Berkeley Shows San Francisco How to Address Inclusionary Housing

Berkeley’s inclusionary housing law has always been stronger than San Francisco’s, with the East Bay city requiring developers to provide 20% on-site affordable units compared to its neighbor’s paltry12%. The law also applies to projects of five units of more, which is one of San Francisco’s proposed reforms. But Berkeley Housing Director Steve Barton has come up with an even better idea to increase affordable units---a reform of the law that also decreases developers’ costs.

Barton’s plan works as follows. Assume a developer could sell a condo for $700,000 but under the inclusionary law is limited to a sales price of $200,000. This means that the developer is spending $500,000 so that Berkeley gains a single affordable unit.

That’s quite an inefficient use of scarce housing funds.

To remedy this, Barton proposed that the developer would pay 62.5% of the inclusionary cost (62.5% of $500,000 is $312,500) into the city’s affordable housing fund. This $312,500 would be used by a nonprofit to create three or four new or substantially rehabilitated affordable units.

In other words, Barton’s approach will at least triple the number of affordable housing units produced by the city’s inclusionary law.

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