Council sets fee for affordable housing mitigation

A new mitigation fee gives developers flexibility on how to handle affordable housing requirements in Berkeley. Photo: Tracey Taylor

Developers of new residential rental properties in Berkeley can now choose to pay into a special city fund instead of including on-site affordable housing after an 8-1 vote Tuesday by the City Council. It’s the latest step by City Hall to create policies that will increase Berkeley’s affordable housing stock.

But whether developers will choose to pay the fee remains to be seen, and some members of the City Council caution that setting the fee too high could have unintended, unavoidable, consequences for future projects.

The city requires developers of new market-rate rental properties to make one of their units affordable — to households earning 50% or less of the region’s median family income — for every 10 market rate units. This means that the units would have to be affordable, for example, to a family of three in Berkeley making $42,100 or less.

In June 2011, the council adopted a new ordinance requiring developers either to include affordable housing or pay the city a fee in lieu of providing lower cost units, according to a staff report prepared for Tuesday’s meeting. Council did not set the fee at that time pending further public discussion. The 2011 ordinance was prompted by a 2009 court decision that invalidated the city’s existing inclusionary housing rules.


The aim of the fee is simply to offer an alternative to developers who prefer not to build their own inclusionary housing, said city spokeswoman Mary Kay Clunies-Ross.

Payment of the fee would build up Berkeley’s Housing Trust Fund, which the city could use to develop its own affordable housing projects around town. The fund was established in 1990 to pool available federal, state and local money for these projects.

Tuesday night’s discussion largely revolved around the amount of the fee and which types of housing developments would be subject to it.

Berkeley City Council, Oct. 16, 2012. Photo: Emilie Raguso

Over the summer, City Council members agreed to discuss a fee ranging from $15,000 to $34,000 per unit. City staff previously had recommended a fee of $20,000 per unit, according to Tuesday’s staff report. In September, the city’s Housing Advisory Commission voted to recommend a $28,000 fee per unit.

Vincent Casalaina, chairman of the commission, told the council that the group’s goal was to set the fee high enough “so that the developer actually has a choice to make. Does he want to pay the fee or put the units in?” Setting the fee too low, he said, while perhaps more palatable to developers, could lead to a long wait before the city could raise enough money to build affordable housing.

Four council members — Linda MaioDarryl MooreMax Anderson and Jesse Arreguín — either spoke in support of the $28,000-per-unit recommendation or did not suggest an alternative.

“We’re on the cusp of a housing comeback. There’s no question about it,” said Anderson. He said it would be important to build up the Housing Trust Fund so the city could help provide housing for those in need.

Moore added that it is a critical time to take steps to increase the amount of affordable housing in Berkeley: “People born and raised here can’t afford to live in our community.”

But Mayor Tom Bates, along with council members Laurie Capitelli and Gordon Wozniak, predicted that setting the fee that high would likely result in little or no money for the city’s Housing Trust Fund, as developers would simply elect to construct the affordable units rather than pay the fee. Councilwoman Susan Wengraf said Thursday, via email, that she too saw the high fee as a near-sighted way to incentivize the construction of affordable housing.

“What we’re about to adopt is not going to produce one stick of the money for the affordable housing fund,” said Bates. He said setting a lower fee could lead to community criticism that the city was pandering to developers. But a lower fee, argued Bates, actually would lead to more money in the Housing Trust Fund.

Wozniak said it would be in the city’s best interest to craft a policy to encourage developers to pay into the trust rather than build inclusionary units. That’s because Trust Fund dollars used by the city, he said, would result in the construction of a higher number of affordable units than the same amount spent by developers. Based on his calculations, he said, the city could build more than twice as many units as could developers, given the same budget.

Forcing developers to build inclusionary housing, via a steep mitigation fee, “is not a good deal for the city,” he said. Wozniak voted against the resolution.

Capitelli noted that pushing developers to include affordable housing in their projects could have an unintended consequence. State law requires cities to give incentives or concessions, such as additional floors, he said, to projects that commit to make a certain percentage of their units affordable to lower income residents. Capitelli said he did not want anyone to be surprised when developers came back to the city demanding taller buildings, or other incentives, in return for providing the requisite on-site affordable units.

Councilmember Kriss Worthington said the city might benefit from offering a lower initial fee, for the next two years for example, to push developers to get moving quickly and elect to pay into the Housing Trust.

“What we’re saying is: we need affordable housing and we need it now,” he said. “Why not have an incentive to turn in their applications?”

Berkeley Student Cooperative supporters in line to speak to the City Council about the need for an exemption from affordable housing mitigation fees, Oct. 16, 2012. Photo: Emilie Raguso

About 20 members of the public addressed the council regarding the resolution. Many of the speakers were students affiliated with the Berkeley Student Cooperative who said the co-op should not have to pay the fee because of the organization’s commitment to providing low-cost student housing. They said they came to share their stories because of a staff recommendation to end the co-op’s historic exemption from paying inclusionary housing fees.

Councilmembers acknowledged the co-op’s efforts and said the city would ensure that the organization, along with others with similar goals, would not have to pay the mitigation fee.

Toward the end of the two-hour hearing, the council voted to approve the $28,000-per-unit mitigation fee for developments with five or more units, but asked staff to come back with language regarding Worthington’s suggestion for a discounted initial fee, as well as criteria for co-op exemptions from the fee.

City staff and officials noted the need to craft these criteria carefully so as not to leave loopholes open for private developers looking to get around the mitigation fee requirements.

Council also asked staff to explore the possibility of a local density bonus that might entice developers to pay into the housing trust rather than build affordable housing into their projects.

The council agreed to assess the effect of the resolution in one year’s time to determine whether it was having the desired effect on new rental development projects.

Other business

Daycare center go-ahead: Council voted 8 in favor, with an abstention by Arreguín, to uphold a Zoning Adjustments Board decision to approve plans for home renovations and the creation of a small in-home daycare center at 2329 Grant St. The applicants asked to raise their home by two feet, add onto their first and second floors and create a new 1,054-square-foot third floor.

The child care center would serve up to 15 children a day between 7:30 a.m. and 3 p.m.

Some neighbors asked the council to overturn the earlier approval due to concerns about traffic and noise. The majority of the councilmembers spoke in favor of the designs and in favor of adding more child care services in the city.

Arreguín said he thought the matter warranted further discussion, and asked for a second hearing. Other members of the council noted that the application has been in the works since 2010 and that it was time to make a decision.

“I know the neighborhood is split,” said Councilmember Linda Maio, who described the child care center plans as “enlightened.” “It will heal over time. We’re talking about 15 children. We’re not talking about 40 or 50. We’re talking about 15 little kids.”

Want a digest of all the day’s Berkeley news in your email inbox at the end of your working day? Click here to subscribe to Berkeleyside’s free Daily Briefing.