East Bay Affordable Housing In Demand, But Developers Still Struggle With Costs

Developers are optimistic about the future of affordable housing in the Bay Area, but note that mounting challenges, from construction costs to permitting struggles, require developers and investors to be creative in order to get projects entitled and delivered in a timely fashion.

East Bay cities such as Dublin or Concord have historically served as affordable alternatives to San Francisco for renters, according to panelists speaking Wednesday at Bisnow's East Bay Residential Development event.

But rising rental rates across the East Bay are erasing the cost-saving capabilities of those alternatives, and supply is increasingly strained.

Brad Griggs, co-founder and managing partner of Blake Griggs Properties, cited data from Yardi Matrix, stating that rents in the East Bay have increased by 12.4%, with development across the East Bay ebbing and flowing over the past few years.

Oakland in particular saw more development, but occupancy across the East Bay stayed strong, with the area needing new development to keep up with demand.

"Acquisition doesn’t provide affordable housing, net-new does,” he said.

Developers are still bullish on the Bay Area, despite construction pipelines in San Francisco slowing to a standstill, which developers blame on what they say are unsustainable development costs and fees.

The San Francisco Chronicle reported earlier this week that pipelines have generally slowed or stalled, while San Francisco considers new options to expedite the process for projects still waiting to break ground. 

Danny Haber, co-founder and CEO of oWOW Development, expressed optimism in an interview with Bisnow on Thursday about the company’s projects in the Bay Area, in particular with regard to the development timeline at its 3043 Piedmont Ave. project in Oakland.

The company hopes to break ground on the 76-unit property in September, but Haber noted that ultimately, even with cities tossing in new incentives, the costs don’t always make sense for developers.

“You can have all the incentives in the world, but if you’re net-negative on the units, it just doesn’t work,” he said. “Most people can’t really build with what the costs are and where the rents are.”

President of Eden Housing Linda Mandolini said on Wednesday’s panel that amid increasing occupancy rates, the long waits for affordable housing continue, particularly in the senior housing segment.

“We have 98.7% occupancy, sometimes up to 99.5%. Our senior housing has a 10-year waiting list,” she said. Mandolini also noted that there has been an increase in affordable housing construction across the East Bay.

Ken Lowney, founder and principal at Lowney Architecture, has noticed an increase in conversions and modular construction technology.

“You don’t save money with modular construction, you save time,” he said. And while site selection plays a huge role, he said, modular construction ultimately saves on costs on the construction side, as it generally requires less on-site labor.

Mandolini echoed this sentiment, stating that Eden is big on using modular as a way to reduce costs.

“We gotta support it, and we gotta figure out how to make it go,” she said.

The mayor of the city of Alameda, Marilyn Ashcraft, expressed optimism about a rise in shopping mall conversions into affordable or mixed-use developments. She agreed that cities need to work more actively with developers, but also with community members.

“You cannot overcommunicate. You need to preface that with the community workshops, in order to bring the community along,” she said. 

Panelists also noted the struggles of the development process when working with municipalities, particularly in the face of NIMBYism, which can lead to constant headaches during the permitting process.

“The community uses a lot of conjunctions. “We love affordable housing, but ..." Lowney said.