Oakland looks for housing solution
City grapples with getting more lowcost homes built
For years, Oakland has struggled to build enough affordable housing to meet demand.
In 2016, the city adopted a plan to get more subsidized units built, but City Council members are now asking if the city’s approach needs updating.
For fourplus years, developers have had a choice between paying a fee that would go toward nonprofit affordable projects or building affordable units in their marketrate buildings.
Since 2016, the city has collected about $20 million in fees for affordable projects. But only one project that’s gotten funding has begun construction. The Nova Apartments, with 57 units, scored $1.6 million from the city and is expected to finish construction in May.
In contrast, developers built 131 affordable units in marketrate properties during that time.
As Bay Area cities grapple with a housing crisis, some Oakland officials want to raise the fees or require developers to include more affordable units on site. But opponents said that will mean fewer affordable homes built, an unintended consequence.
Oakland is already the fifthmostexpensive city in the country for renters, according to Zumper, with the median cost of a onebedroom at $2,000 a month. Whether a new fee plan will make much of a difference is unclear.
Currently, the amount developers pay into the fund depends on what part of the city
their project is in. Payments range from $13,000 to $24,000 per unit. Developers can opt out of paying the fee if they build the equivalent in affordable housing units.
Changing the fees requires a delicate balance to make sure it would boost housing construction rather than stymieing development. In San Rafael, the City Council recently voted to cut the city’s affordablehousing mandates in half in an effort to boost housing.
Last week, Oakland Mayor Libby Schaaf endorsed the current approach and said impact fees are helping create muchneeded housing. Oakland has created 624 affordable units over the past decade — the most the city has ever built. That includes the 131 units built in marketrate properties under the impactfee program.
“We have far more work to do, but the data shows we’re making progress,” she said. Others disagree. “We want to strike the right balance to make sure our impact fees are working as well as they should to help us spur affordable housing development,” said Council member Loren Taylor. “I think Oakland has a history of undervaluing ourselves when it comes to negotiations and thereby leaving opportunities for impact on the table.”
Housing advocates have called into question whether the impactfee program is creating the amount of affordable housing that Oakland needs.
As of fall 2020, the city distributed about $14 million of the impact fees and other funding toward affordable housing projects, but only the Nova Apartments is under construction. At least two projects are waiting on tax credits from the state. One is in the process of applying for building permits, and several are in the predevelopment phase.
“We are much better off with the fee than with (developers) building the units,” said Jeff Levin, a policy director at East Bay Housing Organizations, which represents nonprofit developers. “We just don’t get the same thing in terms of the number of units or in terms of how deeply affordable those units are.”
Cities have to balance the need to offset “real impacts from new construction” with what is needed to foster development, said David Garcia, policy director at UC Berkeley’s Terner Center for Housing Innovation.
It’s reasonable for any city to study their program after several years, he said, but now any analysis has to address the changing dynamics of the housing market due to COVID.
“The city of Oakland was experiencing more housing growth in recent years, but that is all threatened to come to a halt because of the new dynamics that have been presented by COVID,” Garcia said. “Rents are declining particularly for higherend apartments, and ... you’re going to see fewer developments breaking ground.”
Marketrate developers cautioned against changing the impactfee program, saying that it could limit housing production.
“When you tax housing, you either make it more expensive or you make less of it,” said Mike Ghielmetti, president of Signature Development Group, the developer working on the Brooklyn Basin project in Oakland. “We’ve got to look at zoning and supply in order to deal with this and figuring out how to make it easier to build something that is a human right.”
In addition to Taylor, council member Dan Kalb also raised questions as to whether the city should increase the fees.
“We need to take a good look at what the fee structure is and decide what modifications to the structure would be beneficial to the residents of Oakland,” Kalb said. “We are not going to make it impossible to build, but I think we are leaving things on the table here.”
The city is conducting a study that analyzes the program impact over the past five years, said Karen Boyd, a spokeswoman for the city. Boyd did not say when the study will be released.
She said any changes to the impact fee program would require findings that support those changes.
The pandemic has disrupted housing development, and many developers mistrust the city’s program after questions arose in 2019 about whether the city had collected too little, said Greg McConnell, head of the Jobs and Housing Coalition, which represents developers in Oakland.
The city said they did, but hired an outside auditor to investigate how the city tracks its fees. At the time, staff from the planning and building departments said they collected the correct amount in affordable housing impact fees, but the city’s two software programs weren’t tracking the fees properly because the programs weren’t “talking to each other.”
Last week, council member Carroll Fife asked city staff to give a report at next month’s committee meeting on how the problem was fixed.
Fife said she needs to see more research on the city’s program and its impact on developers before urging a change to the fees. In the meantime, she said she wants to focus on pushing for more innovative solutions.
“If we keep doing things in the way that we are doing them, we are doing our future generations and the present a huge disservice,” she said. “We can see that it’s not working.”
McConnell said he worries that if changes are made to the impactfee program, developers will go elsewhere to build to avoid costly fees.
“These guys think we will just raise the fees so we will get more money,” he said of the council. “No — if there are no projects in the pipeline, you won’t get any fees.”