Public Comment

Recommendations for Special Berkeley City Council Work Session on Affordable Housing, December 1, 2015

Rob Wrenn
Saturday November 28, 2015 - 04:24:00 PM

Dear Mayor Bates and members of the Berkeley City Council,

The City's Housing Trust Fund is grossly underfunded and the City Council should take action to increase the funds available to affordable housing developers.

Concrete steps the City Council should take are as follows:

1) Place a measure on the November 2016 ballot to increase the business license tax paid by landlords to 2.88% with suitable exemptions for small low and moderate income landlords, rent controlled units with pre-1999 tenants, units with Section 8 tenants and an exemption for new construction of the first ten years after construction. Basically, you should follow the recommendations of former city housing director Stephen Barton, who estimates that this tax increase could bring in $5 million annually. 

2) Increase the housing impact fee on new market rate housing units to $34,000 per unit, the amount recommended by Bay Area Economics in the March 2015 draft of the City of Berkeley Affordable Housing Nexus Study. If a developer wishes to avoid the fee by building on site affordable units, they should be required to provide 20% affordable onsite units, or five affordable units for every twenty market rate units. Bay Area Economics (BAE) found, in their Nexus Study, that building 100 market rate units creates demand for 25 units affordable to households at median income and below. 

3) Tax short term rentals (airbnb, etc.) and add the new revenue generated by this tax to the City's Housing Trust Fund. The Council should adopt a policy of making an annual budget referral asking that an amount equal to the net new revenue generated by taxing short term rentals be allocated each year to the Housing Trust Fund. This annual referral should be continued until the City's affordable housing goals as spelled out in the Housing Element and General Plan have been achieved. 

Together these three actions, once everything is up and running, could produce an average of at least $10 million a year and the City could actually begin to address the enormous demand for housing that's affordable to those making less than the area median income. The staff report for the December 1 Work Session notes that as much as $36.8 million would be required to complete all the affordable housing projects identified in Request for Information (RFI) responses by affordable housing providers. Yet the report notes that the current Housing Trust Fund Available Balance is only a bit more than $3 million. 

There are many people who work in Berkeley but can't afford to live here; some have long commutes that have negative impacts with respect to air quality and generation of climate change inducing greenhouse gases. Many people who grow up in Berkeley can't afford to stay here with prevailing rents and home prices. The BAE Nexus Study found that in 2014 rents in the new multifamily developments averaged $2,537 for one bedrooms and $3,434 for two bedrooms. Using the standard affordability formula, a household needs an income in excess of $100,000 to afford the average one bedroom in a new building and an income closer to $140,000 to afford a two bedroom unit. Yet data from the American Community Survey (2009-2013) estimated the median income of tenant households in Berkeley to be $38,623, far short of what is needed to afford any market rate unit in a new building. 

In South Berkeley Census tracts, median tenant household incomes ranged from an estimated $28,816 to $37,391 in the same period. In South Berkeley, homeowner households also have median incomes below what is needed to afford a one-bedroom rental in a new building (median ranged from $72,011 to $90,938) High rents also make it hard for students to afford to attend UC Berkeley without being saddled with enormous student loan debt as housing costs can easily exceed fees. 

For profit, market rate housing developers are not addressing the city's affordable housing needs beyond providing a few below market units onsite (currently only 9% of total units; in total over 20 years only 334 units in 27 projects) or paying discounted impact fees that were based on the out of date 2010 nexus study. 

Impact fees on new development should not be the only source of funds for the Housing Trust Fund. Housing development is cyclical. When the next recession comes, it will likely slow down dramatically. The City needs funding sources that will generate revenues even during recessions. Increasing the business license tax on landlords and using new tax revenues from short term rentals will ensure some revenue flow each year. In addition, the impact fees on new development, if adequate, really only address the new demand created by the new high-end housing development and the City also needs to address existing demand for affordable housing. 

Rental and Ownership Units 

In addition to funding construction of new affordable rental units, the City should also be funding the creation of resident controlled housing coops such as those that the Bay Area Community Land Trust is proposing to create. Some Housing Trust Fund money should go toward helping tenants where practicable to buy their buildings. 

Protecting Existing Housing from demolition 

The City Council should strengthen Berkeley’s Demolition Ordinance to protect the existing supply of rent controlled housing. Each rent controlled unit must be replaced -- one for one -- with housing that is permanently affordable to low and very low income households. The City Council should support the appeal of the decision approving demolition of 18 rent controlled units at 2631 Durant, since there is no provision for inclusion of 18 affordable replacement units in the building as currently proposed.The City should not encourage demolition by neglect. Landlords should not be given an incentive to not maintain their buildings by letting them demolish buildings that haven't been properly maintained over the years because the cost of fixing the buildings now would be high. 

With respect to affordable units in market rate housing developments, the City should create a city-maintained waiting list and establish priorities that include priority for people who live and work in Berkeley. 

Streamlining the Permit Process for Affordable Housing Projects 

Projects that include at least 50% units affordable to households with incomes up to the area median income should be given priority and the permit process for such projects should be streamlined. Housing Element data for 2007-2014 shows that the City came close to achieving the Regional Fair Share housing goal for above moderate income housing; it is on track to substantially exceed such goals going forward based on projects now in the pipeline. But at the same time, production of housing for households with low and moderate incomes falls woefully short of the fair share goal The City achieved only 23% of the goal for very low income housing; only 21% of the goal for low income housing and only 4% of the goal for moderate income housing during 2007-2014. So, it makes sense to prioritize affordable housing in the permit process. 

interim measures 

Councilmember Worthington has proposed loaning the Housing Trust Fund $1 million. This makes sense as an interim measure to allow affordable housing development to move forward while the City develops new ongoing income streams for the Housing Trust Fund such as the ones suggested above. The City should also adopt his proposal to match National Housing Trust Fund grants to make sure the City does not miss out on this source of funding. The city staff report says: "The City's ability to award HTF funds to help projects leverage NHTF will hinge on the amount of funds available in the HTF". The City Council must ensure that there are adequate funds in the Housing Trust Fund so that Berkeley gets a share of the NHTF funds. The City missed the boat on applying for Affordable Housing and Sustainable Communities funds which other Bay Area cites received. The City needs to take steps to make sure it get a share of such funds in the future. 

Berkeley should be a leader when it comes to providing affordable housing. It's time to take action.