Comparing the Life-Cycle Costs of New Construction and Acquisition-Rehab of Affordable Multifamily Rental Housing

The cost of producing multifamily affordable housing may differ based on development type. Past attempts to compare the costs of producing multifamily housing through new construction or acquisition-rehab have been limited by an inability to adjust for variations in unit quality among different projects. The authors overcome this challenge by estimating the costs of developing and maintaining a property over a 50-year life cycle. Applying this approach to a convenience sample of 269 properties, the authors find new construction associated with life-cycle costs that are 25% to 45% higher than those of acquisition-rehab.