Real Estate News - May 2025

Multifamily housing in California costs twice as much to build than in Texas

A study by the RAND Corporation, a policy research institute, found that constructing multifamily housing in California costs twice as much as in Texas.

The disparity is largely due to state and local regulations that lead to prolonged permitting and construction timelines, along with significantly higher development fees. RAND’s analysis drew on cost data from over 100 completed apartment projects.

“Housing affordability and its link to homelessness is a major policy challenge in California,” RAND stated in a news release. On average, projects in California take more than 22 months longer to complete than those in Texas. Additionally, municipal impact and development fees in California average $29,000 per unit—compared to under $1,000 in Texas and $12,000 in Colorado.

“California is more expensive than both Texas and Colorado across every cost category we reviewed,” said Jason Ward, the report’s lead author and a RAND economist. “To reduce housing costs, California could learn from states where development is simpler and more cost-effective.”

The report recommends that California consider policy reforms such as adopting a Texas law requiring local governments to approve or reject housing proposals within 30 days, after which proposals are automatically approved. It also suggests implementing policies to synchronize construction inspections, which are often conducted in sequence.

Finally, RAND urges California to reassess municipal impact and development fees, which are 10 to 40 times higher than those in Texas.