Item 35 - Housing Opportunity Ordinance

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Housing Opportunity Ordinance September 7, 2021 Page 7 2 0 5 1 Staff also met with the BIA and received feedback that the proposed $15 per square foot cannot be absorbed by a project. While no specific data were provided by the BIA regarding the cost differential using STW, the verbal indication is a STW requirement will significantly impact the feasibility of constructing a project in the City. As an alternative data source to this outreach, staff obtained data from the Terner Center for Housing and Innovation at the University of California, Berkeley (Terner Center). According to a study, “The Hard Costs of Construction”, completed in March of 2020 by the Terner Center, hard construction costs per square foot from 2008 to 2018 generally fluctuated between $177 to $222 per square foot. Hard construction costs include materials and labor only where materials make up approximately 85% of the hard construction costs and labor makes up the remaining 15%. The study also found that prevailing wage requirements are associated with higher hard costs and on the average, add $30 or more per square foot than those without. While prevailing wage requirements do not have the exact same stringent requirements as a STW represented by a labor organization, they share similar labor monitoring and wage requirements and characteristics. Depending on the per square foot total indicated in the study, the addition of a $30 per square foot in labor, increases the hard construction costs of a project on the average between 14% to 17%. Anecdotally, verbal feedback received from the development community indicates the average per square foot hard construction costs for a residential project range between $130 and $250 depending on construction and housing type and the inclusion of a STW requirement would increase their estimated cost per square foot approximately 15% to 20%. The labor union and BIA representatives all acknowledged the percentage increase in costs and the information that staff had gathered from the research. Blending the above information collectively, it is reasonable to conservatively estimate that the financial impact of a STW requirement on a residential project opting to pay the in-lieu fee would be approximately 15% or higher of the hard construction costs. Table 2 below shows the estimated total increase to a project’s hard construction costs when combining a STW requirement with the HOO in-lieu fee at $5 and $15 per square foot. Table 2: Estimated Financial Impact of Skilled and Trained Workforce Requirement Range of Per Square Foot Cost of Labor and Materials Without STW Range of STW at 15% Per Square Foot HOO In-Lieu Fee Per Square Foot Range of Percentage of Financial Increase on Hard Construction Costs (STW + HOO) $15 21% - 27%$130 - $250 $19.50 - $37.50 $5 17% - 19%