Building just one affordable studio apartment in San Francisco can cost as much as $600,000 to $800,000—and finishing the building can take as long as six years. A few years ago, Tipping Point Community, a local nonprofit, started searching for a better approach. “We just saw 25, 30 years of work that really wasn’t changing anything, unfortunately,” says Daniel Lurie, founder and board chair of Tipping Point. “And we knew we wanted to try something different.”
It’s faster to build in a factory since the process can be optimized for speed in a way that isn’t possible outside, and the basic foundation work can happen on-site simultaneously. Shrinking the amount of time for a project reduces overall costs. Factory OS also saves labor costs because of its location, outside the middle of San Francisco, and the way it’s structured. It’s a union factory—something that’s often necessary for projects that need public funding—but individual workers assemble the entire apartments, rather than work solely as electricians or plumbers, for example.
As with Factory OS, the company’s process moves more quickly than standard construction. Kennedy says that Panoramic Interests will be able to build the apartments for the new project this fall in its Nevada factory in just a month while the foundation is laid in Berkeley, and then can deliver and stack the units immediately afterward. A project that might have otherwise taken 48 weeks will take 16. It will also cost about 30% less than it would have with standard construction.
City funding also comes with regulations that add costs, such as requirements to use local businesses on the design and development teams. “It’s a good program, but it is often implemented in a way that drives costs up pretty significantly,” says Kate Hartley, chief lending and investment officer at the San Francisco Housing Accelerator Fund, an organization that partnered with Tipping Point to manage the new housing project. (Hartley previously served as the director of the San Francisco Mayor’s Office of Housing and Community Development.) City policy makers will have to make a choice, she says: If eliminating some of those regulations could make more affordable housing available at a time when it’s desperately needed, even if the regulations had some other benefits, is it worth making the changes?
Hartley hopes that the new project could be a model for others. The private funding helped get the project moving quickly. The developer, a partner called Mercy Housing Construction, was then able to turn to low-income housing tax credits and low-interest bonds for more funds. The city will sign a long-term lease for the apartments, in the same way that it currently pays for rooms for the homeless at single-room-occupancy hotels. Similar projects could happen with other donors—such as tech companies that are beginning to invest in affordable housing—who could provide an initial loan to speed up projects and save costs, and could then be paid back as the project begins to use tax credits and bond financing.
The project can serve as a tool to push for changes. “We really can hold people’s feet to the fire now, because we have proof that it doesn’t have to cost that much and take that much time in the middle of a literal homelessness crisis in the state of California and in the city of San Francisco,” says Lurie. At the same time, Tipping Point is still searching for ways to further lower costs. “Four hundred thousand dollars in three years is not enough,” he says. “Let’s continue to push that cost curve down. Why can’t we get to $200,000? Why can’t we get to $100,000 a unit? With the crisis that we’re seeing on the streets of San Francisco, and in the state of California, we have no other choice. We have to do this. And we need to be committed to this, whether it’s politically expedient or not. I can tell you, a few years ago, we would not have had many people backing us. Now we’re going to be able to show projects and people are going to have to answer: Why is your project costing double and taking twice the amount of time?”
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