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If you think the housing crisis is bad in Berkeley, consider that it could be worse. You might live Vancouver, British Columbia. There, as here, vacancy rates are stubbornly low. Prices are well outside the range of affordability for a majority of working class people.

This year, Vancouver will break ground on a new project to produce 358 units of permanently affordable housing. If all goes as planned, move-ins will start next year. The project will be fully built in 2018. Vancouver will have: 

• 358 new, permanently affordable rental units on multiple sites
• on land owned by the City of Vancouver
• the buildings also will, in the end, be City-owned
• established non-profits will manage the units as landlord rents will range from 23% to 90% of market rate
• aggregate rents wil be 76% of market of market rate
• the project will not use money from the national or provincial government
• the project is privately, not publicly financed - taxpayers are not on the hook
• the project will not require external subsidies
• the project will produce a modest surplus to repay investors
• the project will produce a surplus that will go to the city itself

All it takes is a City government smart enough to organize the projects. 

I was tinkering with math for the "Vancouver model" of affordable housing financing, as applied to Berkeley. I considered the case of buying existing apartments in Berkeley, rather than building new ones. I think the numbers are encouraging -- we shouldn't need to raise taxes or depend on large amounts of state and federal money: 

To pick a target for revenue goals, I noticed that the Berkeley Tenant Union site says $5M per year could be leveraged to build or buy/rehab at least 40 units per year. What would it take for the City of Berkeley to generate $5M in revenue using something like the Vancouver model? 

I used this web site to get a rough-and-ready estimate of the current price of existing apartment buildings, and their expected net income: 

http://www.loopnet.com/California/Berkeley_Apartment-Buildings-For-Sale/ 

Conservatively speaking, the current purchase price is around $250,000 per unit for apartment buildings. The net operating income from them is around 5% of the price (so, $250,000 x 0.05 = $12,500 net income per unit). 

Half of the average net income is $6,250. 

$5M dollars per year, the goal of the tax, is 800 x $6,250. 

That implies that if the city owned 800 apartment units, and (with the help of the housing agencies) rented them out as ordinary rent-stabilized apartments, the city would have at least $5M in "profit" every year to spend on building or buying/fixing additional units. 

Example: A current listing for 1132 Parker St says the total price for 6 units is $1,615,000. The price per unit is about $270,000. The alleged cap rate 5.60% 

What kind of down-payment might the City make on such a property? 

The Berkeley Tenant Union says that it needs $125,000 per unit to kick-start new housing. Let's use that. A down-payment for 6 units, let's assume, would be $750,000. (That is, 6 times $125,000.) 

For that building on Parker St., a $750,000 down-payment plus a regular retail mortgage for $865,000 could buy that building with monthly payments low enough that the city could easily claim back 2.5% of net operating income. 

In other words, if the deal were run properly, the City would have an operating profit from the first day, given just the outlay of the down-payment. The city would be getting $40,375 per year. 

That's about a 5% return on the $750,000 deposit in the first year. 

In this same scenario, that Parker St. building, 5 units that are NOT currently rent stabilized would BECOME rent stabilized, assuming the City chose to run its own units as rent stabilized units. 

The total purchase price for a full 800 units would be $200,000,000. The money down, assuming $125,000 per unit, would be half that or $100M. 

800 units would represent a little over 3% of all apartment unis in Berkeley, at the moment. 

If the city were to run 80 out of the 800 units not as rent stabilized, but as market rate units, my back-of-an-envelope says Berkeley could borrow the $100M without needing to raise taxes. 

Some links: 

"Innovative use of City land to deliver new affordable rental housing" -- Vancouver Mayor's Office 

http://www.mayorofvancouver.ca/355newaffordable 

"New partnerships could help ease Vancouver housing crunch: UBC study" -- UBC media release 

http://news.ubc.ca/2015/07/16/new-partnerships-could-help-ease-vancouver-housing-crunch-ubc-study/