Cost to Build in California

Why California’s Multifamily Housing Costs So Much More Than Elsewhere

A new RAND report finds that building multifamily housing in California costs 2.3× more than in Texas and 1.5× more than in Colorado (RAND Corporation). The study analyzed over 100 completed apartment projects (market-rate and subsidized) from 2015–2024 across the three states.

Timeline & Fees Are Major Drivers

Permitting and construction take much longer: California projects finish 22+ months slower than in Texas (RAND Corporation).

Development fees are exorbitant: averaging around $29,000 per unit—compared to under $1,000 in Texas and $12,000 in Colorado (RAND Corporation).

Regional Cost Differences Within California

San Diego is the most affordable metro in the state, at roughly 2× Texas costs.

Los Angeles clocks in at 2.5×, and the San Francisco Bay Area tops out at 3× the Texas average (RAND Corporation).

What’s Driving These High Costs?

Structural & Policy Factors:

Higher land prices, labor wages, and seismic building codes

Most costs stem from policy decisions like:

Longer approval timelines

Detailed and prescriptive building regulations (RAND Corporation)

Affordable vs. Market-Rate Housing:

Surprisingly, subsidized affordable housing is also costlier, averaging 1.5× the price per square foot of market-rate units in California—and over 4× those in Texas (RAND Corporation).

Extra costs arise from:

Above-market wage mandates

Larger architecture and engineering fees due to stricter funding requirements (Wikipedia, RAND Corporation)

Policy Recommendations from RAND

RAND suggests several strategies to reduce costs and timelines:

Adopt timelines like Texas: Require local authorities to approve/deny permits within 30 days—or face automatic approval (RAND Corporation).

Streamline inspections: Use synchronized inspections to close the ~7-month time gap with Texas.

Reevaluate development fees: Fees 10–40× higher than Texas deter new housing production (RAND Corporation).

Balance environmental regulation and housing supply: Weigh the efficiency benefits of green building against their impact on affordability (RAND Corporation).

Learn from San Diego: Its relative affordability shows there are workable in-state models (RAND Corporation).

Conclusion

California’s steep multifamily housing costs aren’t just a function of geography—they’re largely policy-driven. Key reforms in permitting speed, fee structure, regulatory design, and inspection coordination could help close the affordability gap with more permissive states like Texas and Colorado.