This is the second in a three-part series on Berkeley’s housing boom. The final installment will be published next Friday.
Berkeley’s current housing boom is mostly producing smaller market-rate units that will be occupied primarily by young professionals and students, producing little in terms of affordable family housing.
Between May 2001 and May 2003, the Zoning Adjustments Board (ZAB) approved 17 housing projects with a total of 930 units. Two of the 17 approved projects, at 2517 Sacramento and at 2575 San Pablo, are senior housing projects; all of the units are affordable to seniors who are classified as “low” or “very low” income. These two projects together would add 67 units of affordable housing to Berkeley’s housing stock.
Fourteen of the remaining 15 projects are market-rate projects, but also include the affordable “inclusionary” units required by the Inclusionary Housing Requirements of Berkeley’s zoning ordinance. Under these requirements, a fifth of the units in any housing project must have rents that are affordable to households whose income is at most 81 percent of the area median income.
However, when Section 8 subsidies are available, as is the case now, 10 percent of the units have to be affordable at the 81 percent level and another 10 percent have to be affordable at 50 percent or 60 percent of the area median income for Section 8 tenants. In this case, the developer receives rents approximating fair market value for the Section 8 units.
It has become common over the past few years for developers to take advantage of the Section 8 provision and to agree to provide an equal number of units affordable to low and very low income households.
When a developer agrees to make a tenth of the units affordable to households at half of the area median income, they also become eligible for a density bonus, which entitles them to build 25 percent more housing units along with other concessions. When these units are Section 8 units, a developer can get a density bonus while collecting from the government and the tenant together the equivalent of market rent.
The 15 market-rate projects in Berkeley include 870 units—166 of these are affordable to low or very low income households. An additional 44 units are in a group-living project on Bancroft Avenue near the UC Berkeley campus with a 120 beds in dorm units for students.
How much is affordable?
A quarter of the housing units approved by the ZAB since May 2001 are below-market units affordable to low- and very low-income households. Five percent are group living units. The remaining 70 percent are market rate units affordable to people with higher incomes.
Of the 17 projects, 15 consist of rentals, while two developers are proposing to build condominium units. The new market rate rental housing that is being built in Berkeley is not affordable to a majority of current Berkeley residents, especially many current tenants.
Government housing programs operate on the assumption that people can afford to pay 30 percent of their gross (before-tax) income on rent. Paying more than 30 percent is clearly more of a hardship for lower- and middle-income families than for those with higher incomes.
For example, three vacant two-bedroom units in the Gaia Building in Downtown Berkeley recently listed on the Panoramic Interests Web site have rents ranging from $2,275 to $2,675 a month. Using the 30 percent standard, these rents are affordable to households with incomes of $91,000 to $107,000.
Rents for two-bedroom units available this summer in other Panoramic Interests buildings listed on their Web site, including one scheduled to open this summer, range from $1,650 to $1,975. These rents are affordable to people with incomes between $66,000 to $79,500.
Who can afford the new housing?
According to the 2000 Census, the median household income in Berkeley in 1999 was $44,485. However, there is a large gap between the median income of tenant households ($27,341) and homeowner households ($80,324). In Berkeley west of Martin Luther King Jr. Way, and south of Cedar Street, an area made up of south, west and central Berkeley, the median income of tenant households ranged from $25,122 to $35,392, depending on the specific census tract.
Tenant incomes are higher in north Berkeley and the Berkeley hills. Incomes have most likely increased somewhat throughout the city since the Census data was collected, but are typically still well below what would be necessary to afford the market rate one- or two-bedroom units now being approved and built in Berkeley.
In fact, many current Berkeley tenants can be classified as low and very low income. A 1998 survey of tenants in rent controlled units found that a third of non-student tenant households were very low income while another 19.6 percent were low income.
Even with rent control, about a third of Berkeley’s tenants were paying over half their income in rent. Since 1998, when the survey was done, median rents for two-bedroom apartments in Berkeley have risen sharply. The median market rent for a two-bedroom unit in 2002 was $1,600.
Rental units that have not been vacant since the passage of the Costa-Hawkins vacancy de-control law in 1995 have substantially lower rents, but the number of these units is shrinking.
Families left out
Lower income families with more than one child face a particularly difficult situation. They require larger units, but few affordable large units are being produced. Families need space, but only families with higher incomes can afford the cost in Berkeley.
The 17 projects approved by ZAB since May 2001, with 930 units total, include only four three-bedroom units. Both affordable housing projects approved in that two-year period are for seniors.
Funds from the Housing Trust Fund were allocated for 17 affordable housing projects by nonprofit developers with a total of 217 units and 35 beds during fiscal years 1999 through 2002. Most of these projects are for seniors or people with disabilities or special needs.
Nonprofit housing developer Affordable Housing Associates got approval before May 2001 for a 27-unit affordable housing project at 1719-23 University that will include eight 3-bedroom units.
Resources for Community Development (RCD) together with Equity Community Builders, has been selected as the developer for the city of Berkeley’s Oxford Street surface parking lot. The planned mixed-use project will include approximately 90 apartments, a majority of them below-market units. The plan calls includes 28 three-bedroom units and one four-bedroom. If built as planned this would be the largest amount of affordable family-oriented housing built in Berkeley for many years.
Rob Wrenn has lived in Berkeley for the last 21 years and is member of Berkeley’s Planning Commission.