Written by Hadiya Al-Idrissi
July 16, 2020
In March 2020, Hannah Hoyt from the Joint Centre for Housing Studies of Harvard University (in collaboration with NeighborWorks America) published the report “More for Less? An Inquiry into Design and Construction Strategies for Addressing Multifamily Housing Costs.” The report includes 30+ interviews from developers, architects, contractors & policy makers who discussed the challenges of increasing multifamily housing production in America. The report also includes a list of proposed strategies and precedents to meet the challenges of the rising costs. While all costs and data in the report are in American dollars, the same cost saving measures and recommendations for change are very much applicable to the Canadian housing context. Recommendations for cost saving and policy changes in the report echo the strategies we have developed at Cahdco based on our project experience, in addition to suggesting a few new tips.
Those interviewed in the report agreed on the following needs to address the rising cost of affordable housing in America:
Why is housing so expensive to begin with? Simply put, the supply cannot meet the demand; housing production should be outpacing household formation by 30% (Figure 1).
Factors that contribute to the unaffordability of multifamily housing in America:
The report gave a breakdown of a typical Project Budget:
Breakdown of Major Costs for Multifamily Project Budget:
|Percentage of Overall Project Budget|
At Cahdco, we generally follow the same cost breakdown when building our capital budgets for projects. As the chart above indicates, reducing the hard costs can have the greatest impact on reducing the overall project budget.
Determining the characteristics of an affordable housing project in the earliest stages of feasibility can also greatly affect its financial viability in the end. Below is a diagram from the report illustrating some common characteristics that affect project costs (Figure 2):
Many of the above noted strategies have already been implemented in many Cahdco projects to increase cost efficiencies. However, a lot of work still lies in policy changes and effective support from all levels of government in terms of financing and cash flow. At the end of the day, the more money we can save on affordable housing projects, the more money we can put toward more affordable housing projects and finally start to shrink the gap between supply and demand.
For more information:
The report itself by Hannah Hoyt can be found here.
The Brookings Institute is also doing a 4-part summary of the summary of the report that can be found here.
Development Project Coordinator
July 16, 2020