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City Council Sets Higher Prices For Low-Income Housing Units

Friday January 16, 2004

Hoping to revive condominium construction in Berkeley, City Council approved amendments to the city’s inclusionary housing ordinance at Tuesday night’s Council meeting. The fractious and often-confusing debate on the housing laws included two last-minute amendments by Mayor Tom Bates that, if they had been adopted, might have taken condominiums out of the reach of moderate income Berkeley residents altogether. 

At the same meeting, under fire from residents from across the city, Council backed off a controversial proposal that would have set aside 21 new on-street parking spaces for the exclusive—and free—use of the city’s parking enforcement employees. 

Berkeley’s inclusionary housing law, one of the first in the country when it was originally passed, requires any new residential construction of five or more units to set aside 20 percent of those units to be either rented or sold at prices that make them affordable to what is described as low-income families. The approved amendments would allow modest increases in the price developers can charge for the subsidized units, as well as the price low-income owners are allowed to ask for when they want to sell their units. Low income as defined in the ordinance is 80 percent of the Area Median Income, or roughly $64,000 for a family of four. In instances where an inclusionary unit is bought by a qualifying family, Berkeley’s ordinance also limits the price such owners can ask if they decide to sell their homes. Resale of such low-income units is restricted to buyers who qualify under the city’s income guidelines.  

City leaders had hoped that the original inclusionary ordinance would, among other things, promote condominium ownership by Berkeley residents. Developers contend that the ordinance has made condominium development economically unfeasible in Berkeley because the below-market price of the low-income units are subsidized by the sale of the market-rate units. Berkeley Housing Director offered Council an example of the problem that stymies condo development when he noted that under the old rules developers might spend $200,000 to $250,000 to build inclusionary units that can only be sold for $150,000 to a qualified, moderate-income buyer. The remaining $50,000 to $100,000 in costs would have to be recouped through the sale of the non-inclusionary units. Berkeley’s Housing Department reports that since 1995, no condominiums have been built in Berkeley without city loans. Tuesday night’s proposed amendments were designed to correct that problem.  

Housing Director Barton said that several developers had expressed interest in building condominiums in Berkeley if the proposed changes went into effect. “Developers are happy with the ordinance,” Barton said. “They believe this will be the difference between going forward with condominium projects in Berkeley and not going forward.”  

In a telephone interview a day after the Council meeting, Councilmember Linda Maio said that under the new ordinance “the homebuyer gets more appreciation for their unit, so that they can, in fact, step up to the next level of real estate ownership when they sell their unit. It’s also more of an incentive to the developer to build condominiums, because they have fewer restrictions.” 

The amendments seemed destined to win quick approval until Mayor Bates threw in two suggested amendments. The first Bates amendment would have raised the allowable income of an inclusionary unit buyer from 80 percent of the Area Median Income to 100 percent, and the second proposed allowing allowing the buyers of such inclusionary units to be able to turn around and sell the units to anyone they wanted, even if the buyer was not of moderate income. 

“I don’t like those kinds of constraints, I’m sorry, ” Bates said. “Maybe I’m a free-market person, but when it comes to this, I just don’t think it works.” 

But raising the buyers’ income limit from 80 percent to 100 percent of Area Median Income (AMI) would probably mean that the lower-income buyers would not be able to compete for the units, in effect undercutting the intended effect of the inclusionary ordinance. When the mayor proposed removing the 80 percent of median requirement for initial buyers, Maio said “that was when we got a little concerned and looked over at [City Attorney] Manuela [Albuquerque].” 

Commenting on the mounting confusion, the city attorney said that, “unfortunately, the Councilmembers are talking about three separate issues interchangeably.” Albuquerque eventually ruled that the mayor’s proposed change was so substantial that it could not be decided upon by Council without proper notice to the public, killing consideration for Tuesday night. Asked if the elimination of the 80 percent requirement was a good thing or a bad, Maio said, “I was one of the people who was alarmed by that.” 

The meeting was punctuated by intense consultations between Councilmembers, Albuquerque, and Barton.  

And after the meeting, Councilmember Kriss Worthington said that the practical effect of the mayor’s proposal eliminating restrictions on resale of the inclusionary units “would set up a speculation market; if the low-income buyers were able to turn around and sell their inclusionary units to high-income buyers, we would probably eventually end up with no inclusionary units being owned by low-income people.” 

After a long debate that moved continuously between Bates’ proposals and several questions by Councilmembers about interest rates and market prices, the original ordinance as proposed passed 5-3, with Councilmembers Hawley, Olds, and Wozniak voting against the amendments. The three Councilmembers indicated that their disagreement was not with the ordinance itself, but with the sunset provision that mandated that Council must come back in two years and approve the ordinance all over again if it wants it to continue; Hawley, Olds, and Wozniak wanted a less restrictive review of the law in two years. Bates’ proposed amendments, as well as proposed amendments to market inclusionary condominium units to public employees and to make them better accessible to disabled citizens, will go first to the Housing Advisory Commission, then to the Planning Commission, for discussion. 

Meanwhile, a proposed city plan to create 21 new on-street parking spaces near the Ashby BART staion—and then set them aside exclusively for the use of the city’s parking enforcement employees—crashed and burned at Tuesday night’s meeting. 

In background material signed by Assistant Transportation Manager Peter Hillier, the rationale for the free street parking set-aside for parking enforcement officers was that “because the city has provided [free] parking to these employees in the past, we agreed to find alternative parking sites in the vicinity” of the parking enforcement facility on Martin Luther King Jr. Way. In addition, Hillier wrote that “continuing [dedicated free parking] will improve employee morale and promote on-time arrival at work.” 

Nearby residents were incensed, pointing out the irony that the city employees charged with giving out tickets to illegal parkers were getting a no-ticket on-street parking deal for themselves. 

“I don’t think city agencies should be taking common property of the public to provide parking spaces for their employees,” neighborhood activist Robert Lauriston told Council. And Pamela Speich, a member of both the LeConte Neighborhood Association and the Residential Parking Permit Advisory Committee, added that “it’s unconscionable that the city should provide free parking for its parking enforcement officers.” 

Council unanimously pulled the item from the consent calendar and formed a three-member Council subcommittee to study the matter and come back with recommendations.