Oakland led the way in easing the restrictions on in-fill development and Berkeley now puts an ambitious plan forward as well. While only properties within a quarter-mile of BART stations and the existing permit areas will be exempt from adding an additional parking spot, this will quickly help address our housing crunch by providing a streamlined approach to legal second units. Do note that at least one of the units will need to be owner-occupied.
Be forewarned though – while you will no longer need an administrative use permit for the addition, the actual building permit process is often much slower than most people anticipate.
“Berkeley officials voted unanimously Tuesday night to streamline the process for homeowners who want to add secondary units — sometimes called in-law units or granny flats — to their properties.
Supporters of the draft plan say it is a sustainable approach to increasing density and will allow more local residents to age in place by cutting down on the bureaucratic hurdles tied to the construction of additions, while also making those projects cheaper.
The proposal, from Mayor Tom Bates, would allow homeowners who follow certain standards to build the units “by right,” meaning they would not need to apply for an administrative use permit prior to construction. Those permits can be costly and take a long time to make their way through the approval process. Building plans would still require review by city staff, but public hearings and neighborhood feedback would be off the table.”
Most home buyers (with help from their Realtors) quickly become adept at navigating our local school systems and identifying which properties will afford their kids the best public school education possible and safeguard the value of their investment.
How many of them, though, realize that the most commonly used measure, the Academic Performance Index (API), is based solely on a narrow band of standardized tests and, even more pertinent, has not been updated in over a year and a half as new testing based on the Common Core takes the place of our old assessments?
A change is in the works – the article linked to below details educator’s efforts to quantify a wide range of variables that demonstrate not simply how well children in a particular district or zone test at the end-of-the-year, but rather how effective our schools are at educating every child regardless of demography.
The downside? It may be at least three years before we have new tools in place to assess our institutions and advise our clients.
“There is near-universal agreement among educators and policy makers that a new system should be distinctly different from the API, which is calculated by weighting school and district scores on various subject assessments. Instead of a single number with consequences tied to end-of-year standardized tests, there should be multidimensional measures reflecting the complexities of school life and performance, including potentially hard-to-quantify indicators of school climate, as well as test scores and indicators of success in preparing students for college and career options. State board President Michael Kirst uses the analogy of gauges on a car dashboard that display oil pressure, temperature, battery capacity and mileage, each measuring different components of a car’s performance.”
Not a week goes by when I don’t hear of another potential development being entitled in the hottest Oakland neighborhoods, particularly Temescal, West Oakland and Uptown.
I’m also asked, with the same frequency, when we’ll start seeing some of that inventory arrive on the market for sale.
Odd as it may seem with our rapidly rising rents and sales prices, the answer may be “not anytime soon”; especially for the highrises. Given our constructions costs in the Bay Area, it simply doesn’t make sense to break ground on a taller building unless you are certain you can exit over $700/sf. As our sale prices are currently tapering off at well below that, our future may be in the lo-rise type of construction already prevalent in Emeryville and West Oakland, no matter what the most ardent density advocates would argue.
Unless, of course, labor and material costs come way down, and/or new modular construction techniques really do prove to be viable options.
“Paul Zeger, partner at Polaris Pacific, said stick-built townhomes need to garner $500 a square foot, mid-rise buildings need about $650 and highrises need about $700 a square foot in order to justify building.”
The big news of the week was that our mortgage giants have started a new program called “Home Possible Advantage” in which qualified homebuyers will only need 3% in order to purchase.
This puts them in a great position to compete with FHA for Buyers who want to minimize the liquid assets that are putting into an owner-occupied property. Those who have discussed this subject with me will remember that I feel the FHA’s decision over the summer to make their mortgage insurance a permanent part of the loan was a real misstep as it will force refinancings in the coming years and thereby shift interest rate risk onto the Buyers (you used to be able to shed the mortgage insurance once you gained enough equity in the property).
This new program is only available to owner-occupiers of single family homes. I’ve had questions about how this will affect the overall market; it will increase the number of potential Buyers, especially younger ones who do not have family to help with a down payment.
The debt to income ratios remain however, so purchase prices will remain firmly tied to incomes, so I don’t expect it to increase appreciation significantly.
The new 97% LTV loans will allow homeowners to purchase properties for just 3% down, a reduction from their previous requirements of 5%. Although this is only a small drop, it is the hope of these government-sponsored enterprises that by decreasing the loan amount required, more individuals will be able to purchase a home.
Studying demographics isn’t exactly on the top of the most people’s lists of ways to spend our small amount of leisure time (I’m an outlier in this regard).
It does matter if you are making investment decisions now that won’t play out for years to come, such as purchasing your first single-family home.
Regular clients know that one of my primary discussions with them prior to a purchase is how long they intend to stay in their home. These decisions have big implications, the largest probably being interest rate risk. Also very relevant, though, is keeping an eye on who will be looking to purchase your property when you decide to sell.
One of the best resources I’ve come across for this information is blogger Bill McBride, whom I’ve been reading on a daily basis for years now. For anyone unacquainted with his work, a look at his website Calculated Risk is encouraged. For a quick synopsis of some of his thinking, please see the Business Insider article on him linked below.
While I’m heartened that Bill is very encouraged by the growth in the economy and the potential support for single-family housing given the demographic trends – I still think we should keep a close eye on the income levels Millennials will be able to maintain, and whether this will be enough to support the purchase of the assets Boomers will be selling to fund their retirements.
McBride argues that currently, with so many 20-to-24-year-olds, the demographics are very favorable to apartment renting. And so of course these days, the multi-family housing sector has been leading the way. And you hear all these stories about how people aren’t into homeownership anymore. But the demographics that are currently favorable to apartments will turn into demographics favorable to homeownership, as the cohort gets older, moves into higher paying jobs, and wants more space for those new babies.
Developers seem more optimistic that funding will be available to increase our high-rise rental stock around the Lake. Let’s just hope that construction costs don’t continue to rise and scuttle these potential deals:
“High-rise development is starting to show signs of life in Oakland for the first time since the Great Recession, with a 298-unit apartment building on the brim of Lake Merritt expected to receive entitlements early next year.
Lake Merritt Boulevard Apartments, set to rise 270 feet on a vacant site on 12th Street and 2nd Avenue, needs the City Council to greenlight a redevelopment plan for the surrounding Lake Merritt BART station area this month in order to skate through environmental review.”