$1200 Per Square Foot: Unpacking the Complex Costs of U.S. Affordable Housing

A recent social media post by real estate developer Bobby Fijan highlighted the escalating and often misunderstood expenses associated with affordable housing construction in the United States. Fijan's tweet, referencing a 2018 project, stated, "$1200 per sf to build. In 2018. For a building without AC," directly challenging the perception that "The US (stupidly) builds way worse affordable housing that costs way more!" This figure underscores a nuanced reality behind the high price tags of subsidized housing.

The seemingly exorbitant cost, particularly for a building lacking a fundamental amenity like air conditioning, reflects a complex interplay of factors beyond basic construction. While average hard construction costs for multifamily units in 2018 ranged from approximately $200 to $500 per square foot, specific projects, especially those designated as affordable housing, frequently incur significantly higher total development expenses. These costs encompass land acquisition, extensive regulatory compliance, and prolonged permitting processes.

Affordable housing developments often face elevated "soft costs" compared to market-rate projects. These include design, legal, financing, and impact fees, which are amplified by the intricate layers of public funding and associated requirements. For instance, projects receiving government subsidies may be subject to prevailing wage mandates, adding an average of $30 per square foot to costs, as noted by the Terner Center for Housing Innovation. Such regulatory burdens, while intended to ensure quality and social benefits, can inadvertently inflate overall project budgets.

Location also plays a critical role. Building in high-cost urban centers, where land is scarce and construction is inherently more complex (e.g., multi-story structures, infill development), drives up expenses. A Seattle affordable housing project, for example, was reported at a total cost of $530 per square foot, with construction hard costs at $341 per square foot. The absence of air conditioning in a $1200 per square foot building, as cited by Fijan, might indicate strategic cost-cutting in certain amenities to keep the overall project viable within a tightly constrained budget, or it could be a feature of older buildings undergoing renovation.

Bobby Fijan consistently argues that incentives shape outcomes in real estate development. The high costs are often a direct consequence of the demanding economic and regulatory environment, compelling developers to prioritize essential structural and compliance elements over additional amenities. This perspective challenges the simplistic narrative that high-cost affordable housing is inherently "worse" or inefficiently managed, suggesting instead that it is a product of systemic pressures and policy choices.