Does Placing Affordable Housing Near Rail Raise Development Costs? Evidence From California’s Four Largest Metropolitan Planning Organizations

California spent over a billion dollars supporting the construction of subsidized affordable housing in rail-adjacent neighborhoods through its transit-oriented development program. We test whether placing affordable housing close to rail or in jobs-rich communities increases development costs on a per-unit basis. We constructed budget and land-use data for nearly 500 tax credit-financed affordable housing sites which applied for tax credits in the state between 2008 and 2016. Through hedonic cost modeling and spatially lagged regression, we fail to find a significant effect of proximity to rail on development costs. Only by interacting proximity to transit with a project being higher than four stories do our models yield a significant effect of 8% higher total development costs. But in these models, a negative 16% interaction term suggests this cost impact is completely absorbed by developers by building above four stories. Beyond this, we find that only jobs–housing balance correlates significantly with per-unit development costs: as the number of jobs relative to housing within a five-mile radius of a site increases by 1, per-unit development costs increases by a mere 5%, on average.