Berkeley, California Reforms Usher In A Wave Of Multifamily Development

More than a century after passing the law that made it the birthplace of exclusionary zoning, Berkeley, California, is trying to right the wrongs of the past.

With a proposal to officially overturn a 1916 piece of legislation that used single-family zoning to discriminate against people of color, Berkeley is making a push to create more housing.

“This law is expected to be officially overturned in October, with Council having previously committed to ending single-family zoning in 2021,” Mayor Jesse Arreguín told Bisnow in an email.

“We felt compelled, as a city that has historically passed problematic legislation that has curtailed housing development, to right the wrongs of the past,” Arreguín said.  

That change, along with the passage of statewide pro-development laws, a growing population and strong demand for student housing, has sparked a multifamily development boom.  

Berkeley permitted more than 900 rentals in 2022, a 20-year high, according to Berkeleyside. Last year, the city entitled nearly 2,100 rental units. So far in 2024, close to 600 units have been entitled, Arreguín’s office told Bisnow in an email. 

By 2030, the city aims to develop 3,100 rentals and 1M SF of commercial space, according to its housing element. Berkeley has also used its density bonus to build more affordable housing in recent years.

The state has also done its part to create more housing in Berkeley. 

“There have been some 100 housing bills in Sacramento, and a number of them are going to allow for more density,” said Ken Rosen, chairman of the University of California, Berkeley Haas Fisher Center for Real Estate and Urban Economics.

2018 was a banner year for housing legislation in California, Arreguín said. The state passed a variety of housing bills, including Senate Bill 35, which streamlines the approval of dense, market-rate projects with affordable housing. 

Among these dense projects is The Hub, a South Berkeley transit-oriented development that would radically change the skyline. Berkeley’s design review commission approved construction of the 26-story, 456-unit apartment tower in July, the San Francisco Business Times reported. 

If entitled, Chicago student housing developer Core Spaces will build a 285-foot-tall high-rise at 2128 Oxford St. with 40 affordable units and 15K SF of commercial space, including a rooftop restaurant, that would be the tallest building in Berkeley, Bisnow reported.

The project is less than 500 feet from Downtown Berkeley BART station, which aligns with the city’s downtown street and infrastructure improvement plans, Berkeleyside reported.

“Most of the entitled developments are in major transit nodes such as the Downtown Berkeley BART station where the state has reduced barriers to higher density development,” JLL Senior Director of Research for Northern California Alexander Quinn said.

A group of nonprofits and private investors has partnered to take advantage of the state’s pro-development policy. 

At the North Berkeley BART station at 1750 Shattuck Ave., AvalonBay Communities, Bridge Housing, East Bay Asian Local Development Corp. and Insight Housing plan to construct a transit-oriented development with 750 units, half of which will be affordable. It will also have 6,500 SF of retail, a childcare center, direct access to the Ohlone Greenway biking and walking trail, and a new bike station for BART riders.

San Francisco-based developer Grosvenor built a 120-foot-tall TOD with 163 market-rate units and roughly 5,200 SF of ground-floor retail at 1951 Shattuck Ave., a block from campus and two blocks from the North Berkeley BART station. Units at the Ace Berkeley range from $2,700 a month for a studio to $9,800 a month for a three-bedroom, according to the project’s website. 

Another state law, Assembly Bill 1033, aims to help with the area's affordability by allowing cities to build more accessory dwelling units, another means by which homeowners and developers can build denser, more affordable projects, Rosen said.

So far this year, Berkeley has permitted 46 ADUs under the law. But a rapidly growing population, including swelling enrollment numbers at UC Berkeley, means that the city and developers need to keep the housing units coming.

Berkeley’s population reached 124,000 in 2020, a 10% growth rate over the decade, Berkeleyside reported. Berkeley grew faster than San Francisco during the same period. 

The population grew in Northwest Berkeley, Downtown, South Berkeley and the eastern border of the city, near UC Berkeley’s campus, producing a spate of high-end development. 

“Positive trends including population growth are influencing factors of the growth in apartment demand in the Bay Area after it experienced below-average rental activity in 2022 and 2023 when many residents migrated to other metros,” Berkadia said in a midyear report.

Enrollment growth at UC Berkeley contributed to the spike in new development. From 2019 to 2023, the university’s headcount increased by 5.4%, with last year’s enrollment totaling 45,700.

Private developers have also been active in building student housing over the past decade.

The Durant at 2539 Durant Ave. was “designed to optimize productivity and improve student housing in the UC Berkeley area,” Greystar’s website says, further characterizing the asset as “a tech-forward development.” 

Amenities include study rooms, bicycle storage and a rooftop deck and lounge.

But while the city and state's efforts combined have resulted in more units, pushing up apartment vacancies in the area, many of those units are geared toward higher-income people.

Multifamily vacancy is 12% as the supply of high-end housing increases, Rosen said. While there have been plenty of luxury rentals added to the supply pipeline, the city and state have failed to address the “missing middle need,” or the need for workforce and other types of middle-income projects. 

Quinn said Berkeley features some of the highest rents in the San Francisco area at $3,600 per unit, far exceeding the region's average of $2,800 per month, based on RealPage data.

While Berkeley’s development boom helps the city reach unit counts specified in its housing element, it fails to meet the needs of middle- and low-income families, Rosen said. 

“New development just doesn't pencil,” as high interest rates and construction costs will put developers on the sidelines, he said.

“The economics don't work without a pretty big subsidy. So, I think we're going to have a slow period after this huge boom for two or three years. But it depends on whether the government prioritizes affordable housing development. 

“Do we get a new federal program with President [Kamala] Harris? We know that housing is on everyone's agenda,” Rosen said. “So do we get a new federal housing program that might include workforce housing? Because that's what we need. We have enough high-end housing in Berkeley and nationwide.”