Santa Monica Homeless Housing: $1 Million Per Apartment

One million dollars.

Well, technically $1,008,944.89 is what a new combination low and moderate income/permanent supportive housing for the homeless project in Santa Monica will cost per unit.

That works out to be $1,252 per square foot, at least double if not triple the going rate, industry experts say, to build apartment buildings in the Los Angeles area.

True, if you factor in the cost for the 19,000-square foot grocery store planned for the ground floor that drops the per-square-foot price to a bit over a $1,000 but that is still far far more than a private project would cost.

Oh, and the land is city owned so it was free, meaning no need to figure that into the projected cost.

And what does Santa Monica – the city council approved the project and an associated $2 million expenditure (the rest will come from grants and selling tax credits and such) on April 10 – get for its $123 million or so?

122 units, plus the aforementioned store, and about 100 below-ground parking spots, half for the store and half for the residents.

And it will take about six years to finish.

There will be 44 studio apartments of about 378 square-feet each – think an extended-stay hotel room with the kitchenette, etc. – 15 one bedrooms at about 650 square-feet, 39 two-bedrooms at about 900 square-feet, and 32 1,100 square-foot three bedroom units.

Most of the units will be set aside for low/mod rentals.  For those, the rent is based on a sliding scale depending on the type of unit and the person’s income – it should be about 30% of income and that includes utilities and such.

But for the “permanent supportive housing” (PSH)  units – of which there will be 50 (presumably most if not all of the studios and the rest one bedrooms) – the rent, according to The People Concern (TPC), the non-profit that will be providing said services, will be 30% of whatever income a person has coming in (up to limit, one presumes) wherever it comes from.

In other words, you pay part of what you have, or say you have, and could theoretically pay zero.

The project is being built by EAH Housing, which has a long history in developing and managing low/mod and PSH units.  At the council meeting, according to the Santa Monica Lookout , Welton Jordan from EAH Housing, attributed the six year time frame – which was noted with chagrin by a pair of council members –  to the complex financing and approval process. EAH currently has ten new housing developments under construction, and Jordan told the council,  “So we’ve done this a lot.  It’s very expensive to build buildings.”

Not that expensive, Mr. Jordan.

In breaking down the costs, about $76 million goes for actual construction, or “hard” costs., about $12 million for architecture and engineering, about $14 million for interest and fees and bond issuance, and another $20 million for what are termed “soft costs.”  Quite often, soft costs includes design and financing, so it is unclear exactly what EAH defines as soft costs and why the percentage – 19% of the project – is so high compared to private development.

 While EAH will develop the property, TPC – which will be getting paid by the county – will provide the services to the residents, both the formerly homeless and the others.

TPC is a firm believer in the idea of “housing first,” i.e. that you get a homeless person a guaranteed place to live first and then work on the other issues they may face, like addiction and mental illness. 

“Adhering to the Housing First model, our staff work collaboratively across programs and departments to identify “best-fit” housing that will meet the specific needs of each individual,” states TPC on its website.  “Housing First is an evidence-based practice to ending homelessness that prioritizes providing housing to individuals experiencing homelessness as quickly as possible without preconditions.”

In other words, the project will almost certainly be what is referred to as a “wet” house, or a place where a person can continue to use whatever substance they prefer and not have to worry about getting kicked out.

TPC says that 93% of the people it has worked with in PSH settings “never experience homelessness again.” 

That sounds impressive but is actually unsurprising considering you can keep getting wasted and not necessarily have to pay much if any rent for a long time, if not forever (sounds like a good deal to me….)

Comparing the costs to other options and other types of construction and units is also eye opening.

In real estate there is something called “the 1% rule.”  This is a rough guide for investing in rental property: you need to get 1% of the cost of the project  to make it pencil.  In this case, the rule would mean each unit would have to be rented for about $10,000 a month (1% of a million dollars.)

For $10,000 a month, one can rent a very nice place, even in Santa Monica.

While that may not exactly apply here, another comparison may be apt. Using Zillow  you will find nice studio units in Santa Monica going for between $2,500 and $4,500 per month.  Using this as a rough guide, each homeless person living at the project – currently a parking structure located at 1318 Fourth Street in downtown, about four blocks from the beach – will be receiving the equivalent of about $40,000 per year in free and/or reduced rent.

If one assumes  the person has Medi-Cal, gets food stamps, and some other assistance, the value received jumps up to about $60,000 per year, not included the value of having your support staff live in the building with you.

Finally, also using Zillow, one will discover that many many small apartment buildings – maybe not as nice as this project, but still – are available throughout the region. The units average about $250,000 each or so, so buying say 10 or 15 buildings to provide the same number of housing units would cost about $30 million.

Neither the city nor TPC responded to requests for comment.

It should be noted that other PSH projects around Los Angeles County have been coming in at only about $850,000 per unit.

Well, it is Santa Monica.