A housing construction site in downtown Berkeley
A construction site in downtown Berkeley. Credit: Kelly Sullivan

State regulators rejected Berkeley’s eight-year housing plan this week, with a letter telling the city to go further in its planned work to upzone wealthy neighborhoods and make other changes to prove it can plan for nearly 9,000 new homes by 2031.

The decision by officials in California’s Department of Housing and Community Development means Berkeley has missed the deadline Tuesday to put in place a plan, known as a Housing Element, that state officials judge to be a realistic roadmap for meeting ambitious growth targets.

The state has signed off on only two Bay Area cities’ Housing Elements, those in Alameda and San Francisco, meaning Berkeley and scores of other local governments that haven’t been approved are now in an uncertain position.

Cities have been warned that missing the deadline could have drastic consequences, including a provision in state law that strips them of practically all zoning authority. Under the penalty called the “builder’s remedy,” developers can get approval for housing projects of any size in cities that don’t have a compliant Housing Element, so long as at least 20% of units in the building are affordable.

A spokesperson for the Department of Housing and Community Development indicated Berkeley is now subject to the penalty. Many advocates who want the city to build significantly more housing agree.

But Berkeley’s planning director contends the city is not subject to it. And Ben Metcalf, the managing director of UC Berkeley’s Terner Center for Housing Innovation, said a judge would likely side with the city if a developer tried to propose a project by invoking the penalty.

“I think a builder would be crazy to try to act under the builder’s remedy” in Berkeley, Metcalf said, “and I don’t think anybody will.”

What seems clearer from the letter regulators sent the city Monday is that the state expects Berkeley to make further changes to its Housing Element beyond the commitment the City Council made last month to zoning for more density along major streets in North Berkeley and the Elmwood District.

“What we’re seeing in this Jan. 30 letter is, in fact, that the amendments that I introduced didn’t go far enough,” said Councilmember Rashi Kesarwani.

State demands firmer commitments to building in wealthy areas

The four-page letter signed by Housing and Community Development Senior Program Manager Paul McDougall takes issue with Berkeley’s plans on several fronts. Still, Metcalf said that compared to other California cities — many of which have gotten longer letters from the department laying out more significant problems with their plans — Berkeley appears fairly close to getting state approval.

“If you grade on a curve here, they’re doing pretty well,” he said.

McDougall wrote that Berkeley must provide more specificity about its plans for rezoning wealthy neighborhoods, such as by setting targets for the number of new homes built in those areas. The letter also told Berkeley that its Housing Element should include a commitment to evaluate progress toward meeting its goals in future years, and make more changes to its policies if the city falls behind.

Metcalf said those are significant directives, sending a message to the city that “HCD is going to keep looking over your shoulder” over the next eight years.

“This isn’t just a planning process, this is actually a performance standard,” Metcalf said.

McDougall also told Berkeley to improve its processes for handling housing applications, and better justify its claims for where new projects can be built.

Housing Elements must include an inventory of the properties city officials believe could be turned into new homes; in Berkeley, like other cities, that inventory includes some vacant lots and other properties currently occupied by businesses. Critics allege that cities often list occupied sites to falsely claim they have enough capacity for new housing without changing zoning rules, when they actually don’t.

In his letter, McDougall, in effect, told Berkeley to lay out more evidence for why it believes enough of those occupied sites will be redeveloped as housing. And, if that extra analysis shows the city doesn’t have the capacity to meet its housing mandate, the city could have to change its zoning to make up the difference.

Planning Director Jordan Klein has long maintained that Berkeley does not need to change its zoning rules to comply with the mandate to plan for 8,934 new homes by 2031, but that the city is taking on work to zone for greater density in practically every neighborhood anyway.

In an emailed statement Wednesday, Klein wrote that planning staff are now “carefully evaluating” the letter to determine how Berkeley will proceed.

‘Builder’s remedy,’ an untested, but potentially powerful tool

HCD spokeswoman Alicia Murillo wrote in a statement that developers could invoke the “builder’s remedy” provision in any Bay Area city that the agency has not declared in compliance by Tuesday’s deadline. She didn’t specifically mention Berkeley in the statement, but it fits that definition.

Matthew Lewis, a spokesman for California YIMBY who emphasized that he was speaking in his personal capacity as a Berkeley resident, said his understanding of state law is that the city is now subject to the builder’s remedy; Ben Gould, an advocate with the pro-density group Berkeley Neighbors for Housing and Climate Action, said the same.

But Klein said the city’s stance is that, with the amendments made by the council last month, Berkeley’s Housing Element is “substantially compliant” with state law — and therefore it is not subject to the builder’s remedy. HCD’s letter to Berkeley was in response to a draft of the Housing Element that Berkeley submitted last November, Klein wrote, and did not address the city’s finding that it is substantially compliant.

“The city will seek additional clarification from HCD to determine what improvements may be necessary to achieve state certification beyond local findings of substantial compliance,” Klein wrote. “The city will continue to work to achieve state certification as quickly as possible.”

If a developer decides to test the city’s argument, housing experts and advocates agree the question would almost certainly wind up in a legal battle.

“Before it’s been adjudicated, I don’t think anyone can say they know for sure what’s going to happen with the builder’s remedy,” Lewis said.

Metcalf’s interpretation was that Berkeley stands a good chance of prevailing in a court case over the provision because of language in the letter that appears to grant the city 120 days to make further changes to its plans.

The differing interpretations of what the state’s letter means for Berkeley’s local zoning authority are a testament to this unprecedented moment in California’s housing crisis.

For decades, local governments submitted Housing Elements that faced little scrutiny from state regulators. As the Department of Housing and Community Development toughens its standards for approval with this round of housing plans, though, untested factors like the builder’s remedy are coming into play.

The Los Angeles Times reported in October that developers proposed thousands of new apartments in Santa Monica by invoking the penalty after state officials shot down that city’s housing plan.

Metcalf was skeptical, though, that Berkeley would see a similar rush. He noted that even if developers know they can invoke the builder’s remedy, they still face hurdles to getting projects built, including requirements for potentially lengthy environmental reviews, that might discourage them.

And developers might also make a political calculation that trying to invoke the penalty, and taking their fight to a courtroom, isn’t worth the ill will it could buy them with local governments.

Metcalf said developers likely figured there was little cost to using the builder’s remedy in Santa Monica, figuring that the city was unlikely to ever approve their projects under normal circumstances. In Berkeley, which builders see as more welcoming to bigger and taller apartment projects, he said they might decide “it just would not make sense to get cross-wise with [the city] if you don’t need to.”

Nico Savidge joined Berkeleyside in 2021 as a senior reporter covering city hall. Born and raised in Berkeley, he got his start in journalism at Youth Radio as a high-schooler in the mid-2000s. Since then,...