Publicly owned land is a precious resource. And that's especially true in Oakland, where every inch of real estate is becoming more valuable as the housing shortage deepens. For that reason, the city's decision to sell a prime piece of taxpayer-owned property along Lake Merritt to a housing developer is good idea — at least on the surface. The problem, however, is that the city's process for selling the land has been flawed, and the tentative deal it has struck with developer UrbanCore, LLC, shortchanges the public.
As we noted in a news story last week, city officials failed to use a public bidding process for the parcel on East 12th Street between 1st and 2nd avenues in 2012 (see "A Parcel for the People?"). Instead, in a closed-door meeting in December of that year, the city council decided to privately solicit bids from only three developers — including UrbanCore — that had previously expressed interest in the land. As a result, the city has no idea whether other housing developers are now interested in buying the property, and so it's not clear whether the proposed deal to sell the land to UrbanCore for $4.57 million is the best deal available.
Moreover, the city solicited the private bids more than 27 months ago — well before the housing market in Oakland turned red hot. Today, developers are increasingly looking to build in Oakland, so there's a strong possibility that a deal more favorable to the city is now available.
It's also bad public policy to privately solicit bids in backroom deals for taxpayer-owned property. If the city council wants to sell public land, then it should put it out for public bidding — just like what happens in the regular real estate market — to ensure that taxpayers are getting the best deal possible. Anything short of that is an abdication of the council's sworn responsibility to safeguard the city's money and its assets.
Affordable housing advocates are also opposing the deal because UrbanCore plans to exclusively build luxury apartments for upper-middle income and wealthy people. A one-bedroom apartment in the 24-story, 298-unit tower is expected to cost $3,150 a month — which is far more than most Oaklanders can afford.
Now, there's a strong argument to be made that Oakland desperately needs more housing at all price levels — for lower-, middle-, and upper-income residents. The housing shortage in the city is impacting everyone. Lake Merritt, the city's crown jewel, is also a logical spot for more market-rate housing.
But having said that, there's definitely room for improvement in the deal with UrbanCore. At minimum, the city should be demanding that the developer provide community benefits, such as hiring local construction workers and paying the prevailing wage. In addition, the city should negotiate with Urban Core to either build some affordable housing onsite or at least fund the construction of it elsewhere. And if UrbanCore refuses, then the city should put the parcel out to public bid — like it should have done in the first place.
Normally, it's difficult to require developers to build or pay for affordable housing. But Oakland has leverage in this case — and the ability to attach strings to the deal — because it's selling public land.
Some city officials have argued that Oakland should close the deal now — and not risk the possibility of Urban Core backing out — because the city needs the $4.6 million to fill a budget hole. But that's also bad policymaking. The city should not be in the business of selling off public assets to solve its structural budget problems.
Other proponents of the deal, meanwhile, have argued that Oakland should sign the deal as is, because the city can't afford to wait to build more housing. But making hasty decisions about a valuable public asset is a mistake. Moreover, it sells Oakland short. Oakland is now one of the hottest places to live in the country, and city officials need to stop acting as if it were some undesirable backwater.
In an interview earlier this week, Mayor Libby Schaaf said her administration is in negotiations with UrbanCore to get a better deal for the city. "I don't think it's too late to get community benefits out of this process," she said. She also said that she's convinced that UrbanCore's CEO Michael Johnson, a longtime Oakland resident, is committed to doing what's best for the city. "It's not like he's some out-of-town developer."
In addition to a commitment to hire Oakland residents and pay prevailing wages, Schaaf wants UrbanCore to finance an extensive outreach campaign to neighborhood residents, informing them of Oakland's tenant protection laws. Many of the older buildings in the area are covered by the city's rent control ordinance — but tenants often don't realize that.
The mayor also said she's considering putting some of the proceeds of the sale into the city's affordable housing fund in order to finance affordable units in other parts of the city. That's a good idea, but UrbanCore should do more than that — after all, it's getting a private deal for prime public land.
And one final point: Schaaf and the city must demand that UrbanCore and its financiers pay cash for the property. As we noted in last week's story, Johnson has a history of not paying his real estate debts to public agencies. As of last month, he and his partners still owed the City of San Francisco more than $2 million in unpaid loans, interest, and penalties from a 2010 housing deal.