The Oakland City Council voted on April 19 to approve an un-tested, geographically inconsistent and slowly phased-in affordable housing impact fee that will worsen displacement pressures on Oakland residents — the very pressures that recently led the city to declare a housing emergency. The fee on market-rate housing developments is estimated to raise as much as $66 million over ten years for affordable housing. The fee is justified on the grounds that new market-rate housing generates demand for more affordable housing also, but because the private market isn't building affordable housing, the government collects a fee from developers to fund new affordable projects. Without the fees, only market-rate housing gets built, and rents for the lowest income earners would continue to rise as demand for affordable homes outstrips supply.
But Oakland is not following established models for successful impact fee programs. No existing affordable housing impact fee program resembles what was adopted by the city council. Of utmost concern is that the council has divided Oakland into three separate zones with different fee levels.
Zone 3 raises the biggest questions about equity. Zone 3 covers the vast majority of East Oakland and is home to the largest share of Oakland's residents of color. City staff argues that this area of Oakland is the least desirable to developers and fees will only make investment there less likely, so the council waived the fee entirely for three years. When fully implemented in 2020, the final Zone 3 impact fee will only be $13,000, about half of the Zone 1 fee of $24,000. Zone 1 covers downtown, parts of North Oakland and the Oakland Hills — areas considered most desirable for new market-rate development.
This decision ignores why East Oakland is so undesirable to developers: decades of discrimination and institutional abandonment by government and investors in communities of color. The city council believes they will reverse this history of redlining by offering what is tantamount to a developer subsidy. In Zone 3, developers can skirt responsibility for the impact created by market rate development in an area that is home to the largest population of residents at risk of displacement. But city staff has failed to provide evidence for the viability of this zone model, and no other Bay Area city has an impact fee with geographically separate prices.
Furthermore, the policy adopted by the city council supports the stance that rents in Oakland must necessarily become on par with rents in San Francisco, by far the nation's most expensive housing market. In fact, the city's report on the impact fee states the "proposal would require higher rent increases than are projected to occur over the short time period proposed for implementing the new fees." The city is collecting the fee to mitigate the impact of displacement, but will incentivize development in East Oakland that will not pay its fair share for the displacement it will certainly produce.
In the past eighteen months alone, Oakland's rents have increased nearly 40 percent — the highest in the Bay Area. As San Francisco proves, increasing the supply of market-rate development alone does not reduce spikes in rental prices. Astronomical rent increases in Oakland's once-affordable market are the largest contributor to the city's loss of a quarter of its Black residents over the past decade.
Market-rate rents are currently far above what most East Oakland households can afford, and although rents have not risen as high in Castlemont as in the Jack London District, the reality is that new developments in the central city have produced spillover rent spikes citywide.
Our communities are in dire need of solutions that holistically address the crisis, not ones that fan the flames. Oakland renters make up 60 percent of the city's residents, and half of all Oakland renters would have to spend 73 percent or more of their income to rent a market-rate apartment in Oakland. Policies explicitly aimed at putting upward pressure on rents under the guise of increasing supply only add to the displacement pressure faced by Oakland's most vulnerable residents. While the $66 million the impact fee might collect could pay for up to 600 units of affordable housing, current estimates show that up to 1,000 eviction notices are filed every month in Oakland. The anticipated benefit is a drop in the bucket, while the costs are diminished diversity and increased homelessness.