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There’s a seductive simplicity in the belief that developers could build affordable housing—if only they wanted to. It’s the kind of narrative that circulates easily in local debates, bolstered by frustration, rising rents, and the visible absence of homes most working families can afford.
But this belief, however satisfying, collapses under the weight of economic reality. If we’re serious about building homes that are both affordable and feasible, we must let go of the idea that the problem is willpower, and confront the fact that the problem is structural.
We’re often told that we just need the “right carrot”—some magical incentive to convince developers to do what they supposedly resist. But even the biggest carrot can’t overcome basic math.
In places like Davis, construction costs are high, land is expensive, and financing comes with significant risk. The result? A home that costs $600,000 to build is still seen by many as “affordable”—even though few families can afford that price, and few builders can make a profit selling for less.
Let’s break this down.
First, construction costs are not what they used to be. According to data from the National Association of Home Builders, the cost of labor and materials has risen sharply over the past five years—especially post-COVID. Lumber prices skyrocketed, then settled at a new normal. Concrete, steel, HVAC systems, and skilled labor are all more expensive. In some California markets, the cost to build a single-family home can reach levels that are already prohibitive per square foot. That’s before a single nail is driven.
Second, land acquisition costs in cities like Davis are prohibitively high. With a long-standing growth boundary and intense land-use restrictions, the supply of developable land is tightly constrained. When land is scarce, its price goes up—and those costs are passed along to homebuyers. Even with density increases, it’s difficult to create meaningful affordability without subsidies or land dedications or both.
Third, there’s the matter of project financing. Developers don’t just build with their own money. They rely on loans, investors, and underwriting assumptions. For a project to move forward, lenders must believe the homes will sell at a high enough price to repay loans with interest. If a developer proposes homes at price points the market sees as “affordable”—say $350,000—they may be unable to secure financing, not because the project lacks moral merit, not because the developers and local government leaders lack the will, but because it lacks financial viability.
Add to that the entitlement process—months or years of public meetings, design reviews, and legal challenges—and you begin to understand why many developers don’t even attempt “affordable by design” housing. The risk is simply too high, and the margins too thin.
So when people say, “Developers just don’t want to build affordable housing,” what they’re really doing is mistaking a broken system for individual refusal. It’s easier to believe in bad actors than broken incentives. But bad actors aren’t the only reason we’re in a housing crisis. Structural contradictions are.
This doesn’t mean developers are victims. It means they’re operating within constraints—some natural, others political. And this is where public leadership matters.
If we want housing that regular families can afford, we need public intervention that makes affordability feasible. That could mean offering land for free or at reduced cost. It could mean providing low-interest public financing. It could mean tax credits for income-restricted ownership housing, or density bonuses that allow more units per acre to spread out costs. It certainly means streamlining approvals and reducing uncertainty.
In short: it’s not about the right carrot. It’s about rebalancing a system that currently punishes anyone trying to build below luxury pricing.
Of course, all of this assumes we agree that affordability is the goal or that lack of housing options is the problem. Too often, the same communities that bemoan high housing prices also resist the density, height, or zoning changes needed to bring those prices down. They want affordable homes, just not near them. They want student housing, but not in their neighborhood. They want equity, but not growth. This cognitive dissonance is a much bigger obstacle than developer unwillingness.
It’s also worth noting that $600,000 is not cheap. And yet, it’s now seen as the floor in many parts of California, including Davis. That’s a profound indictment of our housing market. It means we’ve allowed scarcity and speculation to define our landscape. It means we’ve made housing a vehicle for wealth extraction instead of shelter. It means that even the best efforts at middle-income housing are priced out of reach for teachers, nurses, and working families.
That’s the paradox: the homes we call “affordable” are unaffordable. And the homes that are truly affordable are virtually impossible to build without deep subsidy or public land.
So let’s retire the myth that developers could solve this crisis if only they cared enough. That myth is comforting, but it’s wrong. It distracts us from the real work: changing the rules, reforming the incentives, and reimagining housing as a public good.
The truth is harder to face—but it’s also more actionable. And if we’re serious about solving California’s housing crisis, we can’t afford to keep mistaking complexity for resistance, or wishful thinking for a plan.
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