Real Estate

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)

Related:
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]

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[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.]