Berkeley real estate developers now have more of an incentive to build affordable housing units after the Berkeley City Council voted to pass an ordinance at its meeting Tuesday that would impose a fee on developers who do not meet the required percentage of affordable units.
First introduced in Berkeley after a 2009 Los Angeles court ruling made it illegal for California cities to require developers to provide inclusionary housing — which required 20 percent of the units in new development be set aside as affordable — the affordable housing mitigation fee gives developers an incentive to fund affordable housing units.
If developers choose not to build affordable housing units in complexes, they will be required to pay a yet-to-be-determined fee of anywhere between $20,000 and $34,000 per unit.
“The ordinance will require developers of market rate housing to pay fees on new housing, or would give them the option to provide housing,” said Amy Davidson, senior management analyst for the city’s housing and community services. “If developers chose to provide units, there would be more affordable units, and there would be housing for incomes at or below the 50 percent median income for families in that area — 50 percent being about $45,000.”
All funds raised from the fee will go into the Housing Trust Fund, which is managed by the city and has been sustained primarily by federal funds in order to provide assistance for nonprofit developers to develop projects around Berkeley, according to Jane Micallef, the city’s director of housing and community services.
The funds produced from the ordinance will offset a projected 12 percent decrease in funding during the 2012 fiscal year to HOME, the largest federal block grant exclusive to affordable housing around the country and in Berkeley, making the city’s Housing Trust Fund invaluable for financing Berkeley’s affordable housing in the future, according to city officials.
“When you develop market rate housing, when you develop any housing, you’re bringing more people into the city. When you do that, there is a higher demand for all kinds of things — book stores, apparel stores,” said City Councilmember Linda Maio. “We need to mitigate demand, or there will be a ripple effect in the housing market, and some people in lower level income sectors will be priced out.”
The council will set the ordinance fee amounts based on what it heard from the Bay Area Economics firm, which presented a nexus study in January 2011 supporting a $34,000 per market rate rental unit, while city housing staff from both the Housing Advisory Commission and Rent Stabilization Board recommended a fee of $28,000 per unit.
However, city staff suggested at a Feb. 15 meeting that the council set the fee at $20,000 per unit, mimicking the cost of inclusionary housing and raising money for affordable units without affecting the development climate.
“New housing development created an indirect demand for affordable housing, and the city had a right to order developers to mitigate the impact,” saidSteve Barton, deputy director of the Rent Stabilization Board. “The rent stabilization board has strongly supported the idea of having such a fee, but there is controversy over the amount of the fee.”
Council members also unanimously adopted a resolution at Tuesday’s meeting to approve a number of allocations from the Housing Trust Fund, including $890,000 for the Resources for Community Development — a Berkeley-based nonprofit development housing corporation — to acquire and rehabilitate 47 units of family housing at the University Avenue Cooperative Housing.
“Over the years, we have built affordable housing using funds from the Housing Trust Fund,” said Susan Friedland, executive director of Affordable Housing Associates, a nonprofit Berkeley developer that was allocated $60,000 from the fund. “Most recently, we are just finishing construction on a new building on Sacramento Avenue that will be home to 15 homeless youth.”
Although the resolution to adopt the specific fee amount is set for July 12, Councilmember Jesse Arreguin said he feels it is crucial to have the amount finalized before the council adjourns for summer recess July 19.
“Whatever happens should generate the most affordable housing in the community, whether it means getting money into the Housing Trust Fund or getting units into a project,” Arreguin said. “It is good to have inclusionary projects and economic diversity in the buildings with diverse neighborhoods, but it fundamentally comes down to what’s the best way to get affordable housing in a community.”
Anjuli Sastry covers housing.
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