Is the tech boom putting pressure on Berkeley rents?

Rents have been going up at 1450 Fourth St., a complex of live-work spaces and some tenants believe the tech boom is putting pressure on prices. Photo: Natalie Orenstein
Rents have been going up at 1450 Fourth St., a complex of live-work spaces and some tenants believe the tech boom is putting pressure on prices. Photo: Natalie Orenstein

Artist Leigh Wells still hasn’t gotten accustomed to the constant noise from the trains that run right behind her West Berkeley live-work space. And she tries not to think about the toxic emissions from the neighboring steel manufacturing plant. In fact, if it weren’t for the affordable rent, and the close-knit artist community at the 1450 Fourth St. complex, she’d never dream of living there.

But when the rent in a unit in Wells’ building went for $300 a month above asking price — and her own rent was given a $450 hike — she quickly realized that times are changing.

The threat to artists in San Francisco, where the tech boom has brought to the city hordes of people willing and able to pay steep rents, is often discussed. The situations at places like the Fourth Street development indicates that the phenomenon might have spread to Berkeley.

“I’ve been reading about what’s happening to artists in San Francisco, and the rents spinning out of control there,” said Sarah Winkler, one of the artists who lives and works at the Fourth Street development. “I thought we were a bit immune to it, being in Berkeley. This is the first time I’ve witnessed any kind of big turnover.”


Leigh Wells, an ilustrator, is moving out of her live-work complex on Fourth St. because her rent increased 20 percent. Photo: Natalie Orenstein
Leigh Wells, an illustrator, is moving out of her live-work complex on Fourth St. because her rent increased 20 percent. Photo: Natalie Orenstein

Like all units built after 1980 in Berkeley, the live-work spaces are not rent-controlled. Yet prices in the multi-landlord complex — there are 11 landlords between 15 units — have remained fairly static until now.

When one unit in the predominantly artist-occupied complex was put on the market a couple months ago, an attorney who had her eye on the space offered to pay $2,650, or $300 above the rental listing price. The landlord, one of the original developers of the complex in 1990, accepted the offer. Wells’ landlord, who had recently inherited the property, got word of the unprecedented demand, and notified her that her rent would be raised as well, from $2,200 to $2,650 — a 20% increase — effective in September.

Wells, and another tenant whose rent was also increased, have no choice but to leave.

“$2,600 is so much money to live in a place where you’re physically uncomfortable and your health might be compromised,” Wells said.

These kinds of rent hikes have been commonplace throughout Berkeley for the past year or two, said Jay Kelekian, executive director of the Rent Stabilization Board.

“Rent is exploding in many different kinds of properties,” he said. “Something where the prior rent was $1,500, the new rent in a one-bedroom is close to $3,500.”

There are multiple culprits, he said. Rent began to rise a few years ago, when foreclosures on homes shuffled many would-be homeowners into the renters’ market. Now, the new dot-com boom is causing a “spillover effect,” pushing San Franciscans who can no longer afford to live in the city into the East Bay.

“I’ve also seen the spillover of people not being able to afford to buy a home anymore,” said Moni Law, an attorney and housing counselor for the Rent Stabilization Board. “I had a young professional crying at our counter the other day. She and her husband had gone to 20 or 30 showings the prior year. When they get there, there are 20 prospective buyers standing in line with an offer, often in cash, hundreds of thousands of dollars above asking price.”

The Rent Board releases quarterly reports tracking the median prices of rent-controlled units in Berkeley. According to the most recent report, median rent for a one-bedroom apartment rose from $1,177 to $1,225 between 2012-2013, and a three-bedroom rose from $2,241 to $2,350.

Units like the live-work spaces on Fourth Street are not included in the study because they aren’t rent-controlled. Any units built in Berkeley after 1980 are considered “new construction,” and are exempt from rent ceilings. Additionally, the Costa Hawkins Rental Housing Act, or vacancy decontrol, took full effect in 1999, allowing landlords to charge new tenants any price after a rent-controlled unit is vacated.

Wells explained that she didn’t naively expect the property to be protected from market forces, but thinks that live-work units in particular should be regulated so they are preserved for people who need the affordable housing-and-studio combination.

“I can kind of see the landlords’ point of view,” Wells said. “They’re trying to capitalize on this really volatile market, and catch it while it’s up. But I think it would be really wonderful if communities like this were retained for people who are actually living and working in that space, for people who need that. It’s a really special situation.”

Sarah Winker,  an artist, is concerned about rising rents in her live-work complex  Photo: Natalie Orenstein
Sarah Winker, an artist, is concerned about rising rents in her live-work complex Photo: Natalie Orenstein

Winkler, nervous that her landlord would take a cue from her peers and raise her rent as well, had begun fruitlessly searching for a new space. She was relieved to find out her fears were for naught, but, like Wells, argued for legal protection of live-work spaces.

“Really there should be a cap of some kind because we’re losing our home and our business in one go,” Winkler said. “It’s really hard right now to find affordable housing and an affordable studio space.”

One of the complex’s landlords, Jim Hart, said he decided to raise the rent after someone told him he was not getting market rate prices. Hart developed the complex with two others in 1991. He owns five of the live-work units as well as another similar complex at Eighth and Carleton streets.

Many live-work units — which Berkeley estimates make up 2% of housing in West Berkeley — are actually protected from the market, Kelekian said. Some are registered as nonprofits or receive subsidies. At the Fourth Street complex, however, the only protection tenants receive is the state law that requires landlords to give 60-day, rather than the standard 30-day, notice if the rent is hiked 10% or higher.

“Live-work uses account for a small proportion of West Berkeley’s housing, but have gained prominence and posed challenges for City regulation,” the city of Berkeley website says. “Originally pioneered by artists and craftspeople converting industrial spaces themselves, live-work has now attracted developers seeking more upscale residents.”

Tenants of the Fourth Street complex say the set-up is crucial for some artists who can’t afford a separate studio space, and the layout of the development helps foster community. The units have doors that open up onto a central courtyard so that residents can easily communicate and work together. Last summer the artists at the complex hosted a collaborative show.

“There’s going be a real culture change here,” said Thomas Richardson, a three-year tenant at the complex. “That’s the grounding force of this place, this artistic community, people who get together and have events and commiserate about how loud the train is.”

Thomas Richardson added commentary to this "For Rent" sign. Photo: Natalie Orenstein
Thomas Richardson added commentary to this “For Rent” sign. Photo: Natalie Orenstein

In protest of the current situation, Richardson tacked a cardboard note announcing “No artist need apply” onto the “For Rent” sign.

While Berkeley may be effectively closed to new artists eyeing a place in the city, Law explained that many long-time residents — including some of Berkeley’s most well-known creative characters — do have some security, if their apartment was built prior to 1980.

“A number of the people I council every week often include artists,” Law said. “And if they’re long-term residents, they frankly are happy that there’s rent control because their rents are still affordable, in the $900-$1,200 range. It’s great for a few, and a diminishing option for too many.”

The area surrounding 1450 Fourth St. is increasingly being marketed as desirable, Law said. The website for the Fourth & U housing development on Fourth Street hawks the neighborhood’s “relaxed lifestyle.”

Pricier new housing developments — such as Berkeley Central, the higher-end downtown apartments that opened at 2055 Center St. in 2013 — are thought by some to be the key to stabilizing rent in a hot market. Currently, there are more than 1,300 apartments under construction or soon to be constructed in the city, with the majority clustered around downtown. Many believe the availability of more rental units will keep prices down.

“In theory, the people moving into Berkeley Central aren’t moving into some other place, so it makes it easier for other people to find housing,” said Michael Caplan, city of Berkeley economic development manager. “Usually when you add supply, it doesn’t have an upward push on rent. New housing relieves demand, but you need to have a sufficient amount of new housing in the region relative to regional demand for it to be an effective tool for moderating rents. Whether or not it’s actually impacting rents in older Berkeley housing, I have no evidence of that.”

Kelekian said high-end development runs the risk of setting the status quo.

“The whole logic of development is: the more you build, it’ll add to the supply, so it’ll push the rents down,” he said. Berkeley Central “seems to be having the opposite effect because it’s setting the bar at a higher level. It’s not the panacea that everybody promised it would be.”

Update 11:25 a.m. This article has been corrected because of an editing error. It originally said that Jim Hart was Leigh Wells’ landlord. While he owns units in the building, he does not own Wells’ unit. 

Related:
‘Explosive” downtown Berkeley housing boom under way (01.14.14)
1,000 new apartments planned for downtown Berkeley (02.07.13)

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