Just what we need: more market-rate housing!

Monday night, the Planning Board will hear about two new residential development proposals that, if they’re approved and implemented in the next seven years, will end up increasing by 50 per cent the number of new housing units built in Alameda between 2015 and 2023.

In September 2015, Assistant Community Development Director Andrew Thomas estimated that 1,834 new housing units would be constructed on the island during that period.  The two new projects would add 964 units to the total.

As a result, the new projects would increase dramatically the City’s already projected housing “surplus.”

Based on Mr. Thomas’s estimate, more housing units are expected to be built in the City between 2015 and 2023 (1,824) than the number of new units the regional planners have determined Alameda needs during that period (1,723).  If the two new projects to be discussed Monday night are added to those included in the estimate, the excess would grow to 1,075 units.

Now, tell us again, please, Alameda Home Team, about the dire housing shortage you and the pro-development wing of the Inner Ring say the City is facing.

But, please, don’t tell us how the proposed new residential projects will solve the City’s “affordable” housing problem.  One of the two proposals – for 589 units at Encinal Terminals – is planned to include only 34 “moderate” income, 20 “low” income, and 25 “very low” income units; whether these units are for-rent or for-sale is not specified.  For the other proposal, involving 375 units at Alameda Landing, no figures for the “affordable” housing component were made public.

Our regular readers will recall that all of the residential projects “in the pipeline” as of September 2015 would add a total of 305 rental units (of which 90 are reserved for seniors) and 63 for-sale units to the City’s stock of “affordable” housing.  At the same time, they’d boost the number of “market-rate” units by 1,539.  If anything, the two new projects will exacerbate this imbalance.  (Of course, if you subscribe to the “movin’ on up” theory, eventually the benefits of new housing for the well-off will trickle down to lower-income households.  But by the time that happens, John Knox White will be finishing his second term as mayor).

Will the two new residential projects get approved and built?  It’s anyone’s guess, but the proposal for Alameda Landing faces a particularly difficult hurdle:  the new scheme changes the currently permitted use of the property so drastically that it may take another amendment to the master plan originally adopted in 2000 to enable the developer to do what it wants.  If so, approval by Council, not just the Planning Board, will be necessary.  And we can just imagine what Vice Mayor Frank Matarrese, for one, will say about re-writing an agreement to allow additional residential development even though the City already is projected to have a housing “surplus.”

We’ll start with a brief history lesson.

Back in 2000, the City entered into an agreement with Catellus Development Corporation for re-development of approximately 218 acres south of the Oakland Estuary that had been used by the U.S. Navy.  The original master plan called for 485 units of single-family housing; two “affordable” housing complexes comprising 62 units and 39 units, respectively; a school; a community park – and a 1.3 million square-foot research and development (R&D) and office park.

The single-family residential development (Bayport), the school (Ruby Bridges), and the “affordable” housing complexes (The Breakers and Shinsei Gardens) got built.  But then Catellus decided that developing the rest of the project in accordance with the approved master plan was no longer economically viable, so it came to the City asking to re-do the deal.

Under the new version, the R&D/office park was a goner.  In its place would go another 300 housing units; a 250,000 square-foot retail shopping center south of Mitchell Avenue; and 400,000 square feet of office space, 50,000 square feet of waterfront retail space, a 20,000 square-foot health club, and an eight-acre waterfront park, including a “promenade,” north of Mitchell Avenue.

The proposal required adoption of an amended master plan, which divided the area into four sub-areas and set forth the permitted uses for each.  It also contained this sentence:  “Additional uses may be added to a sub-area permitted land use program, provided that a corresponding reduction in the authorized amount of another use is made to ensure that no new or substantially more severe environmental impacts (including traffic impacts) would result from the change.”

Council approved the amended master plan and related agreements in 2006 and 2007, and, since then, Catellus has proceeded to implement them.  The developer sold a portion of the retail shopping center to Target and, through an affiliate, built out the rest.  And it sold the residential tract to Tri-Pointe Homes, which is putting up 285 housing units on the site.  The sub-areas south of Mitchell Avenue thus are finished, or about to be.

Left to be developed are the approximately 40 acres along the waterfront north of Mitchell Avenue and immediately across the Estuary from Jack London Square.  The amended master plan did not provide for any residential development in this area.  Instead, the land was to be used for office and retail purposes – according to the staff report, 394,000 square feet of the former and 35,000 square feet of the latter – and for the waterfront park.

But now Catellus has changed its mind yet again.  It wants to cut down the office space to 10,000 square feet and the retail space to 15,000 square feet and instead use the land for 375 new housing units and a 124-room hotel.  (The waterfront park remains).

And the reason for the change?  To “maximize the value of land,” the staff report says.  “Catellus has notified the City that it is necessary to increase the value of the 40-acre property in order to financially support redevelopment of the property and construction of the public waterfront park.”

If we were feeling the Bern, we’d translate this statement into simpler language:  Catellus wants to make more money!  And if we were really feeling it, we’d want to know how much money Catellus already made by “partnering” with Warmington Homes on the Bayport residential development, selling a portion of the improved site for the retail shopping center to Target, and selling the improved site for the 300-unit residential development to Tri-Pointe Homes.  Surely, it could have set aside a few shekels to cover the cost of the waterfront park that’s been part of the deal for a decade.

But let’s not pillory Catellus too much for desiring to pad its profits.  We’d still like to know how it intends to demonstrate that its new proposal doesn’t require another amendment to the master plan.

At first glance, we’d read the language quoted above to permit tweaking the permitted uses a bit – e.g., building 10,000 fewer square feet of offices and 10,000 more square feet of retail stores than the master plan contemplates.  But the new proposal does more than just shuffle around square footage; it transforms the character of the development:  The primary use for the 40 waterfront acres was supposed to be office and retail; if Catellus gets its way, it will become residential.

Moreover, even if the quoted language is otherwise broad enough to permit the shift in use, there’s still the tricky matter of ensuring that “no new or substantially more severe” traffic impacts “would result from the change.”  Now, we can expect to hear that residential use – if, of course, it’s multi-family – generates less traffic than commercial use, but, even if that were true, we would find it hard to believe that the new proposal would not worsen traffic congestion during commute hours.

The currently approved master plan for the waterfront area would increase the number of office and retail workers, but those who live off-island would be going in the opposite direction from Alameda commuters in the morning and afternoon peak hours.  The new proposal would increase the number of residents, and those who work off-island would join the queues of Alamedans waiting to get through the tube or over the bridges during those hours.

When Catellus sought a modification of the development plan to facilitate the sale to Target, the City required the developer to submit a Supplemental Environmental Impact Report showing the effect of re-configuring the shopping center on vehicle trips to and from Alameda Landing.  (It is worth noting that the SEIR predicted an additional 3,303 net new daily vehicle trips, 95 net new a.m. peak hour vehicle trips, and 340 net new p.m. peak hour vehicle trips).  We hope that even a Planning Board predisposed toward development would insist on commissioning a similar analysis before it approved the new proposal.

Maybe the approach should be to tell Catellus that we’re serious about ensuring any change in uses won’t make traffic conditions worse.  So you can replace office space with housing without amending the master plan – as long as the total number of vehicle trips during a.m. and p.m. peak hours remains exactly the same.  Somehow, we suspect that would be a tough standard to satisfy.

And then there’s the policy question.

The staff report stated the issue this way:

The proposed land use program requires that the Planning Board and Alameda community consider citywide housing needs, citywide employment needs, and citywide open space needs.  Ultimately, the Planning Board will need to decide whether the City should allow residential use of the land to facilitate the immediate construction of housing and a public waterfront park or preserve the land for additional future employment and commercial uses, even if that decision means that the City may not realize those objectives or the construction of the public waterfront park for an extended period of time, or until such time that nonresidential land values increase sufficiently to cover the development costs for the site and the waterfront park.

Not surprisingly, the staff report recites that Alameda and the rest of the Bay Area “are in the midst of a regional housing crisis” characterized by rising rents and housing costs and reduced availability of rental units and “reasonably priced” for-sale units.  But it is by no means clear that Catellus’s new proposal would alleviate that situation to any significant extent.

We don’t know yet if any of the proposed 375 housing units would be for rent.  Nor do we know yet how many of the for-sale units would be “reasonably priced.”  But we do know that, of the 285 housing units in the current Alameda Landing residential development, only the 32 units in the Stargell Commons are rentals, all of which are restricted to low- and very-low income households, and only 16 of the for-sale units are reserved for moderate-income households.  The remaining housing consists of market-rate units priced from the “high $800,000’s” to the “low $1 millions.”

If the 375 housing units in the new proposal follow this model, don’t expect it to provide much relief for middle- or lower-income households.

The effect on “citywide employment needs” of replacing land designated for offices and retail stores with sites dedicated to residential development is harder to assess.

There can be no doubt that the City needs more local jobs.  As the staff report reminds us, Alameda has “one of the worst jobs/housing balances in the Bay Area.”  (In 2014, Mr. Thomas told the Planning Board the jobs-to-housing ratio was 0.71).  Moreover, as the staff report also notes, increasing local employment opportunities for Alameda residents is one way to lower traffic congestion during commute hours.

The problem is that, at least right now, there seems to be an over-supply of office space in Alameda.  According to Colliers International, the current vacancy rates at Harbor Bay Business Park and Marina Village are 28.5 per cent and 11.1 per cent, respectively.  Catellus may well be right that, as of today, building offices at Alameda Landing would be a money-loser.

On the other hand . . . Alameda Landing’s waterfront location may make it a more attractive venue for businesses than either of the existing office parks.  And we can’t help but think, as we gaze out our window in downtown Oakland at all of the high-rises going up south of Market in San Francisco, that there might be start-ups – or even law firms – looking for less expensive but still impressive digs on our side of the Bay.  Anyone know any of the guys at Pied Piper?

As for the third factor identified in the staff report – the need for more open space – we’re going to have to tread carefully.  At the Merry-Go-Round, we like parks – hell, if we’d had our way, the whole of the former Naval Air Station would have been turned into a wildlife refuge.  But it certainly can be argued that the City doesn’t need another park at Alameda Landing, especially when the eight-acre Estuary Park and the 21-acre Jean Sweeney Open Space Park are nearby.  Still, we don’t cotton to the tactic of Catellus taking away the park it promised the last time around unless the City now greases its palms with more housing sites.

No action is being requested of the Planning Board Monday night.  But maybe we’ll get some idea of whether Catellus really will be able to pull this one off.  If not, we’ll just have to be satisfied with the housing surplus as already projected.

Sources:

Alameda Landing master plan (2006): 2006-12-05 staff memo re Alameda Landing DDA;  Master Plan (December 2006)

Alameda Landing SEIR (2011): 2011 Alameda Landing Supplemental EIR Addendum

Alameda Landing existing residential development:  2012-12-10 staff report to PB re development plan & density bonus2013-05-13 staff report to PB re residential subdivision map

Catellus proposal: 2016-05-23 staff report to PB2016-05-23 Ex. 1 to staff report to PB – Site Plans and Illustrations

RHNA: Final RHNA (2014-2022)

Housing “pipeline”: 2015-09-14 staff report to PB re annual H.E. report

Jobs-housing balance: 2014-02-10 staff presentation to PB re rezoning 1835 Oak St.

Office vacancy rates: Colliers Oakland real estate report

Encinal Terminals proposal: 2016-05-23 staff report to PB re supplemental EIR2016-05-23 Ex. 1 to staff report to PB – Draft Master Plan

 

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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8 Responses to Just what we need: more market-rate housing!

  1. Dear Robert,
    In a perfect world, the jobs created in Alameda would be filled by people living in Alameda. As it is, 75 % of employed residents commute off island to work. It seems to me that there should be a way to change this through public policy. Aren’t there tax incentives that could be given to businesses who take steps to improve their ratio of resident workers? Can’t we offer mortgage loan assistance or rent subsidies to people who work in Alameda to incentivize them to move here? Seems so logical to me.

  2. David says:

    Classic. Hold the public amenity hostage to wring more concessions out of the city.

    Aside from that, the City of Alameda could be doing a lot more to attract businesses to fill the vacant office space and measure the gross imbalance of jobs/housing in the city.

  3. Paul S Foreman says:

    The most salient information provided in Andrew Thomas’s Staff Report on the Alameda Landing item is his statement that Alameda has, “one of the worst jobs/housing balances in the Bay Area.”, and that precious little land remains that is zoned commercial.

    Last year, I did a comparison study of Alameda vs. other comparable East Bay Cities with regard to public safety costs in order to determine whether it was reasonable for 80% of our revenues to be devoted to public safety. Every other city had a much lower percentage of their revenues devoted to public safety, even though the actual dollar expenditure was comparable to Alameda. It became evident that the reason for this was that every other City had a much larger part of their land devoted to commercial use. As City Manager Russo often stated, residential development does not improve the tax base because it demands much more service and produces much less revenue than commercial development.

    From the above, I conclude that if the City continues to approve residential development at the current rate, our jobs/housing balance will get much worse and the public safety proportion of our budget will get larger and larger, leaving less and less money for road maintenance, library, parks, social services and the like. What is worse, the shrinkage of available land for commercial use, such as may be happening at Alameda Marina, Encinal Terminals and Alameda Landing eliminates any chance of improving the jobs/housing ratio.

    The differences of opinion between those for or against more residential development are just that, arguable opinions. The budget issue discussed above is not an opinion. It is demonstrable fact that our Planning Board and City Council must address. In my mind the answer is simple. The fact that the current market for commercial development is weak should not lead to filling that space with houses. It should lead to allowing much of the land available for commercial development to lie fallow until the commercial market improves.

    • “It should lead to allowing much of the land available for commercial development to lie fallow until the commercial market improves.”

      It’s one thing to wait out the market in Alameda Point’s Enterprise Zone. With the property north of Mitchell at Alameda Landing, there is a risk to the city in waiting. The city owns the property (specifically the Successor Agency to the former redevelopment agency, namely the Community Improvement Commission). In a catastrophic earthquake along the Hayward Fault, the mushy soil between Mitchell Avenue and the wharf will liquefy. The shock waves will reverberate outward toward the Estuary (the weakest point) and ruin the wharf, which does not currently have a subterranean barrier to protect it.

      Catellus’s plan calls for securing the wharf and protecting its piers from collapse. If the wharf is a total loss in an earthquake, it’s probably not likely that the city will rebuild it. Maybe no one will miss it. But the choice to wait has potential consequences worth taking into account that go beyond traffic and jobs,

      • David says:

        Sorry Richard, I’m not convinced.
        If the wharf collapses, surely that impacts Catellus, and not myself. At least, it wouldn’t directly impact myself.

        Converting the use to residential would directly impact myself and countless others, vis-a-vis the traffic and jobs issue.

        I can’t see a good reason for so many residents to put their interests behind Catellus’ interest in preserving the wharf for their own endeavors.

  4. David says:

    Paul – thanks for pointing out what I documented long ago… It’s long been understood that residential development costs more to service than industrial or commercial. Residents want street lights fixed, potholes repaired, prompt response from police and fire, etc.

    Compare that to the extreme case of a Google, Cisco or Apple campus – they are all within reasonable driving distance of Alameda. Those commercial spaces are largely taken care of by the company – onsite courtesy security, etc.

    Ironically, parkland tends to increase the tax base, because it increases nearby home values.

    This is covered in this report, and others.
    http://www.andywightman.com/docs/crompton_2000.pdf

    One can also see a breakdown of spending of Alameda County tax dollars in the assessor’s annual report:

    https://www.acgov.org/assessor/documents/2015-16_Annual_Report.pdf

    Regarding Catellus looking to re-zone for more housing:
    http://www.sfgate.com/technology/businessinsider/article/New-home-sales-spike-in-April-ITB-XHB-PKB-6286621.php

  5. Steve Gerstle says:

    The promises of developers have a very short half-life.

  6. Paul S Foreman says:

    Correction:In my previous comment to this article, I said tha close to 80% of City revenues was spent on public safety. What I meant to say was that close to 80% of expenditures were devoted to public safety.This does not change the thrust of my comment, but I want to be accurate.

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