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For the fear of shadows: Real estate development under Berkeley's new City Council

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MAY 07, 2017

After more than 20 years as a real estate broker in the Bay Area, Daniel Winkler has sworn off Berkeley.

“I don’t want to own rentals in Berkeley, I don’t want to own an office in Berkeley and I don’t want to build in Berkeley ever again,” Winkler said.

In February 2015, Daniel Winkler & Associates helped CS Development & Construction buy a property at 1310 Haskell St. The developer had planned to replace the site’s existing single-family home with three 2-story units.

The development was in compliance with the city’s zoning ordinance, according to Winkler, and was approved by the Zoning Adjustments Board in March 2016. Berkeley City Council, however, has rejected the development twice after hearing concerns from surrounding residents that the new housing would be out of scale and cast shadows on their neighborhood.

“I can’t imagine someone coming to my house and saying, ‘You should move because the place you live casts a shadow over my house,’ ” said Sonja Trauss, founder of the San Francisco Bay Area Renters’ Federation, a coalition of approximately 600 pro-density renters. “There’s a reason for which people live in Berkeley. Their needs are way more important.”

After City Council first rejected the project, the California Renters Legal Advocacy and Education Fund, an organization dedicated to suing California cities that disregard state housing law, filed a lawsuit alleging that the city had violated the California Housing Accountability Act. The law makes it difficult for local governments to reject housing that complies with local zoning laws and cities’ general plans.

Aslesha Kumar/Staff
Aslesha Kumar/Staff

The city of Berkeley settled the case, agreeing to hold another public hearing on the 1310 Haskell St. development. But at the hearing Feb. 28, the council once again rejected the development, claiming that the Housing Accountability Act did not protect certain parts of the development plan, such as the demolition of the already existent house on the lot.

Winkler alleged that City Council was exploiting a legal loophole. The developer disagreed with the council’s interpretation, but he chose not to file another lawsuit to avoid high costs, Winkler said.

“Right now you have a derelict lot with a dilapidated house that no one can occupy,” Winkler said. “That’s better than three homes that are two-story that are well within the zoning guidelines?

Like the developers of 1310 Haskell St., many others have become involved in prolonged administrative processes with the city while trying to get their developments approved.

In January, the Pacific School of Religion actively abandoned a development project on its campus, citing the “changes in the (city’s) political landscape.” At the beginning of the year, the developers of the contentious Harold Way project, located in Downtown Berkeley, announced that they were selling their permit for the 18-story development.

Last December, Mayor Jesse Arreguín took office alongside a new group of several self-proclaimed progressive city councilmembers, many of whom emphasized community inclusion and housing justice as part of their campaign platforms.

But Arreguín has garnered an anti-development reputation among some. Arreguín said this might be because, unlike his predecessor Tom Bates, he evaluates construction projects on a case-by-case basis instead of automatically approving them.

In the five months since Arreguín took office, seven developments have been brought before the council. Of these projects, one was denied, five were approved by the council and one was approved by default after the council failed to come to a decision. Among the projects that passed, however, three were approved only after their decisions were delayed up to three times.

Projects such as 1310 Haskell St. are part of a larger ethical and economic debate about how the community should address development.

Most recently, City Council approved a long-disputed development at 2902 Adeline St, a proposed 14,065 square-foot apartment complex. The finalized agreement, a 50-dwelling unit project, allocates four units to very low-income housing and four units to low-income housing.

While most parties agree that there is a need for more housing, there has been much controversy as to what types of development are justified. Some argue the city’s housing shortage must be addressed by building as much housing as possible, but others call for a focus on housing regulations and affordable housing development to ensure that new developments are accessible for the city’s most vulnerable residents.

The crisis

Between 2010 and 2016, Berkeley’s rents have risen more than 65 percent, according to lead Rent Stabilization Board staff attorney Matt Brown.

Since about 1995, the Bay Area has generally experienced economic prosperity. Silicon Valley employees have moved to Berkeley, and housing supply hasn’t been able to keep up with demand, driving up costs, said Robert Edelstein, campus professor emeritus from the Haas School of Business and co-chair of the campus Fisher Center for Real Estate and Urban Economics.

Between 1980 and 2000, Arreguín said, the city of Berkeley saw very little market-rate development — a trend he attributed to the city’s passage of the 1973 Neighborhood Preservation Ordinance, which placed stricter regulations on development.

Additionally, the city has a long-standing tendency to protest new development for reasons such as ugly designs, hasty approval, transportation issues and demand for more affordable housing units, said campus geography professor emeritus Richard Walker.

But amid the housing crisis, Arreguín said, the city must build more units — specifically those that are affordable — in order to prevent people from being pushed out of Berkeley.

Berkeley is no longer a suburb, but part of the urban core of a large metropolitan area, according to Walker. He added that as the Bay Area grows denser, developments are needed to provide more housing, offices and other amenities — Berkeley can’t stay the same.

Playing “musical chairs”

Numerous projects being built in Berkeley are priced between $2,500 and $4,000 per month, and are affordable only to those in upper income levels, Arreguín said. He added that Berkeley is currently subject to speculation by out-of-town real estate agencies that acquire properties as investment opportunities, thus displacing people from their homes.

“It’s like musical chairs. People are going to fight over housing. … People who are rich are going to get it. So if there are more people than housing, the ‘extra’ people are going to be poor people.”

— Sonja Trauss, founder of the San Francisco Bay Area Renters’ Federation

Berkeley Student Cooperative, which aims to provide affordable housing for students, shares the same concern. BSC operates at a full capacity of 1,260 beds and had to wait list 1,400 students last semester, according to BSC Vice President of External Affairs Zach Gamlieli.

Davis Belilty, a second-year Berkeley City College student, applied to live in a co-op in 2014, but it took him nearly a year and half to get in. Though his home is now a 10-minute walk away from the college, he commuted from Oakland for the first three months he attended BCC.

Belilty enjoyed his bike commute to BCC — a courtesy of the West Coast’s balmy climate –– but it carved out a significant portion of his day. Belilty wasn’t alone as a student forced to live outside the city of Berkeley — a fellow student from his Spanish class, for instance, lived in Stockton. Belilty said he believes more rigorous regulation on property uses and price ceilings are necessary to mitigate this displacement.

“An increase in housing supply that can only be afforded by a small subset of the population is not really an increase in the housing supply,” Gamlieli said in an email.

Trauss, however, said it doesn’t matter which type of housing the city invests in — low-income or market-rate. In the absence of new luxury developments, according to Trauss, high-income individuals who wish to live in the area can always afford to compete with mid- and low-income populations for existing housing, which drives up prices eventually.

“It’s like musical chairs. People are going to fight over housing.” Trauss said. “People who are rich are going to get it. So if there are more people than housing, the ‘extra’ people are going to be poor people.”

Even if newly developed properties cost more than other properties in the surrounding neighborhood, Edelstein said, any addition to the overall housing supply will lower the average property price.

But if market-rate housing development truly drives housing prices down, Brown said, the new development that took place over the last three years of Bates’ mayorship would have shown that. Instead, Berkeley experienced unprecedented rent increases, he added. 

Now, City Council is taking a different path — Arreguín hopes to finance 500 units of affordable housing developments with funds from the newly approved Measures U1 and A1, Arreguín said.

Visions of Berkeley

To Kelly Hammargren, development often leads to the loss of Berkeley’s many historic buildings and unique environment.

The Harold Way Project had been set to feature 302 apartment units and a three-level underground parking lot. The construction, however, had drawn concern from Berkeley residents that the new building would interrupt the city’s view of the bay. The project also called for the replacement of Shattuck Cinemas with a new 10-screen movie theater.

The thought of losing the city’s largest movie complex called people to action, Hammargren said, adding that the protest against the Harold Way project had garnered more than 5,000 signatures because there was something in the project “for everybody to hate.”

“So here, we can sit on grass and there’s sunshine all around us — that’s what makes Berkeley livable,” Hammargren said.

“Sometimes being a part of a community means that you’ll be asked to give up some of your own comforts for the greater good.”

— Dana Buntrock, UC Berkeley architecture professor

Nonetheless the Harold Way Project was ultimately approved after nearly three years of deliberation. City councilmembers who voted in favor of the project back in December 2015 said the developer’s fee payment of $10.5 million would enable the city to create more affordable housing.

The new council in general, however, has been more interested in appropriately sized developments that will not obstruct sunshine over massive amounts of space, according to Hammargren.

Campus architecture professor Dana Buntrock said preserving individual properties’ access to light is minor in relation to mitigating displacement.

“The trade-off that comes with protecting that house’s access to light at all costs is for other people to move further and further away… into dangerous housing like the Ghost Ship,” Buntrock said in an email. “Sometimes being a part of a community means that you’ll be asked to give up some of your own comforts for the greater good.”

In limbo

Winkler said he feels that Arreguín’s policies, however, are putting small real estate businesses at risk. Unlike larger development companies that pay hundreds of thousands of dollars a year to lawyers, “mom-and-pop” developers can’t afford to fight the city.

“This is not some big development company — this is a mom and pop, husband and wife,” Winkler said of the Haskell Street project’s owner, CS Development & Construction. “They build houses for their living. They’re not flying in a private jet. They’re not building a thousand units a year.”

Clifford Orloff, the managing partner of OPHCA, a developer that took the city to court twice over demolition fees associated with its project, said the city’s recent actions have made development in Berkeley difficult, causing developers to go elsewhere, such as El Cerrito or Albany.

Orloff said the only way to lower rents in Berkeley would be to build about 5,000 more units in the city. But he’s not sure how the city could achieve this increase when even the small 3-unit Haskell Street development failed to pass through the council.

Matt Baran, the architect of the Haskell Street project, has been informing his clients that there is no guarantee that a development will be approved even if it meets zoning requirements, according to Winkler. Winkler said he believes that the current owner of the Haskell Street property will no longer pursue the project. He plans to help his client sell the house to a new buyer, who may perhaps attempt construction again.

“But in the meantime, nobody gets to live there. (There are) no tax benefits to the city, no family to go to the school, nobody to support the small businesses,” Winkler said. “It just sort of makes it wither away.”

Charlene Jin is the lead business and economy reporter. Contact her at [email protected] and follow her on Twitter at @CharleneJin0327.

MAY 08, 2017