Berkeley aims to bolster housing fund with fee discount

Six housing projects buffering the downtown area are in the pipeline that would be subject to the city's affordable housing requirements.

Six housing projects planned for the broad downtown area would be subject to the city’s affordable housing requirements. Image: Google Maps

Berkeley officials voted Tuesday night to reduce, temporarily, a fee required of developers in hopes of both replenishing a city fund for affordable housing and curtailing building heights in projects planned to buffer downtown.

The Berkeley City Council has, for quite some time, grappled with how to build up its affordable housing stock. Developers in Berkeley are required to provide a certain amount of affordable housing, either by paying into a city fund that’s used to build this housing elsewhere, or by including below-market-rate units in their projects.

If they elect to pay rather than build, the money goes into the city’s Housing Trust Fund. The fund was established in 1990 to pool available federal, state and local money for these projects. Some officials have said the city might be able to build more units, as compared to what private developers would produce, if developers pay into the public fund.

In October, the council set the fee per unit at $28,000, but some officials hypothesized that no developer would choose to pay a fee that high, leaving the housing fund without much support. (For more background, see the staff report prepared for Tuesday’s meeting.)

To complicate matters, state regulations require cities to give incentives or concessions, such as additional floors, to projects that make 5-11% of their units affordable to lower income residents; the greater the percentage, the greater the incentive. Berkeley requires one affordable unit for every 10 at market rate, or roughly 9%. That means the city would essentially be required, due to state law, to let developers build higher than city code allows if projects include the requisite affordable housing percentage.

So setting the fee too high, said several officials Tuesday night, could lead to taller buildings in neighborhoods surrounding downtown, a starved Housing Trust Fund, and a decentralized pool of affordable housing — which could make it harder to provide services to those in need.

Mayor Tom Bates noted that, unfortunately, setting the fee too low would likely lead to a community perception that the city is pandering to developers. (Bates said he hoped to see the city come up with a more creative approach, rather than a flat fee, and perhaps negotiate reasonable amounts with developers related to each project.)

Advocates of a higher fee, who spoke during public comment, said developers can afford to pay it, pointing to what appears to be a healthy market in Berkeley, with plans for 1,000 new downtown units in the works. They urged officials “not to cave in now” and reduce the fee, and said city staff had provided “conflicting information” about the issue to council. Another commenter said the discount would essentially be a “corporate kickback,” noting that the $28,000 fee was already less than what was suggested in a 2010 affordable housing study prepared by a consultant to the city.

Ultimately, Councilman Laurie Capitelli made a motion to reduce the fee, to $20,000, for projects that are completely submitted to the city by October 2014, and approved by the Zoning Adjustments Board by October 2016.

“If everybody paid the $20,000 fee, we would have $10 million in the trust fund,” said Capitelli. “We can do something with that.”

Council members Linda Maio, Jesse Arreguín, Gordon Wozniak and Susan Wengraf, along with Mayor Bates, voted to approve Capitelli’s motion. Councilman Kriss Worthington was opposed. Members Darryl Moore and Max Anderson were absent.

Even with the reduction, Bates said he doesn’t see many developers jumping at the discounted rate.

“I don’t think there are going to be too many takers when it gets down to it,” he said. “I feel like $20,000 is the same as $28,000. We’re not going to get any. I could be wrong about that.”

More resources:
Affordable housing impact fee presentation, city of Berkeley (May 2011)
Affordable housing policy: Impact fee nexus study (June 2010)

1,000 new apartments planned for downtown Berkeley [02.07.12]
First high-rise in 40 years planned for downtown Berkeley [12.21.12]
Council sets fee for affordable housing mitigation [10.18.12]

Berkeleyside publishes many articles every day. To see all our stories in chronological order, and read ones you may have missed, check out our All the News grid.

[Editor’s Note: Berkeleyside originally posted this story on Feb. 20 at 3:30 p.m., but it has been republished due to a technical glitch with our Daily Briefing e-newsletter system. This story was modified slightly to reflect a more accurate understanding of city rules and state density bonus requirements.]

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  • EricPanzer

    Once again Berkeley finds itself surprised that basic economic principles work, and that making your preferred option too expensive causes people to choose the other option. If the City wants to experiment with incrementally lowering the fee until some developers choose to take that path, that’s fine by me. Unless, of course, making that option attractive requires lowing the fee to the point where the proceeds would lead to the construction of fewer affordable units than would occur under the 10% “requirement.”

    That said, I can scarcely think of a less appealing approach than having the City negotiate affordable housing fees for each individual project. Bates was a major champion of the Downtown Plan and it’s worrying to see him make this suggestion. Look at how long it took for the New Californian (a.k.a the Trader Joe’s building) to get built. Do we really want every single proposed building in the Downtown to undergo a potentially even more contentious and drawn out process in regard to affordable housing? A project-by-project approach means that special-interests and cantankerous individuals will have new opportunities to slow or even obstruct housing development. Developers and the institutions that provide the financing which makes construction possible both like certainty–just like any other investor. A project-by-project approach would eliminate that certainty and turn Berkeley’s affordable housing processes into a black box—with all the attendant opportunities for posturing, delay, and even corruption.

  • The article describes one of the concerns with the current system as “a decentralized pool of affordable housing.” Haven’t we learned to avoid “centralized” affordable housing (i.e., the economic segregation of the projects) over the past 60 years?

  • curiousjorge

    seriously. negotiated fees seems like the worst of both worlds…

  • MM

    I tend to think that these fees and complicated rules discourage construction. Maybe it would be better to back off and let the market forces prevail.

  • Kent Lewandowski

    Letting market forces work is a nice idea but will certainly not lead to affordable housing getting built. With residential real estate in downtown Berkeley being listed above $500 / square foot, that prices out anyone whose income is less than 6 figures or who does not have a trust fund linked to their name. So, if you want affordable housing, meaning less profits for developers, then you need to mandate it through regulation.

  • The_Sharkey

    Why does downtown, in specific, need to be “affordable?”
    Berkeley is, what, 5 miles across? It’s not like commuting across town is horribly difficult.

    PS: I’m having some Disqus problems so I can’t log in to my account.

  • The_Sharkey

    If any given solution seems like practical common sense, you can be assured that it’s the last option the city government will try.

  • Japhy Writer

    I’m not sure the problem was “centralized” as much as it was “poor design”. Maybe I’m being too optimistic, but I think having a well-designed centralized affordable housing system in Berkeley would be easier logistically than having it in the hands of the individual private developers. I realize it’s sort of a lesser of two evils though…

  • gsr

    Well, unless you live along one of the main corridors, getting around in Berkeley without a car isn’t that easy. Lines that serve the outer areas of Berkeley like the 49 or 7 run very infrequently and stop running much earlier than the core corridor lines (like the 51B and 18). Given that the occupants of affordable housing are less likely to have a car, affordable housing should be in areas well-serviced by transit lines and in easily walkable areas (close to grocery stores, etc). Alternatively, AC Transit should improve its bus service, but that seems even less feasible than increasing affordable housing options.

  • Biker 94703

    “Affordable Housing” is easy to create. You start with very small spaces and then you add several people.

    In a town with 30,000 students, housing is not and will never be cheap. Try El Cerrito.

  • 3rdGenBerkeleyan

    sounds to me like yet another back door deal made by Berkeley city council.

  • Name

    but we need the DIVERSITY

  • The_Sharkey

    You don’t need a car to combine BART/bus with biking or walking.
    Berkeley is a small city, and most of it is flat and easy for bicycling or walking.

    If you want convenience, you have to pay for it. I don’t think asking someone to commute across a town that’s 5 miles wide in order to live in affordable housing is particularly burdensome, especially when you consider that they’re getting the benefit of living in housing that’s priced below market rents.

  • Let us know if we can help resolve any Disqus problems.

  • Blacklotus

    So does this mean as a property owner I can have permit fees waived to build extra rooms or an extra in-law unit to provide ” affordable housing ” ? Or do only corporate interests get break$ and not have to pony up cash that would support the city. Am I the only one who thinks this is a ridiculous idea considering the current state of Berkeley’s infastructure IE: potholes, crumbling roads and overflowing sewer lines. All of which the city is claiming they can’t afford to fix, so by giving away funds to developers they are in fact putting themselves in further in debt. Additionally about 50% of the City’s designated Downtown Area has been bought or leased by the university. This removed it from the property tax rolls, but the University only pays a fraction of the lost money in compensation, despite having to make use of numerous City-run services. So since everyone but Berkeley residents seems to be getting a piece of the ( nearly free ) pie , I think either everyone should not have to pay fees or everyone should, Corporations & Cal included. Then the city can stop looking to cut needed services, employees ,retirement and fix the dang roads !

  • emraguso

    Looks like council’s decision to lower the fee may be having the intended results (if this project goes forward).