Re:California’s Housing Crisis Reaches a ‘Breaking Point’
by brudgers on Monday July 17, 2017 @08:18PM
(#14793399)
High rise housing projects take many years. Just assembling a suitable parcel in a good location from multiple small parcels under separate ownership requires cunning and misdirection and often a couple of decades.
Real estate is slow. Apple has its new spaceship in Cupertino. Apple paid $300 million for HP's 100 acre former campus in 2010. Apple's adjacent parcel was acquired in 2006. Even without regarding how long it probably took to close the first parcel, that's more than a decade ago. For a straight up office building with no need for sales and marketing. And office buildings are what Cupertino wants on its tax rolls.
Suppose that 100 acres went to housing instead. At $3million per acre and 30 units gross per acre, there's $100,000 per unit in land cost. At a low end 4:1 improvement to land cost ratio, the construction of each unit runs out to $400,000 and the unit cost is $500,000. Throw in 20% for carrying costs and 20% for developer profit and units hit the market at $720,000.
Sure a person can play with the numbers and get them lower or higher. But even at 30 dwelling units per acre, that's only an addition of only 3000 units over ten years to the overall Bay Area market. And it took more than $1 billion in capital and a decade worth of work. If it were easy, it would have happened.
Real estate is slow. Apple has its new spaceship in Cupertino. Apple paid $300 million for HP's 100 acre former campus in 2010. Apple's adjacent parcel was acquired in 2006. Even without regarding how long it probably took to close the first parcel, that's more than a decade ago. For a straight up office building with no need for sales and marketing. And office buildings are what Cupertino wants on its tax rolls.
Suppose that 100 acres went to housing instead. At $3million per acre and 30 units gross per acre, there's $100,000 per unit in land cost. At a low end 4:1 improvement to land cost ratio, the construction of each unit runs out to $400,000 and the unit cost is $500,000. Throw in 20% for carrying costs and 20% for developer profit and units hit the market at $720,000.
Sure a person can play with the numbers and get them lower or higher. But even at 30 dwelling units per acre, that's only an addition of only 3000 units over ten years to the overall Bay Area market. And it took more than $1 billion in capital and a decade worth of work. If it were easy, it would have happened.