The Gaia Building in downtown Berkeley is now owned by the Dinerstein Companies of Texas. Designed by the architect Kirk Peterson, it was built by the developer Patrick Kennedy for Panoramic Interests in 2001 and was later sold to Equity Residential. Photo: Stephen Coles.

The corporation that was probably Berkeley’s second-largest landlord has passed the torch to another major developer — or sold the torch — to the tune of a reported $180 million.

Equity Residential, based in Chicago, recently sold six Berkeley student housing developments with 343 units to The Dinerstein Companies (TDC) of Houston, Texas.

The sale was completed last month.

“We’re really excited about this acquisition,” said Josh Vasbinder, west coast partner of Dinerstein, which specializes in student and multi-family housing.

“We really like both the short- and long-term fundamentals within the city of Berkeley and the University of California, Berkeley. We have been trying to get into this submarket for a couple of years so we’re excited to finally be able to have a presence.”

The sale includes the Gaia Building at 2116 Allston Way; Berkeleyan Apartments at 1910 Oxford; Renaissance Villa at 1627 University Ave.; ARTech Building at 2002 Addison St.; the Touriel Building at 2004 University Ave; and the Fine Arts Building at 2110 Haste St.

The housing group is being rebranded the Sterling Berkeley Collection, which includes new names, all of which start with “Sterling”.

The ARTTech Building in 2007. The Dinerstein Companies of Texas recently acquired it from Equity Residential. Photo: Stephen Coles.

Equity Residential, a longtime power player in Berkeley housing, had wanted to sell the properties for years, putting them on the market in 2015. John Hyjer, first vice-president of investment for Equity, told Berkeleyside in a 2016 interview that the company wanted get out of student housing and focus on high-end urban properties.

At that point, Equity owned around 500 units in Berkeley, second to the Lakireddy family, which owns more than 1,000 units.

A sale of Equity’s Berkeley portfolio fell through in 2015 because of “lease issues,” Hyjer said at the time. At that time,  the portfolio included entitlement rights to the 205-unit Acheson Commons, a then-undeveloped project along University Avenue between Walnut Street and Shattuck Avenue.

In 2016,  Acheson Commons was sold separately to another Texas housing entity, Mill Creek Apartments, which has started construction and renamed it Modera Acheson Commons.  Mill Creek is also the developer of the proposed 18-story tower building over the current Walgreens store in downtown Berkeley, at 2190 Shattuck Ave.

Equity withdrew its other properties from the market for a while. The current portfolio was put back on the market in April, Vasbinder said. The purchase, he said, “allowed us to scale up very quickly in a market that has historically had a very high barrier to entry.”

This barrier, he explained, is high real estate prices and few available properties. Dinerstein’s nearest development is a student housing complex being built in Davis.

“We are in the process of rebranding the [Berkeley] properties,” Vasbinder said. ” The vast majority of the units are occupied and leased, so those will stay as-is. As units become vacant and available they will be released at market rents. I cant confirm pricing, sorry.”

Sterling Berkeley properties. Map: The Dinerstein Company.

The properties have gotten new names and will now be called Sterling Addison, (ArtTech) Sterling Allston, (Gaia) Sterling Haste, (Fine Arts) Sterling Jefferson, (Renaissance Villa) Sterling Oxford (Berkeleyan Apartments) and Sterling University Ave. (Touriel Building).

Jordan Klein, the economic development manager for the city of Berkeley, estimates that the sale of the six properties could result in $4.4 million in transfer taxes to Berkeley. About $1.7 million of that is attributable to Measure P, which voters adopted in 2016. That increased the amount property owners paid in transfer taxes from 1.5% t0 2.5% for property sales over $1.5 million.

Berkeleyside asked for comments from Equity Residential and Mayor Jesse Arreguín  but hadn’t heard back by publication.

This article has been updated to include new information about transfer taxes.

Kate Darby Rauch

Catherine "Kate" Rauch has been contributing to Berkeleyside for several years, and also happens to live in Berkeley, near downtown. Her work as a journalist has encompassed everything from 10 years as...

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172 Comments

  1. 12×20 space = $145.
    Parking usually underground = more cost.
    Every parking space has an equal or double the area for circulation – call it 1.5. So the parking space is actually 12×20+12×20*1.5 = 600 square feet, or about $58 per square foot for parking.

    $58 psf for parking, $400 psf for living.

    This points to the cheapest way to house homeless individuals – build a parking garage where they park their cars and SUV’s. Spaces could be rented for $300 per month.

  2. Paying for a transfer tax qualifies for their costs increasing? That applies to rent stabilized tenants too?

  3. Parking spaces are about $35,000 each and construction cost per square foot for apartments with kitchens and bathrooms, hard costs, are about $400 per square foot. Add it up!

    Who is giving out free land?

  4. The “luxury” stuff (I assume you mean nice tile, stainless front appliances, etc) adds perhaps $5,000 to the cost of each unit, which cost $400,000 to build. Not a significant factor.

    70 square foot SRO rooms with shared baths like a college dorm could get rents down to the $750 range. What part of the city is zoned for those? I own property in an R1-A area and I would build a 40 unit SRO building on it without parking if I could. SFH there now.

  5. There is nothing self-righteous about loving the character of your city, and seeing it as unique and special and wanting to preserve it. If you’ve explored Berkeley you know it is special. Why? Because previous generations cared enough to engage renowned urban planners to shape it. This is unusual in America and it is of value. I for one will fight to preserve what makes Berkeley special.

  6. All I can say is that things always look easier from the outside. It’s pretty obvious you are not in your lane.

  7. Ahh yes, if only we built an economy on the principles of Cuba, then we would be the envy of the world. Capitalism is like democracy, it’s the absolute worst way to do it, except, of course, for all the others.

  8. The market would be flooded with cheap rentals if the regulations / landlord laws in berkeley weren’t ridiculous. We have an in law unit and we wouldn’t rent it out in a million years because of the million ways we could get screwed by berkeley. No thanks. It will remain an extra unoccupied room.

  9. An engineer with a few years of experience and a customer satisfaction manager can buy that house. They might make 200K together. Go check out loan qualification websites.

  10. Where the heck is the skill level going to come from at the city level to build anything? Look at the streets! With the pension structure the way it is, the city needs to shed employees and commitments, not add them. It needs residents that don’t require any services to cover past commitments to employees.

  11. You used a years old building cost estimate for a building that is not being built, most likely because it doesn’t pencil out, and then you made up proposed financing terms out of thin air (if you find a way to lend at 1.5% when rates are really 4% that doesn’t cost anyone else anything, let me know).

    Instead, you could just admit that the economics of your proposal simply do not work. And it is the failure to grasp those fundamental economics, realities which the market apparently does really understand, that continue to allow voices like yours to derail an honest discussion of what can be done to move housing in this city forward.

  12. Apartment buildings should be concrete or steel with concrete floor plates for sound insulation and durability. This also makes them more expensive.

  13. Hardly the rent greedy landlords charging. Greedy concrete providers, greedy plumbers, electricians, etc. they could afford rent but maybe not in Berkeley- how about accepting that? In Stockton you can get a BR for $500, you work, save, getskills then move to Berkeley when you can afford it. Not here I am, house me, feed me, take care of me.

  14. But that’s not what’s happening. When was our last smog alert? The fact is is that we cannot possibly house all who desire to live in Berkeley. So enforce the laws. No camping on streets, curbs, underpasses.

  15. Good points Woolsey. Why aren’t our parks for kids? Perhaps hard lines are needed so parks are clean, bathrooms available and no parent has to worry about needle sticks, human feces, creeps. I’d vote for one who promised that.

  16. @retiredracer13 – I hate to sound trite, but if what you want could be done, it would be. There are a lot of people who would like to house everyone but no one can figure out how to do it. The new ADU law allows pretty much any single family home to add a rental unit. The market should be flooded with cheap rentals if it were possible.

  17. This comment seems to be saying that housing isn’t being built because population isn’t growing.
    In reality population isn’t growing because housing isn’t being built.
    If we built lots of housing, it would all fill up, and Berkeley’s population would grow.

  18. “As units become vacant and available they will be released at market rents…” No surprise there.

  19. Ok lets do a thought experiment. Assume that the land is free, and the developer will eat the carry costs and sell the built apartments for cost. So what is the minimum rent to cover that cost on a 30Y mortgage with property taxes and insurance. To meet a total cost of $1850, the units have to cost $275K to build (mortgage is $1313 at 4%, property taxes around $400/mo., and somehow bargain basement insurance for $100/mo.). I haven’t seen any recent developments that get cost / unit down that low. “Affordable housing” costs are about 3X that, and market rate developers come in about 1.5X that.

  20. In Europe the kids can go play in the parks (without someone shoving meth into their mouths like in People’s Park). And, they generally have lots of parks and open space available. We can’t do that here. At best, kids play in the apartment hallways. Not fun.

  21. Based on that criteria, there is no way to create new affordable housing, because it is not possible to build housing today that can support rents of $1850/mo or less. There is simply no mechanism to do so given the raw building costs, even if the land were free.

  22. Search on loopnet. Apartment buildings in Berkeley are typically small (4-10 units) and sell for about $375,000 to $700,000 per apartment. You would need rents on the order of 2500 to 5000 to get a bank to loan you money to buy this. Are you suggesting the city buy these and rent them at a loss? Just like Premier Cru?

  23. Eminent domain isn’t free. They have to pay market price. Equity wouldn’t care who bought it – the guys from Texas or the City of Berkeley.

  24. Great idea, but not feasible. It is not possible to build a 400sq foot apartment and rent it for $700 or even $1400. The cost of construction – materials and labor – are more than that. You are going to have to get a lot more creative to solve that equation. I hate to say this, but your position is exactly what we hear from people that have no idea about what they speak. I do not mean to denigrate you but you are being unrealistic. Re-read concernedresidentofearth’s post above. He/She hit the nail on the head.

  25. Because not building drives up your rents. Refreshing to see such honesty here instead of homeowners pretending that they care about affordability.

  26. Guarantee these exact same conversations are happening in those cities. We all have to do our part to address the housing crisis.

  27. Three ways to do it:
    1. Set maximum per bedroom rents of $750 or $1,000. Result: nothing gets built.
    2. Tax Berkeley residents to pay for other people’s rent. Result: 10 people get cheap rent several years from now.
    3. Change the building code and zoning to allow 70 sq foot SRO hotels, which would be worth only $750 on the open market. Result: Nobody is housed, because advocates for the poor would oppose these as being degrading; and middle income people won’t want these SRO’s near them. Result: nobody housed.

    Edit: Four ways.
    4. Wreck the city by looking the other way on crime, letting all amenities disintegrate and close them, pile on the drug addicts and mentally ill. That would lower the rent as well.

  28. Great to hear someone admit that the new apartments are filled with Berkeley students – not with commuter tech bros.
    So let’s never hear the claim again that we should not build apartments because they fill up with tech bros.

  29. To explain the joke: nimbys often claim that they are filled with tech bros who commute long distances by car -bad for the environment.
    In reality they are mostly filled with students who commute by walking and biking – good for the environment.

  30. The best way to keep rents under control? How about ignore infrastructure spending, ensure the police department is understaffed, and ensure all public spaces are scary and filled with needles and urine.

  31. The reactionaries in this town like to paint a picture of us being forced to build for evil Cal students, even more evil techies, and constantly having our hand forced by nefarious circumstances of a nasty new world order.

    This of course couldn’t be farther form the truth. We can choose to continue to build virtually nothing at all, like the last 4 decades.

    The consequence will be that the techies will eventually outbid each and every last one of you. Until Berkeley has truly become a ghetto for white $5M+ citizens. Remember to, once you arrive in your trailer out in Stockton, let us know how compatible that development was with your “Berkeley values”. We’ll ponder that while we watch the wrecking ball go to work on what used to be your home.

  32. And it never occurred to you as strange that this state with its many homeless is also the one state that has created an order of magnitude more jobs than homes over the last decades? Of course that must be a coincidence.

  33. Many != all. Read, then reply. Not the other way around. Like many American children, despite growing up in SFHs, you seem to have reading comprehension issues. Maybe your math skills make up for it. Unfortunately, the Swiss children will trump you there, despite growing up as apartment renters in 80%+ of cases. But yeah, our kids can sure eat more hotdogs. 72 is the current record I believe. There’s an accomplishment. Thank goodness for the SFH!

  34. Exactly right, Sir.

    All these self-righteous Berkleyans declaring that our town is full so eff off, like to think of themselves as mighty enlightened and progressive, yet their stance is no better than Trump when he wants a moat along the southern boarder to keep out all the brown people. Different melody, same music. Good luck keeping the orange guy company.

  35. What exactly is this affordable housing you speak of ? Is it dropped like manna from heaven ? Or is it created at great cost to others, costs which increase the price of other housing ? Because if it is that, then there is no affordable housing without a lot of market rate housing to support it, and your conclusion makes no sense.

    So please, what exactly do you mean when you say affordable housing ?

  36. These buildings are crap. A decade ago I did some tenant improvements in them. The buildings were crap then! The formula: find investors and sell the building 15 years later. Oh, convince folks this is good housing. It’s not quality housing.

  37. Berkeley unfortunately has to deal with BOTH issues. Single family homes are being taken over with tech workers. Apartments are being taken over by students who Cal has added to their enrollment without providing housing for. Both are real problems.

  38. As if the argument that the existing community should be forced to change at the whims of tech locusts is any better?

  39. I’d like to see landlord’s sue to be allowed to adopt the new CA rent control law which allows 5% increase instead of the apltry 65% of CPI berkeley increase.

  40. You also have to look at job creation which far outstrips housing. The fact that Berk has built hundreds of units is just evidence they haven’t built enough. Yes Oakland is on a tear but look at job creation in the region.

  41. Really when did you become the arbiter? You can imagine of 100 yrs ago when the area was sparsely populated and more hosing coming in – “well there goes the neighborhood.” now you’re here and want to freeze time?

  42. My gosh Google and Facebook and every other co. are “unfairly” profiting off everybody. If you want fair profit affordable housing put up the money for it through taxes and you will have it, plenty of it – not 6 units. stop reaching into private businesses pockets to build our inadequate amount of housing.

  43. You are right – prices have not gone down. Maybe it’s time to stop building these massive buildings.

  44. Not all European children grow up in apartment buildings, and not all of them turn out just fine. In what aspects do they turn out better than our SFH children? Where did you get your data?

  45. Seriously? Anyone who’s lived here more than a year knows that tech bros and wealthy students are pretty much the clientele for these apartments.

  46. Yes, but it can’t take it because a small number of people don’t like that you are doing something on your property that the law permits.

  47. As some additional commentary, The Panoramic (Kennedy’s building) has minimal common space in each unit (small kitchen and maybe room for a table or couch). Also, there is a single bathroom for four people; whereas Logan Park has two people per bathroom (two bathrooms per unit).

  48. 42k students. 31k off-campus.

    You tell me: where do you think they sleep? Cal certainly isn’t telling.

  49. Yeah? How much net income from the retail space after Tenant Improvement allowance, Leasing commissions, free rent and vacancy? Its only worth what it adds to the bottom line.

  50. I’m using $350K per. You should look at what Patrick Kennedy just built on Telegraph and also the new Logan building at Durant and Shattuck. They have two different approaches to keeping rents down but in a nutshell: small personal spaces. I just did the math. For Logan and its about 250sf per bed. Kennedy is about 169 in a 4 bedroom. More privacy in Kennedy’s. I’ve been in his building and the units are tiny.
    Both plans are online. Those are two for-profit approaches to keep rents down. Non-profits are still building larger units and just requiring more subsidy. My beef is that subsidized tenants are actually getting better units these days than for profit.

  51. Not enough research was done prior to this article going live. No mention of the affordable program? No mention of all of the retail space included in the deal? Not truly student housing as a percentage of the units are reserved for “Below Market Rate” tenants.

  52. Equity didn’t build the housing. They bought them and sold them on the open market and what the new guys paid for the properties has no bearing on what rents they can charge. Rents are set by supply and demand. Very very basic economics: Lower rents by reducing demand or increasing supply. Note there is nothing in that equation about how much Equity sold their buildings for.

  53. 343 apartments * $3000 / month is about $1 million

    To paraphrase Ross Perot, that giant sucking sound is a million dollars in rent money leaving Berkeley every month

  54. No, I don’t think that local landlords want less profit. But I do think they are more familiar with our city, and I think it’s more difficult to communicate with owners who are further away. And at least if the owners are local, some of their profit will be spent and reinvested locally (at least in theory).

  55. The city isn’t the king of all creation. We have a system of private property in this country which you enjoy. The state can’t take your property – physical or intellectual – on a whim. The private owners of land in the city can choose to use it as they see fit within rules set by the city. If the city had a hand in every private transaction – or every property transaction – how the heck would that comply with the laws of the US?

  56. The Gaia Building planned to house the Gaia Bookstore boy the bookstore went out of business before the building was completed.

  57. Beneath the veneer of progressivism, much of Berkeley has a selfish and change-averse culture, and the Berkeleyside comments section is the best window in it. “Got mine, now I’ll tell you what you can or can’t do with yours.”

  58. And I thought that all the new housing was supposedly filled with rich tech bros who pollute by driving to Silicon Valley. Now I hear they are filled with UC students who walk or bike to school.

  59. They can’t per rent control, can they? Rent board decides what rent increases are allowed and it’s pretty whimsical. And the formula is only 65% of CPI at best.

  60. To answer a few of the comments in response to my comment above:
    It’s not that it’s “up to Berkeley” in terms of “have to” , it’s “up to Berkeley” in terms of coming to terms with the fact that to build or not to build more housing is a choice that has consequences in terms of how our City will change as the years go by. I often get the impression from posters around here that not building more housing is choosing to keep Berkeley as it is. That is completely magical thinking. The world changes around us and we are at the whim of forces and trends that we have no control over. How we respond to our environment is what determines the way Berkeley will change, but there is no course of action that will keep Berkeley the same as it is now, or was ten years ago, or twenty, or forty. There is no “end” as “LongaVita” asks, the only constant is change. I can tell you as someone who has lived here for almost 50 years that Berkeley is most definitely NOT as it was in the 1970’s and 1980’s.

    The choice to not increase our population (Berkeley census is essentially unchanged 1970-2010) resulted, in combination with the trends in the Bay Area and actions by UC during the same time period, in us morphing into a town where teachers and waitstaff and other service workers can not afford to live, for the most part. This is fact. Whether those effects could have been foreseen is not worth discussing, but it is an undisputed change in the fabric of our community from what it was when I was a youth.

    To me then, the choices around growth have to do with what I think will result in a town I want to live in. I want to live again in a town where a larger number of my kid’s teachers and the folks pouring my coffee and collecting my trash, have the same connection to this local place as I do. They’ll want to keep it clean, and drive across town conscientiously, and make other decisions small and large based on the fact that it’s their town too, not just the place they work. I want to bump into people on the sidewalk and at the store, and at my kid’s school, who I know from around town. I believe that sense of pride of place in all it’s varied manifestations of our eclectic population would be a net positive if more of the people working here also lived here. THAT is the Berkeley I want to reclaim. I think lowering our skyhigh real estate and rental markets through increased supply and much more aggressive set asides for below market units is the way to accomplish that. I don’t care about angles of sunlight on my back yard, or sight-lines of iconic bridges from strategic vantage points, or creating a “mini Manhattan” (I kinda like Manhattan as a place to visit, sounds nice in a limited quantity to me).

    So should we double in size? Sure, why not. But I’d settle for 50% bigger, which is exactly how much larger the population of the greater bay area is, as well as Alameda county since 1970. If you want to stay the same, it makes sense to me to at least keep pace.

  61. Just because you claim “plenty” does not make it so. There has been neglect here for decades. We are not close to overcoming that.

    The fact that rents keep increasing is indicative of shortage. Econ 101. Really.

  62. Nonsense. Many European children grow up in apartment buildings. They turn out just fine. In fact, in several aspects they turn out a whole lot better than our SFH children.

  63. As long as there are people with this cartoonish perspective on risk/reward incentives, we are doomed to repeat these inane exchanges.

  64. It’s a basically a pot of mad money. They budget for a certain amount. Anything over that is a free for all.

  65. why not? if a buyer paid $300k for a bungalow that is now worth $1.3 million just because it is in Berkeley, then the seller should pay a hefty windfall tax and the new
    buyer, very likely a millionaire cuz who else can afford a million dollar home, should pay the extra reassessment.

  66. Berkeley has built many hundreds of units over the past several years and prices have not gone down. Oakland is building plenty of units and the prices have not gone down, on the contrary, they’ve gone up. when it comes to housing, typical market forces don’t work, on the contrary they make things worse. If you don’t believe me, look at all homeless people across the state who can’t afford the outrageous rent greedy landlords are now charging.

  67. Evacuate? In our moment of triumph?!
    Mr. Zell, 74 years old, is credited for calling the top of the real-estate market in 2007, when he sold another of his companies, Equity Office Properties Trust, to Blackstone for $23 billion, not including $16 billion in debt. Soon after, the commercial-property market crashed as prices fell and debt defaults surged.

  68. “General municipal services” covers basically everything the city does. The measure was intentionally made as vague as possible so the city could use it as a smokescreen to just pilfer the money to pay down unfunded pension debts.

  69. It is not Berkeley’s job to build itself up into a bedroom community for workers at peninsula tech companies.

  70. I look forward to welcoming our next 10000 undergraduates, filling all the housing that does, can, and will ever exist.

  71. Seriously? ALL of the money goes to deal with the “homeless”? If that’s true, the “homed” are going to have to find some way of getting attention paid to their needs, such as voting in a new mayor and town council.

  72. Or one can just as easily argue that current property owners like Equity Residential are selling and abandoning Berkeley.

  73. City government loves property turnover both for the transfer tax, and the reassessment.
    Folks, please think this over very carefully-we have a City Council that claims to want to help the poor and working class, but has taxes that add huge costs to every property that changes hands.
    Guess what-even by the Rent Stabilization Board’s rules-if landlord’s costs increase-they may pass those costs down onto the tenants. Giant Texas corporations know how to work the system to make sure they profit from investing in good old Berkeley.
    One thing is certain-they are not buying these properties for their health, or to make housing affordable.

  74. Who says so? Communities can choose whether they want to grow or not. If Late Capitalism orthodoxy now dictates that we must build housing for everyone on earth who wishes to live here, we are truly doomed.

  75. Forget Vienna, check out the Bronx. The South Bronx was destroyed by rent control. Landlords couldn’t make a profit, or even cover their costs, and consequently abandoned buildings, sold them at a loss, or burned them for the insurance. The South Bronx did become the “murder, rape, aggravated assault, and arson capital of America” (per Wiki), but at least they managed to get rid of those undesirable landlords. Also, we got the movie, “Fort Apache, the Bronx”, with Paul Newman, which was also a big benefit.

  76. Clearly you do not understand the economics of owning rental properties and it seems like you really don’t want to.

    You advocate that building housing should be profitable. Who would build a rental unit if they thought that they could never sell it? After all, who would buy it if merely owning it was not profitable. The world you imagine could only exist if everyone owned their homes and no one rented, and even then it wouldn’t work.

  77. Rising,even continuing population numbers, assure that there will never be enough. The extreme alternative is building until Berkeley is no longer Berkeley ..

  78. What purpose for the public good would be achieved with a policy to bankrupt landlords? Truly absurd on the face of it.

    It should be city policy to encourage increasing housing density to match the pace of demand (i.e. population growth) as well as developing local jobs and playing a leading role in the development of regional mass transportation that is good enough that the vast majority of people prefer public transportation over cars.

  79. You do realize that when such taxes are increased that the costs are passed on to the tenants, which increases market rents, so that everyone is adversely impacted.

    I’m surprised that residential landlords don’t follow the lead of commercial landlords, and automatically add any tax increases to the rent.

  80. When does it end? people will always want to come here…Should we double the population?

  81. Bankrupt the landlords? Well, we could always switch to having the government provide the housing. That worked so well in eastern Europe. If you get the chance – look at some of the housing built by the state in these countries.

  82. .

    To the contrary. We are the Stewards of the Bay Area. Does anything truly think this great Region is somehow going to be BETTER, if we cram still more people into it?

    I think not. In fact, it’s laughable.

    Don’t further degrade the Bay Area. If people want sprawl, they can go to LA. If they want ridiculous density, NYC. Etc.

    .

  83. .

    Probably a plus for this type of deal is that the tenants you get are upscale. No meth labs, eviction issues, etc.

    Just steady money.

    .

  84. It’s interesting – Berkeley’s mandatory set-asides have the effect of increasing the prices that builders must receive for their projects to make them pencil out. In effect, the new tenants are subsidizing the housing lottery winners.

  85. If we tear down single family houses as part of our plan to house everyone at low cost, we only end up with extremely high rise apartments–not at all pleasant to raise a family in–and the same high costs, just like Manhattan. NY has lots of high rise apartments. Did it lower their costs? No, they have even higher rents than SF because all their high-rises simply accommodated more business growth.

  86. So your plan is to tear down single family housing and put up ugly apartment blocks? No matter how many apartments and condos we build, it will have no impact whatsoever on housing and rental costs. At best we help Facebook continue expanding within the Bay area rather than going elsewhere as Mark Zuckerberg recently announced. Unless job growth is somehow curtailed or tied to new housing, prices will continue to rise to the maximum amount tolerable, which is the level at which companies–like Facebook, Apple, etc.–decide to expand elsewhere.

    Of course, builders will do well, but Berkeley will become uglified and housing costs will remain excessive.

  87. What the heck does the ownership location have to do with anything relevant? You think local landlords want less profit than people from Texas? Since the cost of living is higher here, it is probably the opposite.

  88. What the big corporate money paid for these buildings does not affect rents. Equity made money because of the lack of building, constant or increasing demand for apartments and the low rate of return on alternative investments. Please take a basic economics course. The last half of your last sentence displays a certain level of ignorance. What money was going out of our economy did not change.

  89. That’s actually super helpful.

    Could you guestimate what the per unit would have been if you kept it box like?

  90. “General municipal services” covers basically everything the city does. The measure was intentionally made as vague as possible so the city could use it as a smokescreen to just pilfer the money to pay down unfunded pension debts.

  91. What speculating are you referring to? Speculating you can sell it as a developer or speculating you can continue to raise rents?

    The high cost of buying a house is because of the limited supply and the demand for housing. There is no landlord involved in that housing situation.

    Rent is determined by supply and demand for housing just like demand for homes. Rents are not determined by how much the guys from Texas paid for their buildings.

  92. There are a lot of variables. I would suggest the monkey see – monkey do approach, initially. Find some completed projects around town of the size, quality and unit mix you are considering and contact the general contractor (not the developer) and ask what they cost to build. They should help you for marketing purposes although I have found the amount of detailed information they will give out is dependent on how busy they are and how “real” they think you are. I would probably take an architect’s opinion with a grain of salt. I would also suggest paying a builder to be involved in the design of the project because they can find efficiencies that architects might miss and when discovered down the road, it can be too late. As usual, this is one of those things that are easier the second and third time around if for no other reason than you have credibility with the people who actually know. I just finished a 19 unit 4 story wood frame project that cost just under $400K per unit. It was terribly inefficient to construct because we were trying to build a “cool” building. I could have built 22-24 units in a more box-like building and gotten that unit price down.

  93. What rent can I charge given the above numbers? I don’t do anything except a few hours of maintenance a year. I do risk the area changing and not being able to collect enough rent to cover the costs. I do have money tied up that could be doing something else. I do run the risk of the tenant causing more damage than the security deposit. I do run the risk of having the heating system fail, the land subsiding, or the next door neighbor creating a living hell. Lots of risks. What can I charge for rent?

  94. So…when I sell it I have to sell it for $305,000, and the person who buys it from me can turn around and sell it for $1,000,000 if they happen to live in it themselves?

  95. Wait, Jefferey says it’s OK for you to make a profit building housing. You’re just not allowed to make any money selling it. So you’re either going to be the landlord in perpetuity, or sell the building for no profit.

  96. Whatever they are willing to pay for it. But the city shouldn’t bend over backwards to protect you from competition which is what they do today. They should be issuing over-the-counter permits to the guy next door to you who wants to build a fourplex.

  97. I want speculating on rental housing to be a money loser.

    I want building homes to be a money maker.

    I want rent to be high enough to cover construction, renovation, maintenance, etc. Not so high that landlords get profit without doing anything.

  98. Exactly. The last thing those new Texas landlords want is competition in the form of new housing. THAT’s why this transaction is so valuable to them.

  99. That’s a disingenuous argument. If you can’t make money selling housing, you can’t make money building it either.

  100. Why the down vote? Many homeowners are hurting from the city’s constant tax proposals, while the city supports nonprofit development that cannot be taxed.

  101. The easy back of the envelope answer is that the 1970 Berkeley census shows a few single digits more population than the 2010 census. So zero population growth over the same period both Alameda county and the greater bay area showed 50% population increases. To 1st order, housing stock can be assumed to track those population numbers.

  102. How much rent can I charge for the following?

    House in Berkeley. Land acquisition cost = $105,000. Construction cost $200,000. Forgone personal income to complete this project: 2 years of income. Current costs are $1300 mortgage, $5600 per year property tax, $400 per year insurance, $300 per year utilities. How much do you think I should be able to charge a tenant for occupying this building that I created?

  103. It’s up to Berkeley to build enough housing so that the prices are not astronomical. Or, perhaps as is with the case for you, don’t build enough housing relative to the rest of the region and let housing prices go through the roof and we’ll just continue this trend of all of our teachers and waitstaff and other workers commute here from elsewhere as our servants rather than our neighbors.

  104. Didn’t AB 65 change the rules regarding ADU’s? Where did it talk about apartment buildings?

  105. I keep picturing a Texas matriarch saying “We’re setting out the good silver tonight”. Sigh, missing Patrick Kennedy (I know, he’s still here — and building!)

    It will be interesting to see the effect of the Tenant Protection Act of 2019. Some have hypothesized that landlords (especially corporate, out of state ones) will automatically apply the max allowable rent increase, which may have the effect of making the rental market less sticky. Or not. YMMV.

  106. May I suggest, then, Tin Foil Addison, (ArtTech)
    Tin Foil Allston, (Gaia) Tin Foil Haste, (Fine Arts) Tin Foil Jefferson,
    (Renaissance Villa) Tin Foil Oxford (Berkeleyan Apartments) and Tin Foil
    University Ave. (Touriel Building).

  107. I’m running a hypothetical pro forma on an 80% low income and 20% moderate income development. Thinking 2k floorplate, 5-6 stories, say 24 units total.

    Would love your guestimate as to construction costs?

    Or anything else useful 🙂

  108. The things that you consume, like food and services, are produced by someone. Producing food should be profitable. Producing housing should be profitable. Merely owning it should not be. The transaction being discussed here does not involve the production of housing. The most generous interpretation of the landlord’s role here is they maintain the structure. But under current market conditions they don’t even have sufficient incentive to do that minimal work.

  109. I was using the statewide statistics because I don’t have ready access to a time series of Berkeley housing starts. My instinct is that you’re correct.

  110. The youngest buildings in that group were completed in 2004. If they don’t fall under the Tenant Protection Act of 2019 this year, they will next year as exempted units are those that have been issued a certificate of occupancy within the previous 15 years.

  111. Should it be city policy to bankrupt farmers and food stores? Medical providers? PG&E? Because these private ventures also provide essential goods and services? Why limit your hatred to landlords?

  112. I’m not sure Measure P is set up to tax big developers with more than 100 units, although it turns out that way. It is designed to apply an extra tax to any real estate transaction over $1.5 million, which probably includes every home east of Shattuck by now.

  113. Until we start building up. We will never have enough housing in Berkeley! Way to many single family homes

  114. That makes no sense. Almost everything else we consume is affordable yet produced at a profit.

    If there is no profit in building housing, it’ll all be government owned. Or do you consider building housing to be “undesirable economic activity”?

  115. They will be temporarily exempted as new buildings. But it’s a rolling exemption. 15 years after a building is built, it loses the exemption.

    “Way above market rent.” That phrase doesn’t make any logical sense.

    Re the west coast goldrush, you’ve got it backwards. Investors are rushing in because they know Berkeley will fight new supply (their competition). People like you, who oppose housing, are the reason these investors love Berkeley.

  116. I agree with most of that except the “normal” comment. We’ve been underbuilding since way before 2005. More like the 1970s.

  117. In a historically unprecedented move, AB 68 just did away with single family home zoning and lot coverage requirements (for ADUs up to 800 sq.ft. that meet the 4 feet back/side setbacks). Apartments are going up along every commercial corridor in Berkeley. REITNation is going to take a hit next go around…

  118. As I was reading the final sentence, the transfer taxes amount looked impressive and much needed. Then I realized that I know next to nothing about the transfer tax issue and would welcome an article about the history of transfer taxes in Berkeley and how they are spent. A long well-researched article about this tax would be very welcome.

  119. $525,000 per unit is above replacement cost. The only reason this makes sense is because supply is not meeting demand and above market rents are being charged. I have two projects being planned and my target is $350,000 cost per unit. I don’t sell, but maybe I should and share the undeserved profits with the politicians and Nimbys that enabled them.

  120. That’s fine but fundamentally if owning housing is profitable then housing cannot also be affordable. Those are two necessarily opposed outcomes. Buying an apartment building _should_ have no expected value but it’s clear that these investors anticipate good returns. They are “excited”. It is a bad thing for investors to be excited about your housing market.

    There are plenty of examples of cities around the world that have made sure that being a landlord is an undesirable economic activity. Vienna is the favorite example of many urbanists. Berkeley is not one of these cities. Berkeley has instead assembled a regime under which landlords expect extremely robust returns on their investments, or superior cash flows without any investment at all.

  121. If all 5800 units were suddenly built that would be an exceptional expansion in the city housing supply. That would be 10x the normal (pre-2005) annual pace of building. But we all know that’s a superficial reading of the pipeline. This city is notorious for approving projects but then not issuing the necessary demolition permits for the old building, and other obstructions. But the main obstruction is that 99% of the land in the city is off-limits to development. That is the “long-term fundamental” facet of the Berkeley housing market that these foreign investors are so excited about.

  122. I’m guessing they going to be exempt from the new state rent control law (because they are newer buildings). The sad part is that I’ve seen some of the units in these newer developments and they are very low quality, often dark, and way above market rent. A good investment for a Texas developer. The west coast is now a Gold Rush – all the out of state developers are coming because of the bills the governor recently passed.

  123. Ugh, these name changes gross me out. Many of these buildings’ names reflect some history of the site. Touriel is the family name of the folks who owned the Darling Flower Shop, Gaia was the name of the bookstore which used to be there, Fine Arts was named for the theater (at some point XXX) that once stood there.

    And now that I’m complaining that the younguns won’t know the history they already didn’t care about, I guess I’ve cemented my status as curmudgeonly old-timer.

  124. One could just as easily say: they are “excited” to own student housing since the university has not built any housing for students in the past 50 years and will never build anywhere near enough to house all the undergrads much less grad students..And as result the city’s entire rental market is distorted and private developers can make big money serving students from wealthy families….while the poor students commute from out of town.

  125. “It should be city policy to make landlords bankrupt” I’m not sure why you believe this. Landlords aren’t inherently evil. There are lots of people who want/need rental housing, who have no interest in home ownership. When I was in school my landlord wanted to sell me the house I lived in, but it was the last thing I wanted. I wanted to focus on my studies (and other outside activities) and didn’t want to worry about leaking plumbing, wiring issues and having the house painted. There are benefits for many tenants in renting, particularly in a college town. Landlords actually do provide a needed service, and though it goes against much of the popular belief here, not all landlords are greedy misers. Some even, of their own volition, provide below market rate units to assist low income people.

  126. It seems to me the City loves to punish small-time landlords but ignores these big investment firms. Why not have some kind of tax on developers who own 100+ units? Berkeley should be leading the way in taxing the uber-rich and not punishing people who are struggling to get by.

  127. It looks like the city will reap $4,500,000 in transfer taxes for these sales. Measure P, passed in 2018, taxes trasnfers of real estate in excess of $1.5 million at 2.5% of the sales price. What will the city do with the $4.5 million windfall? Well, the city website says, “The revenues from the increased tax will be used to fund general municipal services and could be used for homeless shelters, navigation centers, mental health support, rehousing, rental subsidies, and other services for people experiencing homelessness including but not limited to homeless seniors, transition-age youth, the long-term homeless, and disabled homeless; and staffing costs associated with implementing these programs.” https://www.cityofberkeley.info/Finance/Home/Real_Property__Transfer_Tax_Seismic_Refunds.aspx

  128. See, this is the real big corporate money in the Berkeley real estate game. They are “excited” to own these apartments because they know the city of Berkeley will prevent anyone from competing with them. They know there will be no development.

    It should be city policy to make landlords bankrupt, but instead the city decries people who build houses while enabling far-away investment trusts to suck all of the money out of our economy.