from any quarter. Simply amazing!
Hagerty is an Oakdale real estate developer active in community nonprofits.
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Don Quixote Note: Some representatives from Modesto are meeting with the City this Friday. Perhaps the media can get a reaction to their view of government building "affordable housing". A viewpoint from a local real estate agent about a local project can be found at : Hesperia - Why is the City involved in developing attainable housing and just what is attainable housing?
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