Squeezed out: The shrinking availability of Berkeley’s affordable housing

Alvin Wu/Senior Staff

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Sonia Mucino, a food service worker at UC Berkeley’s Crossroads dining commons, spends about one and a half hours on a typical morning shuttling to and from campus, the Oakland school her youngest children attend and her home in Richmond.

Mucino has been looking for a home in Berkeley since 2006. But she and her husband, who works as a van driver for a supermarket, haven’t been able to find affordable family housing in the city.

In Richmond, Mucino pays $1,400 a month for a two-bedroom apartment. In Berkeley, the average market rent for a two-bedroom apartment is $2,171.

Mucino is one of many Berkeley employees who can’t afford to live in the city. And Berkeley is one of numerous cities in the Bay Area and the nation struggling to resolve a dearth of affordable housing.

The Bay Area’s economic recovery after the 2007 recession generated approximately 500,000 new jobs in the past few years, creating higher demand in the housing market.

On top of regional pressure, UC Berkeley anticipated in its 2020 Long Range Development Plan an increase of up to 12 percent in campus head count from 2001. The plan proposes an increase in UC housing supply of up to 32 percent from its 2005 levels.

Meanwhile, Berkeley officials have floated a number of proposals to increase the city’s supply of affordable housing. Between 2007 and 2014, the city produced only 14 percent of the housing production goal set by the Association of Bay Area Governments for moderate, low or very low-income units. The percentage lies below those of San Francisco and Oakland, which produced about 32 and 23 percent of their goals, respectively.

Berkeley is attempting to generate more resources for affordable housing largely through fees and taxes on new and existing market-rate housing developments. One of these is the Affordable Housing Mitigation Fee, which requires developers to either include a minimum percentage of on-site affordable housing units or put money into the city’s housing trust fund.

A nexus study on the fee — which the city evaluates every five years — was presented to Berkeley City Council in July. It found that one needs to make at least 100 percent of Alameda County’s median income — approximately $92,900 for a four-person family in fiscal year 2015 — to afford average market rent in Berkeley, whereas just 65 percent of the median income was sufficient in 2010.

“The people in between (low and high incomes) — there is no place for them,” said Mayor Tom Bates at the July 14 special City Council meeting about the study. “There is no place for them and no policy to support them at this point in time.”

City officials will delve further into the study’s results and, in the fall, will continue to discuss a variety of proposals to resolve the city’s affordable housing crisis.


Barriers to building

Simply advocating an increased housing supply is a “fundamental misunderstanding of the nature of housing,” said Stephen Barton, former deputy director of the Berkeley Rent Stabilization Program.

The Bay Area is geographically constrained by steep hills and surrounding bodies of water, and the area’s best locations are already saturated with housing, according to Barton. This requires developers to tear down existing one- or two-story buildings and build high-rises in their place, which increases construction costs.

Some laws have also posed obstacles for new housing developments. California’s Proposition 13 — a tax reform act that generally caps property tax increases at 2 percent per year — discouraged cities from building residential developments because commercial developments, such as auto dealerships, can bring in more revenue through sales taxes, according to Carol Galante, a UC Berkeley professor of affordable housing and urban policy.

Galante also said the California Environmental Quality Act, which mandates developers to submit environmental impact reports, adds “significant cost and delays” to the planning process.

Patrick Kennedy, a developer with Panoramic Interests, which has conducted many development projects in Berkeley, said Berkeley has been generally more welcoming to new developments during the last 20 years.

“The downturn that began in 2007 (made it) very hard to finance anything,” Kennedy said. “That has changed now — 180.”

Beyond the problem of creating more housing in general, the issue of generating housing for those with moderate or below-moderate incomes is another point of struggle for the city. About 84 percent of the housing units produced in Berkeley from 2007-14 were for above-moderate income earners, according to the city’s 2015-23 housing element report.

“We have an economic and cultural diversity in our community,” said City Councilmember Jesse Arreguin. “In spite of all we have done … gentrification has been happening for several decades now, and it has accelerated.”

A faltering fee

In 1986, Berkeley established a requirement that multifamily housing developments make 20 percent of their units meet certain affordable housing criteria.

But in 2009, a court ruling invalidated Berkeley’s and other California cities’ inclusionary housing requirements as applied to rental housing, ruling that the requirements violated the Costa-Hawkins Rental Housing Act. The act allows owners of rent-controlled properties to raise rent to market rate whenever there is a change in tenants.

In response, Berkeley City Council adopted the Affordable Housing Mitigation Fee in 2011. This policy gives developers the alternative option of paying $28,000 per unit to the city’s Housing Trust Fund — a pool of money intended for low-income resident housing — if they choose not to reserve a number of unit, equivalent to 10 percent of their units, for very low-income residents.

Some city officials would rather see more money in the Housing Trust Fund than have developers build on-site units, based on the idea that the city could leverage the funds to build more affordably priced units than the 10 percent required by the mitigation fee law.

But according to city spokesperson Matthai Chakko, as of Friday, no developers have paid the fee since 2011, choosing instead to build low-income units. The fund receives other money, though, from sources such as federal grants.

The city voted in 2013 and again in April to discount the fee by $8,000 in the hope of funneling more money into the Housing Trust Fund.

One advantage of building on-site units instead of paying the fee is a state law that allows developers to up the density of their projects beyond the regular limit if they provide a certain amount of affordable housing. To mirror this bonus, Councilmember Laurie Capitelli and Bates proposed a city density bonus in April that would give developers up to a 35 percent density increase if they either incorporate affordable housing into their project or pay an in-lieu $10,000-per-unit fee.

Kennedy, the developer with Panoramic Interests, said a city density bonus would be a step in the right direction, noting that it is sometimes easier for developers to pay a fee rather than try to sell low-income units.

City officials such as Arreguin and Councilmember Lori Droste, however, have said that given the urgency of the housing shortage, it is beneficial for developers to build on-site units.

“I would like to see the units built on site because there is an immediacy to it,” Droste said. “They are built quicker and are integrated within the project.”

The nexus study found that City Council could reasonably increase the mitigation fee to $34,000 from $28,000 per rental unit and increase the minimum on-site unit requirement.

Droste supports increasing the fee but has expressed concern about developers choosing to pay it.

Meeting the middle

Aside from using measures such as the mitigation fee, the city is pursuing a number of other ways to make housing more accessible, including for middle-income people.

There “aren’t really” any subsidies targeted at middle-income people, said Sarah Karlinsky, the senior policy adviser for the San Francisco Bay Area nonprofit SPUR, which works on issues such as housing and economic development. Karlinsky said the city can create more affordable housing by “radically changing” its approach to construction — for example, by relaxing restrictions on parking, height and the number of units that can be in a building.

City Council has also voted to work on loosening restrictions on the construction of accessory dwelling units — livable structures built on the grounds of pre-existing properties. As a result, 56 additional housing units are expected by 2023, according to the city’s 2015-23 housing framework.

Galante said that encouraging the creation of these flats was an innovative way to increase housing supply and that Berkeley is at “the forefront” of doing so.

Additionally, Capitelli and Arreguin have proposed a 2016 ballot measure to increase the business license tax for residential rental properties. According to their proposal, these properties are currently bringing in windfall profits for their owners because rents have risen beyond the minimum of what is necessary in order for landlords to profitably operate.

According to the proposal, a 1 percent increase in the business license tax would cost the average landlord $15 per unit per month and would bring in up to $3 million annually.

Although property owners have criticized the proposed tax increase as unfair, Barton called it an “extremely fair proposal,” noting that much of rental units’ values come not from landlords’ efforts but from the overall value of living in Berkeley.

For Mucino, part of the attraction of living in Berkeley is its quality of public schools, which she said she would have liked her two youngest children to attend. She also hopes one of her oldest children will transfer to UC Berkeley, putting her own daughter among the crowd of students she serves in the campus dining commons on a daily basis.

“Everybody who has ever lived, worked and studied in Berkeley made the city what it is,” Barton said. “The larger society has made the location very valuable. … The larger society (should) get to decide what to do with that value.”

Contact Yuka Koshino at [email protected] and follow her on Twitter at @YukaKoshino.

A previous version of this article misspelled Sonia Mucino’s name.