High Philly Construction Costs vs. Affordable Housing

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My preferred approach to reducing high construction costs in Philly would involve relaxing anti-density zoning regulations, allowing more as-of-right development, and taxing land instead of buildings. But people should be aware that construction costs are crazy high, in part because of labor costs, and there’s a trade-off there with keeping housing affordable.

Adam Ozimek sends us to Kevin Gillen:

“Philadelphia has the fourth highest construction costs in the nation, about 20 percent higher than the national average. There’s nothing wrong with that, per se, if you have high house prices, high rents and incomes to cover that,” said Gillen. But Philadelphia’s rents and incomes are more in line with places like St. Louis and Cleveland. “I like to say we have Manhattan building costs with Baltimore rents,” he added.

Gillen says that part of these costs are related to Philadelphia’s taxes and governmental inefficiency, but that labor premiums for city unions alone pushed construction projects to the suburbs. “The difference between building in the city and the suburbs is a 20 percent premium on union labor costs. You cross City Line Avenue and your costs go down 20 percent,” he said.

The political issue here is concentrated benefits vs. broad-based benefits. You could make an argument that higher wages for construction workers have spillover effects, as people spend that money elsewhere in the city economy. But could we expect even larger spillover effects if rents dropped across the board and all housing consumers had more money to spend on non-housing goods and services?

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2 Responses to High Philly Construction Costs vs. Affordable Housing

  1. Cleanup Philly says:

    Unions have a knock off effect. That Democrats want to make all construction more expensive means that housing is more expensive, building is slowed, and there are fewer jobs.

    So how is that Obama vision working again?

    • Jon says:

      It’s not the only thing that makes housing more expensive. I’d put more weight on anti-density zoning and lack of as-of-right development rights. But yes, high labor costs adds to it.