City may boost affordable housing with density bonus

This proposed four-story, 23-unit project on San Pablo Avenue is partially funded by Berkeley’s Housing Trust Fund. Image: HKIT Architects — This proposed four-story, 23-unit project on San Pablo Avenue was partially funded by Berkeley’s Housing Trust Fund. Image: HKIT Architects

The city of Berkeley is looking at how to build up its affordable housing stock by giving developers an alternative to a state law that grants them extra density in exchange for including affordable units on site.

Under the proposal, from Mayor Tom Bates and Councilman Laurie Capitelli, developers of rental housing seeking a density bonus would not have to include below-market-rate units in their projects. They would instead pay new fees that could potentially bring millions into the city’s Housing Trust Fund for affordable housing, Bates said.

The state density bonus allows developers who include 11% below-market-rate units meeting very-low-income standards to add 35% more units to the project. Council previously created a $20,000-per-unit fee for developers who prefer not to include affordable units on site and do not seek the density bonus. But most projects that have come before the city have elected to take the bonus — to get the extra units — which has meant that little money has come into the city’s Housing Trust Fund.

Council voted unanimously Tuesday night to have city staff look closely at the proposal after Bates and Capitelli made several significant amendments to it. As proposed, developers would pay the city $20,000 per unit in the entire project, plus $10,000 per unit — the proposed city density bonus fee — for units in the base project.

The amendment also asks staff to look at “the feasibility of including requirements for local hiring, job training programs and the payment of prevailing wages” and, after a suggestion from Councilman Kriss Worthington, staff also will look at the possibility of including project labor agreements as part of the proposal. Those agreements determine benefits for workers as well as other factors.

The final amendment asks staff to look at the financial feasibility of the overall proposal, to consider whether fees should be adjusted if they are “found to be either too high or overly generous for developers.” Staff will analyze, too, whether the proposal “provides a sufficient incentive for developers to exercise the City density bonus option.”

Bates said, if developers elect to take the city’s density bonus, the results for the Housing Trust Fund could be significant. His office looked at a handful of projects that have been approved in Berkeley, and compared the current system to the new proposal. According to those calculations, about $900,000 is currently expected to come into the fund under the existing system. Under the new proposal, the city could potentially be looking at more than $12 million.

A half dozen public speakers who stuck around Tuesday until the item came up at 11 p.m. told officials they support the new proposal. They said they believe it’s important to get money into the Housing Trust Fund, which can get more units for it than can private developers because the money can be leveraged with state and federal housing grants. Other speakers, from the labor community, said they were pleased with the proposal’s efforts to ensure that construction workers, too, are taken care of.

One man, who received additional time from several other speakers who agreed with him, told council that the city is giving away too much to developers, and needs to rethink its housing policy.

Councilman Jesse Arreguín said he hopes staff will be able to raise the fees once more analysis is complete, to bring even more money into the city.

The subject of the appropriate amount for development fees related to affordable housing has been a topic of debate of late. In 2012, council set the fee per unit at $28,000 for developers who do not wish to include below-market-rate units on site. Officials then discounted the fee to $20,000 to try to entice more developers to pay it. A council majority voted earlier this month to extend that discount pending the outcome of a nexus study, which will assess the appropriate fee structure based on project costs. No one thus far has paid the fee, which comes due when the certificate of occupancy is issued. No pending project has yet gotten to that point.

Worthington pushed the city to complete the nexus study, which he said had been due to council in December.

“Due is a relative term,” replied City Manager Christine Daniel, adding that she hopes to have the report to council before its summer recess. “That’s probably the best we can do given where we are in the calendar.”

She said that document would need to undergo environmental analysis, and be considered by the city Planning Commission as well.

Council members called the city density bonus proposal “exciting” and “visionary,” and said they look forward to seeing the outcome of the staff analysis.

Bates acknowledged as the meeting ended that the topic is a challenging one, but said he hopes the new proposal will be effective in raising more money for the city’s affordable housing needs.

“It is a hard thing,” he said. “This may work. We’ll have to see.”

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Emilie Raguso