What Does It Cost to Build Quality Affordable Housing? Lessons from Alan Biller

Introduction

In this episode of the Affordable Housing & Real Estate Investing Podcast, host Kent Fai He speaks with Alan Biller, a development manager at Enterprise Community Development, about one of the most important questions in the field: What does it really cost to build quality affordable housing?

Alan’s path to development began with grassroots tenant organizing in Washington, D.C., and evolved into managing award-winning projects like Highland Terrace Apartments in Richmond, Virginia. His unique perspective, shaped by work on the policy side, the lending side, and the development side, provides an honest look at why affordable housing costs so much and what it takes to deliver buildings residents can be proud of.

How Much Does It Cost to Build Affordable Housing Per Unit?

Alan explains that costs vary depending on geography, construction type, and design requirements.

• In Richmond, Virginia, new affordable housing costs $300,000 to $400,000 per unit.
  
  

• In high-cost markets like Washington, D.C., New York, or California, that number rises to $500,000 to $700,000 per unit.
  
  

• Even with higher costs, rents are capped by Area Median Income (AMI), meaning developers cannot simply raise rents to balance budgets.
  
  

His Richmond project, Highland Terrace Apartments, was built on the site of a historic church and cost $21 million for 66 units, averaging just over $318,000 per unit. Despite its affordability goals, the building features quartz countertops, LVT flooring, community rooms, and other amenities that make it indistinguishable from market-rate housing.

Why Does Affordable Housing Cost As Much as Market-Rate Housing?

A common misconception is that affordable housing should be cheaper to build. Alan challenges this directly:

• Baseline costs such as land, labor, and materials are the same as market-rate housing.
  
  

• Design standards imposed by housing finance agencies often require high-quality materials that last longer and reduce long-term operating costs.
  
  

• Durability matters. For example, developers now use LVT instead of carpet to reduce turnover costs and extend the building’s lifecycle.
  
  

As Alan puts it, “To build quality affordable housing at its baseline costs at least as much as it does to build quality market-rate housing”.

What Makes Affordable Housing Development So Complex?

Developing affordable housing is not just about construction. It requires navigating overlapping demands from multiple stakeholders:

• Community engagement. Highland Terrace required balancing community concerns with historic preservation rules. The project maintained part of the original church façade to honor local history.
  
  

• Government oversight. Projects must comply with HUD rules like Section 106 historical reviews, which add layers of time and cost.
  
  

• Financing puzzles. Sources must equal uses. Deals combine debt, equity, tax credits, subordinate financing, and sometimes grants to fill the gap.
  
  

Alan emphasizes that affordable housing is “fundamentally anti-market” because developers are asked to deliver high-quality housing to people who cannot pay market rents.

Key Insights from Alan Biller

• Building quality affordable housing in Virginia costs $300,000 to $400,000 per unit; in high-cost states it can exceed $700,000.
  
  

• Using durable materials like LVT flooring reduces long-term operating costs and keeps buildings looking new.
  
  

• Affordable housing development takes years. Highland Terrace began in 2016 and held its ribbon cutting in 2023.
  
  

• Deals are shaped by compromises among developers, lenders, asset managers, property managers, communities, and government agencies.
  
  

• Developers who think affordable housing is easy are likely not building it right.
  
  

Memorable Quotes from Alan Biller

“If you are building affordable housing and you think it is easy, you are probably not building affordable housing”.

“To build quality affordable housing at its baseline costs at least as much as it does to build quality market-rate housing”.

“These are hard projects. If you are doing it well, if you are doing it right, it is not going to be easy”.

“Every deal is a compromise between lenders, equity partners, asset managers, the city, and the community”.

Common Questions Answered in This Episode

How much does it cost to build affordable housing per unit?
In Richmond, Virginia, around $300,000 to $400,000 per unit. In high-cost states like New York or California, $500,000 to $700,000 per unit.

Why does affordable housing cost as much as market-rate housing?
Because land, labor, and materials are the same. In many cases, design standards and durability requirements make affordable housing even more expensive.

How long does it take to complete an affordable housing project?
Often seven years or more. Highland Terrace took from 2016 to 2023 to complete.

What financing mechanisms are used?
Most projects rely on a mix of 4 percent or 9 percent LIHTC, tax-exempt bonds, subordinate loans, and local grants.

Why is affordable housing considered “anti-market”?
Because it requires delivering high-quality homes at below-market rents, which is fundamentally opposed to normal market forces.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. By interviewing leaders like Alan Biller, Kent continues to provide transparent insights into what it really takes to deliver affordable housing across the United States.

DM me @kentfaiheon IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.