November 12, 2019

Why $4.5 Billion From Big Tech Won’t End California Housing Crisis

Consider the math. At the moment it costs about $450,000, and considerably more in high-cost areas like the Bay Area and Los Angeles, to build a single unit of subsidized affordable housing in California, according to the Terner Center. That is by far the highest of any state, and just short of twice the nation’s median home value. And it’s not as if these are houses. The $450,000 figure is for an apartment of modest dimensions in a multifamily building, with standard layouts, bargain finishes and few of the amenities of for-profit development.

Given those figures, the $4.5 billion that Google, Apple and Facebook have earmarked would create about 10,000 housing units. To be sure, the companies’ money will stretch further on already-owned land, and it is likely to be augmented by other public and private funding sources, which is why Google and Facebook estimated that their investments would produce a combined total of 40,000 housing units in the Bay Area.

Even when the money is multiplied, however, the magnitude of the housing shortage remains pulverizing to any checkbook. According to a widely cited figure that originated with a 2016 report by the McKinsey Global Institute, California needs to build 3.5 million housing units by 2025 — more than three times the current pace — to address its shortage and regain any semblance of affordability. The theoretical cost is outlandish ($1.6 trillion), and while Gov. Gavin Newsom campaigned on McKinsey’s 3.5 million figure, his office now refers to it as “a stretch goal.”

None of this is to say that California’s housing problem is unsolvable, or that tech companies shouldn’t be helping. It’s to make the point that if single- or even double-digit billions were enough to even dent the problem, it would have been dented long ago.

Article source: https://www.nytimes.com/2019/11/06/business/economy/california-housing-apple.html?emc=rss&partner=rss

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