Source: Bisnow

Date Published: 08.12.2025

Link:  ‘Affordable Housing Is An Oxymoron’: Why Homes For Low-Income Renters Are Far More Expensive To Build

Government sponsored Affordable housing projects cost significantly more to build than market-rate housing due to how the Low-Income Housing Tax Credit (LIHTC) program is structured. Because LIHTC only covers part of a project’s cost, developers must combine multiple funding sources—each with additional rules and fees—leading to higher soft costs like legal, financing, and consulting fees that can exceed 25% of the budget. Developers are also required to meet stricter environmental and labor standards than market-rate projects, while developer fees calculated as a percentage of total costs create incentives for developers to keep budgets higher. As a result, affordable housing frequently costs nearly twice as much per unit: in California, LIHTC units averaged 1.5 times more than market-rate housing, with soft costs hitting $187 per square foot compared to $84, while in Boston, average costs for large affordable projects reached $678K per unit—43% higher than market-rate equivalents. Meanwhile, in Texas where regulations and approval times are lower, LHITC projects’ “soft costs are still nearly three times that of market-rate projects — $60 per SF compared to $22 per SF.” These examples underscore how layers of regulation, financing complexity, and fee structures inflate costs for Affordable housing, limiting the number of affordable homes built despite $14B-plus in annual federal LIHTC support.