Why affordable housing does not come cheap. – Monterey County Weekly

Pam Marino here. I have covered affordable housing for long enough to know “affordable” is a relative term. What may one day be affordable for the families and individuals who need such housing does not come cheap. It often costs more than regular housing that’s unencumbered by the Byzantine rules and regulations attached to affordable developments.

Stack on top of that the skyrocketing cost of construction due to supply chain issues, natural disasters, tariffs and other factors, and “sticker shock” becomes an apt term to describe the current cost of providing a safe home for a family or person making far below the median income.

Nonprofit developer CHISPA is about to spend what is likely the highest cost per unit it’s ever encountered: $700,569 per unit for a 65-unit project in East Garrison, located between Marina and Salinas. The total cost of the long-awaited apartment building is $45,537,000. If all goes well with the funding, they expect to break ground in a couple of months, says Dana Cleary, CHISPA’s director of real estate development. 

Compare that price tag to the 47-unit Junsay Oaks senior apartment complex completed by CHISPA in Marina in 2019, which cost approximately $17 million, or $361,700 per unit.

What’s going on? Cleary says the cost of materials is one big reason for the enormous jump. Lumber prices have been especially volatile in the last year, hitting a record high last May of $1,686 per thousand board foot, a 406-percent increase from the same time the previous year, according to a report by the College of Natural Resources at North Carolina State University. It’s currently $1,024 per thousand board foot, still high. (“Board foot” is a standard unit of measure for the volume of a board that’s 12x12x1 inches.) A combination of fires, Canadian tariffs and flooding and mudslides in British Columbia last fall have been drivers of lumber’s high prices.

Another factor driving up the cost in East Garrison, Cleary says, is labor. Developers building on the former Fort Ord are required to pay the “prevailing wage” for labor, a rule negotiated by the county with unions many years ago. In Monterey County the prevailing wage is tied to what is paid to construction workers in the San Francisco Bay Area, which is higher than other regions. 

Now CHISPA is experiencing new costs in the form of construction insurance, adding another $300,000-$400,000, and a completion bond required by an investor that’s adding another $300,000. Chalk up those new expenses to investors and insurers getting nervous in the wake of the growing problem with fires. 

Why is CHISPA building the project now? The organization has had the option to build since 2007, part of a requirement for East Garrison’s developer when the county approved the new community in 2005. When the Great Recession came in 2008, affordable housing funding dried up. There was some state funding at the start of the pandemic, but CHISPA opted to wait as prices began to rise.

Last year CHISPA applied for federal tax credits for the East Garrison project not fully expecting they’d come through, Cleary says. To their surprise, they got the credits—and the credits came with a requirement to begin building within 180 days.

“When it comes to affordable housing do you sit around and do nothing?” Cleary asks. The people who need housing most will have it a year or two earlier than if CHISPA had waited to see if prices settled again. 

There’s more good news in that CHISPA was awarded state funding to build units for farmworkers, which means 43 of the 65 units will be reserved exclusively for farmworkers and their families, much needed here in Monterey County.

And there’s local funding coming into play, as well. The Monterey County Board of Supervisors, acting as the Board of Directors to the Successor Agency to the Redevelopment Agency Monterey County, is scheduled to consider a reimbursement agreement with CHISPA not to exceed $6 million for consultant costs. The funds will come from a tax increment assessed to property owners within the East Garrison subdivision. 

You can tune into the board meeting tomorrow, Jan. 25, at 10:30am on the county’s YouTube channel, or you can participate on Zoom. There’s also the option to attend the meeting in person inside the board chambers at 168 W. Alisal St., Salinas.