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It Costs $500PSF to Build Apartments Here

It Costs $500PSF to Build Apartments Here

05/17/2018 1:46 PM | Margaret Fulton (Administrator)

From high land values to rising construction costs, the price to develop in Los Angeles is fueling the affordability crisis.

Finding a solution to the affordability crisis plaguing California is a top concern for both residents and the development community. At RealShare Southern California last week, experts sat down to talk about the affordability problem, what is driving it and why the current proposed solutions—namely the potential repeal of Costa Hawkins—are not going to bring down the prices. The panel, Overcoming the Affordability Crisis, included speakers Jim Andersen, SVP at Trammell Crow Company; Mike Rovner, president and founder at Mike Rovner Construction; Kitty Wallace, EVP at Colliers International; Janet Neman, senior managing director at Charles Dunn Co.; Eric Sackler, director of Los Angeles at Coldwell Banker Commercial, with moderator Jeffrey Hudson, managing director of capital markets at Walker & Dunlop.

The cost of construction and land prices are the biggest cause of the affordability crisis. Andersen estimates that his hard cost expenses are $300 per square foot to develop an apartment building in Los Angeles, and all in, the cost is closer to $500 per square foot. To recoup those costs, Andersen said, “You either build tiny units or swanky places.”