Does Placing Affordable Housing Near Rail Raise Development Costs? Evidence From California’s Four Largest Metropolitan Planning Organizations

Matthew Palm and Deb Niemeier

Housing Policy Debate, 2018, vol. 28, issue 2, 180-198

Abstract: California spent over a billion dollars supporting the construction of subsidized affordable housing in rail-adjacent neighborhoods through its transit-oriented development program. We test whether placing affordable housing close to rail or in jobs-rich communities increases development costs on a per-unit basis. We constructed budget and land-use data for nearly 500 tax credit-financed affordable housing sites which applied for tax credits in the state between 2008 and 2016. Through hedonic cost modeling and spatially lagged regression, we fail to find a significant effect of proximity to rail on development costs. Only by interacting proximity to transit with a project being higher than four stories do our models yield a significant effect of 8% higher total development costs. But in these models, a negative 16% interaction term suggests this cost impact is completely absorbed by developers by building above four stories. Beyond this, we find that only jobs–housing balance correlates significantly with per-unit development costs: as the number of jobs relative to housing within a five-mile radius of a site increases by 1, per-unit development costs increases by a mere 5%, on average.

Date: 2018
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DOI: 10.1080/10511482.2017.1331367

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