Editor: David Reiss
Brooklyn Law School

November 27, 2013

Reducing The Cost of Affordable Housing Development: Lessons for NYC?

By David Reiss

Enterprise and the Urban Land Institute have issued a report, Bending the Cost Curve on Affordable Rental Development: Understanding the Drivers of Cost, that identifies affordable housing development’s “most commonly cited cost drivers, provides a brief overview of their impact and applicability, and includes high-level recommendations to promote a more efficient delivery system.” (4). As the report notes,

Affordable housing delivery is shaped by a number of procedures, regulations, and policies instituted at all levels of the system—each with associated costs. Development costs may be dictated by site constraints, design elements, local land use and zoning restrictions, building codes, delays in the development process, efforts to reduce long-term operating costs, and the affordable housing finance system. Most affordable developments rely on multiple funding streams, both equity and debt, each of which carries its own set of requirements and compliance costs. While there may be some alignment of affordable housing land use regulations, financing tools, or programs, far too often developers must seek a complex series of approvals or obtain waivers to bring a project to fruition. This process alone can introduce costs through delays to the development timeline as well as introduce additional uncertainty and risk, which, in addition to regulatory barriers, can also increase costs. (3)

While the report offers no shocking insights into affordable housing’s cost drivers, it does provide a good overview. It also brings to mind research that NYU’s Furman Center did some years ago about the drivers of the high cost of housing construction in New York City.

Given that Mayor-Elect de Blasio has put affordable housing at the center of his campaign, his team should focus on reducing these costs as part of his overall affordable housing strategy. Mayors Bloomberg and Giuliani were not able to make any significant progress on this issue, even though doing so would be quite consistent with their approach to governance. Perhaps that makes it even more of a compelling goal for the de Blasio Administration.

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