In February of 2016, California’s Legislative Analyst’s Office (LAO) reported that California’s shortfall of subsidized housing units—affordable to those who earn 80 percent or less of the median income where they live was about 1.7 million housing units. The LAO estimated that closing this shortfall through new construction would cost in excess of $250 billion in public subsidies, though the report also noted: “There is a good chance the actual cost could be higher.”

That caveat now seems prescient. Between 2016 and 2019, the costs to develop a new affordable unit under the Low-Income Housing Tax Credit (LIHTC) program have increased from $425,000 per unit to more than $480,000 per unit, an increase of 13 percent in just four years (after accounting for inflation). Costs per square foot have increased by 30 percent over the same time period, reaching $700 per square foot in 2019. A report by the federal Government Accountability Office (GAO) found that average development costs for new LIHTC projects in California were the highest in the nation, eclipsing those in New York City.