Gavin Newsom’s executive order calling for surplus state land to be used for subsidized affordable … More
I’ve made the case before that, State and Local Governments Should Donate Land for Housing. Land acquisition takes time because it can be challenging to find land with the right location, zoning, and infrastructure to build housing. And it can be costly, especially in places experiencing rapid growth and competitive demand for developable land. About 6 years ago, California governor Gavin Newsom issued an executive order directing state agencies to identify surplus land for construction and development of housing. It was not a donation program; instead, Newsom’s executive order would provide the land at a deep discount. How is the program working?
According to KQED, the order led to the assessment of about 44,000 parcels of state-owned land. Of those, only 46 were suitable for housing, and 19 have ended up in the process of development. I picked one of those projects, Sugar Pine Village in South Lake Tahoe, California. Like many such projects, press reports often are sketchy on the details, usually touting the advent of the project as a human-interest story. The Placer Sentinel story about the project, for example, reports the following.
“The next stage of the Sugar Pine Village project, which includes an additional 60 units, is already underway and is anticipated to open in October 2025.”
“Governor Gavin Newsom Oct. 17 announced that a new affordable housing project in South Lake Tahoe is opening 68 units to residents. Sugar Pine Village, which will eventually grow into a 248-unit community.”
And story doesn’t have any information about cost. This matters because in order to measure and compare the project cost, it is important to know total development cost. Another story in the San Francisco Chronicle does cite the costs (it says $25.7 million) but neglects to cite the total acreage or the terms of the lease only saying it’s part of the Governor’s initiative and that, “the state will retain ownership of the land through a long-term ground lease with the developer.”
I mention this because one of the big problems in housing in the United States is the complete lack of curiosity about the costs associated with “affordable housing.” There isn’t even really a common language around what affordable means other than a measure of income that residents earn, not how it’s paid for. This leads to a lack of awareness of scale of costs. So, let’s take a quick look at the numbers, the real numbers, from the Treasurer of California.
Accurate information about the Sugar Pine project from the Treasurer of California shows even with … More
First, you’ll see the press just got it wrong. The total cost of the project is much higher. The number cited by the Chronicle is close to the $25,588,048 in tax exempt bonds used for the project. And the number reported by both papers on units was wrong as well.
But taking a look at the actual project numbers is revealing. My land cost estimate is from a lot up for sale about a mile away and the price figure on a single-family home in South Lake Tahoe and both figures are from Zillow. My guess on the land might be off by a substantial factor, but if the cost for developable land in South Lake Tahoe is about $25 per square foot, land costs could have been about 5%.
I searched a myriad of documents in the public sphere on the internet and I could not find any terms for the lease. The costs of the project aren’t just staggering, they are absurd in context. The project is just way pricier than it should be. I make that determination based on the comparison of the per unit cost with the cost of a single-family home in the same area. Maybe that standard will come to be known as the “Valdez Test.” I think it is reasonable. And while the organization developing the land didn’t have to pay for the land, it didn’t make a dent in the almost $1 million price for each unit. That savings only yielded a savings, per unit, of less that $50,000.
Donating the land would be better – now the project has some ongoing cost of paying on a lease to the state. Maybe it’s only a dollar, but the Newsom scheme isn’t really helping very much. And this is yet another example of another one of my tests – is it necessary but not sufficient? Cheap or free land is necessary, but as this example shows, it’s nowhere near efficient.
