City Ordinance Would Charge Fee on New Housing to Fund Low-Income Units

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After about a year and a half without any city framework for affordable housing development, the Berkeley City Council voted at its Feb. 15 meeting to authorize the preparation of an ordinance adopting a fee on new housing to generate more money for low-income units.

The affordable housing impact fee would require developers to pay a given amount per unit - to be determined by the council - for every new housing structure they build. The money raised by the fee will go into the city's Housing Trust Fund, which funds affordable housing construction and is made available to local developers.

If any development begins before the council votes to exact a fee - no earlier than late May - the city will lose out on potential funds, according to Jane Micallef, director of the city's Housing and Community Services Department.

"(Council members) still have a number of issues that they want to debate before they ultimately settle on a fee," Micallef said. "But they want to make sure they put some fee in place before there's any development."

She added that the city has not been set back in developing affordable housing by not having a fee in place since the inclusionary zoning ordinance went out of effect in 2009.

Under the inclusionary zoning ordinance, which was adopted in 1986, developers were required to set aside 20 percent of units as low-income, or affordable to families at 80 percent of the median income in the Oakland Primary Metropolitan Statistical Area - which includes Alameda and Contra Costa counties - a figure that is set by the U.S. Department of Housing and Urban Development.

Inclusionary housing programs were called into question in 2009 when a Los Angeles court case held that such requirements violate the Costa Hawkins Rental Housing Act of 1995 - legislation that prohibited California cities from imposing their own rent control laws.

The council is considering providing developers with the option of including affordable units on site - much like they used to under the inclusionary housing ordinance - in lieu of paying the fee, with the distinction that this will not be a requirement and thus not in violation of Costa Hawkins, according to Micallef.

Arreguin said the proposed fee is actually better for developers than inclusionary zoning. The fee would amount to the cost a developer would have paid to set aside affordable units, without restricting the tenancy.

Since November 2009, Berkeley has been working to replace its inclusionary housing laws. The city contracted the firm Bay Area Economics to complete a nexus study examining the demand for affordable housing, as generated by new market-rate units. The firm presented a draft of its study to the City Council in June.

The study found that the maximum fee the city could impose would be $34,000 per unit.

The city manager's current recommendation is that the fee be set at $20,000, while the Housing Advisory Commission and Rent Stabilization Board suggest raising the proposed fee to $28,000 per unit.

"I'm actually in support of something higher than $28,000 because I don't really feel that with $20,000 it's enough to help affordable housing developers build more affordable housing," Arreguin said. "The average cost of building a unit is anywhere from $100,000 to $500,000, so I don't necessarily think that that's enough."


Sarah Mohamed covers city government. Contact her at [email protected]

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