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Thursday, October 5, 2023
‘Affordable’ housing costs $1500 per square foot?
By Grassroot Institute @ 9:08 PM :: 2180 Views :: Development, Cost of Living

Grassroot Scholar O’Toole seeks public records on state agency’s ‘affordable’ housing costs

from Grassroot Institute of Hawaii, October 4, 2023

The following testimony was submitted by Grassroot Scholar and Thoreau Institute founder Randal O’Toole for consideration by the Hawaii Housing Finance and Development Corporation at its pubic hearing on Oct. 4, 2023.

Hello,    October 4, 2023

Please accept this as testimony to the [Hawaii Housing Finance and Development Corporation] for today’s public hearing on low-income housing tax credits. If you have any questions, you may reach me at this email address or the address below.

Recently, the state of California proudly announced that it had funded an affordable housing project in San Francisco that cost only $400,000 per housing unit. Since the median value of homes in San Francisco is well over $1.3 million, this seemed to be quite an accomplishment.

What the state didn’t reveal, however, was that the average housing unit that cost $400,000 was only 260 square feet, about the size of a 16’x16′ room. That means the cost was $1,500 per square foot, which is well over twice the cost of private home construction in the San Francisco Bay Area.

Across the nation, state and local governments are spending tens of billions of dollars a year on so-called affordable housing, and anecdotal evidence indicates that some supposedly affordable housing costs a lot more than unsubsidized housing built by private developers. The large amounts of money involved have led to several scandals.

In California, politicians have been discovered steering affordable housing funds to developers who then make campaign contributions to the politicians. In Florida, developers have been accused of using affordable housing funds to pay for things that have nothing to do with the affordable housing projects. In New York City, housing officials have been accused of accepting bribes to sell affordable housing units to people who were ineligible to buy the units.

Aside from the possibility of illegal use of funds, taxpayers deserve to know whether the funds spent on affordable housing are effectively used. Spending $1,500 per square foot on housing when private housing costs less than half that is not an effective use of funds.

The best source of information about how effective low-income housing tax credits are used is the applications made by developers for those credits. These applications are usually accompanied by Excel spreadsheets that include information about the square footage of the housing units, the costs of construction and associated costs such as land acquisition and architects and consulting fees, the sources of funds the developers expect to use to pay for the construction, and how many units of housing will be available to families based on their incomes as a percent of median incomes. All of this information can be used to determine the cost-effectiveness of LIHTCs.

Recently, I filed a public records request with the Hawaii Housing Finance and Development Corporation seeking electronic copies of applications for 48 projects that received low-income housing tax credits. These applications can probably all be found on the computer operated by whoever in the agency is in charge of receiving such applications.

Despite the central location of these applications, my request was denied because this information, I was told, “is not readily available to the public.” No specific reason was given for why it wasn’t available. I was asked if I could “pinpoint specifically what it is you’d like to see from each of these approved applications.” Though I responded (by email) on July 24, the agency has not replied to my response.

For the record, there is nothing in any of these applications that is private information. None of the applications have names of people who would be renting affordable apartments. There are no personal or corporate financial statements, credit reports, market research studies, correspondence with potential or actual tenants, or personal information about tenants. As stated above, the applications simply break down costs, the anticipated sources of funds to build the projects, square footages, and income thresholds for potential renters or buyers of the units.

Truly transparent government requires that the public know how its money is being spent and how cost effective that spending is. Some states, such as Colorado, post applications for affordable housing funds and tax credits on their web sites. Hawaii should do the same, making all applications available for public review.

Thank you for this opportunity to submit this testimony.

Randal O’Toole


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