The math of building affordable housing in Berkeley looks especially troubling this year.
With affordable housing developers requesting about $8.7 million and the city’s rapidly diminishing housing trust fund now down to $2.4 million, it appears that not even the most creative calculating can prevent the Housing Advisory Commission from putting some projects on the back burner when it meets Thursday to study the proposed developments.
“There is no way I can see how we’re going to be able to fund all the projects coming in,” said Berkeley Housing Director Steve Barton. “It certainly does potentially put projects at risk.”
Heading into the year, the Berkeley Housing Trust Fund stood at a relatively flush $3.4 million, but a series of unexpected cost overruns on projects already approved has essentially cut the fund drastically. The trust fund is a reserve set aside by the city to fund permanently affordable housing developments.
The federal Department of Housing and Urban Development gives the bulk of the money to the city’s affordable housing fund, which is then allocated to non-profit developers as seed money so they can qualify for other forms of public and private financing.
Since 2002, the city has developed 2,209 units of affordable housing through grants awarded from the fund. Typically, city allocations equal about 10 percent of the development costs.
In past years affordable housing developers usually received their entire request, but this year when they are asking for more money, overruns have exhausted the trust fund before they could press their case.
The trust fund sustained its first hit in July when the council took $450,000 to pay for extra costs at Jubilee Senior Homes on San Pablo Avenue, which had already received $2.3 million from the fund.
Then last month, the council allocated an extra $529,000 from the fund to Affordable Housing Associates’ University Neighborhood Apartments to pay for unexpected water damage and unbudgeted expenses.
And before new projects can even vie for the remaining $2.4 million, the Housing Advisory Commission is expected to recommend allocating an extra $727,000 for AHA’s Sacramento Senior Homes, where a lawsuit filed by neighbors has delayed construction for months.
“This year is going to be really tough,” said Dan Sawislak, executive director of Resources For Community Development (RCD), which is asking for $2.2 million—essentially the entire trust fund—to help pay for its planned 96-unit building beside the proposed David Brower Center on Oxford Street.
RCD’s building is part of a trend, Barton said, of non-profit developers proposing bigger projects that require bigger city subsidies.
“We just haven’t had developers coming in and asking for an entire year’s worth of money before,” he said.
To give developers like RCD a fighting chance, Barton has proposed that the city allocate an extra $1.3 million this year from funds HUD has given to the city for allocation in 2006. The move would leave the city with $500,000 to divvy out next year.
Competing with RCD for trust fund money is an AHA project requesting $2 million to build 55 live-work units on the 1000 block of Ashby Avenue, a Jubilee Restoration proposal for $1.9 million to build 118 units on the 2600 block of San Pablo Avenue and a Satellite Housing project for $1.9 million to build a 79-unit affordable senior apartments on the 1500 block of University Avenue.
Todd Harvey, housing manager at Jubilee, said his firm can’t afford to lose out on city financing.
“If we don’t get the funding our project is probably dead,” he said, adding that Jubilee was scheduled to start making mortgage payments on the property next month. The firm is partnering in the development with The Related Companies of California, one of the state’s biggest for-profit housing developers.
Working in Jubilee’s favor is that, at $16,102 a unit, the project has the least expensive per unit in the group seeking financing. However, the city has only invested $60,000 in the project to this point, far less than on the other projects, for which the city has already spent hundred of thousands of dollars in pre-development funds and loans.
The biggest benefactor so far has been the Ashby Avenue AHA lofts project, to which last year the city allocated $1 million from the housing trust fund.
“We have all our permits, we’re ready to go,” said Housing Manager Kevin Zwick. “I don’t know if the project can sit around for two years until they have enough money for a new round of funding.”
The AHA proposal runs $72,369 per unit, an expense which has become a growing concern among some councilmembers.
AHA’s most recent project on University Avenue, after the cost overruns were taken into account, ended up costing the city $90,000 per unit—about a third higher than the city average.
That raised red flags with Councilmember Gordon Wozniak, who questioned if the city could afford such expensive projects.
“$90,000 per unit is just way too much,” he said. “If we keep building projects like this we’re doing a disservice to the low income people in the community.”
Getting costs down could be difficult in a market where the price of construction has skyrocketed.
The price of steel has surged 66 percent over the past year, primarily due to rising demand in China according to a report published in USA Today.
With the city not likely to have money to fund much affordable housing development next year and the cost of construction skyrocketing, Zwick said he expected AHA to refocus its efforts.
“In the last few years the city let housing developers know they wanted new construction,” Zwick said. “But, if there’s no money available for a couple of years we’d probably just look to acquire buildings and rehab them.”