New: Vacancy rates and Tuesday's Housing Nexus workshop

Monday July 13, 2015 - 06:15:00 PM

On Tuesday, July 14th, at 6:00 pm, in the City Council Chambers is a workshop to discuss the updated Affordable Housing Nexus Study authored by BAE, Bay Area Economics. This is the report that will help determine mitigation fees for affordable housing development. To determine the City's current "3.1%" vacancy rate, BAE considered only 9 buildings, each with more than 50 units, built between 2001 and 2012, a total of 1054 units. This doesn't reflect any older units or smaller buildings, the majority of rentals in Berkeley. When using a small statistical sample, in this case around 2% of Berkeley households, care must be taken for the sample to be random and represent the whole of the population. A much better, free, reliable, and unquestionably standard resource for this type of statistic is the US Census Bureau. 

Since 2005, in addition to its decennial door-to-door surveys, the Bureau annually compiles community data from many sources and reports, and makes this data available on its website*. The most recent report from 2013 gives the vacancy rate for Berkeley at 8.09%. In fact, between 2009 and 2013, the vacancy rate has not fallen below 7.35% reported in 2011. Berkeley's Consolidated Plan for Housing, sent to HUD in May of this year, does mention the Census reporting a 7% vacancy rate in 2010 (pg 57), but dismisses it as an error or anomaly. The Census' annual figures suggest that it is, in fact, the norm.
In the Nexus study, BAE states that a 5% vacancy rate indicates a healthy housing economy. When the vacancy rate is lower (3.1%) there are fewer units available and little turnover, so construction of more units is vital. With a higher vacancy rate (8.09%) there are too many units, and development needs to back off and/or prices need to come down to make available units affordable to more people. For the past 6 years, and maybe longer, the City has been under reporting its vacancy rates to allow and encourage developers to build much bigger, much denser housing projects; all of them at inflated prices. The problem becomes that as the rental rates increase, so does the vacancy rate as tenants give up and move into smaller quarters, often shared by many more people, in order to make their rents affordable. Or they are forced out of town or even onto the streets.
One unexpected benefit from a glut of housing is that now developers are actually providing their 10% required replacement units in their own projects, eliminating the need for in-lieu-of fees. The City doesn't care for this. They'd rather have money for the Housing Trust Fund, which hasn't produced any new low income housing in nearly 10 years (though all the funds manage to get spent every year). This is why they are planning to increase the low income units required of developers from 10% to 34%; knowing that few investors will agree to that many low income tenants in their luxury housing projects.
It's time to call a moratorium on all development while we find out how and why this was allowed to happen. This is an unacceptable breach of the public trust and either staff, or the politicians, or their aides, or someone should have noticed this long ago and put a stop to it.