The $600K per room SRO Hotel

The Failure of Public Housing (Part 5)

The reason public housing projects fail is that governments or more readily public-private partnerships in the U.S. not only don't produce nearly enough units to meet the housing demand of residents who cannot afford market rate rents or poorly plan and execute such projects but they also don’t produce cost effective housing. The SRO hotel being renovated in downtown Sacramento will cost the state over $50 million and will only provide 88 housing units to homeless persons. California has in excess of 181,000 homeless persons; at that rate, they would need to spend $108 trillion to house every homeless person in their state. That price tag is cheap compared to an apartment renovation in downtown SF that will cost a million per unit and only produce 35 units of housing. As I pointed out 2 years ago in a prior answer: (What is Preventing California from building enough homes to meet demand?) Los Angeles spent in excess of $800,000 to house a single homeless person. It would probably be cheaper for these cities to demolish these early 20th century structures and rebuild a modern structure, but state law requires cities to preserve early 20th century buildings and retain ground floor commercial space. In fact, most of the mandates the state imposes on public housing cause them to be less cost effective. The state also mandates union scale labor on construction sites and numerous different sources of financing. The union labor that constructs public housing also opposes innovations that could drive down the cost such as modular construction where sections of the building are assembled in factories and joined at the construction site. Privately funded projections that aren’t subject to these mandates can produce housing units at much lower costs but still cannot produce studio apartments for less than $550,000 per unit. The fact that even private philanthropic efforts that cut costs at every turn can’t produce cost effective housing is a testament to the fact that real estate speculation in coastal California has made housing unobtainable except for the wealthy, even on the taxpayer dime. In 2021, Moody analytics estimated that land costs alone consumed an estimated 55% of the price of median priced homes nationwide and upwards of 70% of median priced homes in large metros like Los Angeles and San Francisco.