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The Kennedy plan for renting 100 tiny box apartments to the city for the homeless, as suggested in a Berkeleyside article, appears to be a developer boondoggle -- a wasteful use of city funds. I am completely sympathetic with the homeless plight and strongly feel that it is our moral duty to provide shelter options for the homeless. However this crisis should not be used to pad the pocketbooks of investors and developers. This is disaster capitalism at its worst – exactly what Naomi Klein warned against in her book “Shock Doctrine.” Below I outline the reasons that the city of Berkeley should not to get sucked into this developer boondoggle. 

First, consider the relative cost of this development. The developer claims it will cost $25 million to build the 100 unit structure – that is $250k for an 8 x 20 foot cell. Kennedy is claiming that the construction costs are therefore $250k/160sqft = $1562/sqft. This is 10 times the typical construction costs of $150/sq ft for wood frame construction. Even if we doubled these typical construction costs to adjust for higher labor and material costs in the bay area, Kennedy is charging 5 times the going construction rate. 

What is really happening here is either the developer is fudging the numbers about the actual costs or he has constructed shell companies, with investors taking a cut at each phase of construction, in order to create the illusion that costs are >$1500/sqft. The actual return to his investors will likely be 5 times his claimed 5% return – more like a ~25% return on investment. 

This is an investor’s wet dream since the wealth extraction is from a city and therefore entails no risk. The developer can claim high capital costs and rapidly depreciate these claimed costs, effectively reducing his capital gains from rentier extraction – more tax-cheating wealth extraction from the public. In addition, since the developer will not be paying property taxes (since he is just leasing the boxes to the city), there is no long term return to the city on this for-profit capital development. 

In the Berkeleyside article, there was no discussion of management fees or utility costs. Who will pay these? 

Lastly, the city will pay this rent independent of whether the units are actually housing people. This project looks like premium rent extraction from the city – a bad deal for the citizens of Berkeley.  

Second, consider the requirement of the city providing public land, at no cost, for this “for-profit” venture. This is effectively a giveaway of the commons to private developers. 

This was the basic problem with the Bates Administration and why the Council was changed. For the last several years we saw giveaways to developers in the form of discounts and delays in implementing new fees on developers. This venture, Kennedy’s homeless boxes, sounds like the same type of backroom deal making. I hope that Council members are not in on this boondoggle.  

Since the developer will not be paying property taxes (since he is just leasing the boxes to the city), there is no long term return to the city on this for-profit capital development. For the developers, this is the perfect arrangement. The city provides cost-free access to public land – it is a total boondoggle for the developer – as are all land giveaways. 

Please don’t support this crony capitalism. Public land should be used for the public benefit and remain in the public domain. If housing is needed, public land should be used to create public housing by non-profits with the city retaining ownership. Such public ownership provides a check on the ever increasing rents and housing prices driven by a housing bubble economy. This unstable investor-driven bubble can be stabilized by a relatively small amount of public housing combined with rent control. 

Third, the issue of homelessness should be divorced from the issue of low cost housing -- or from any attempts to create more student level housing which should be the job of the University. Market rate housing (the Kennedy micro boxes appear to be more costly than market rate) has no role to play in housing the homeless. 

Homelessness should not be considered a permanent state requiring city funded for-profit construction of permanent housing. For some, homelessness is a temporary state requiring public aid and shelter until people can recover from a financial disaster. For others who are permanently disabled, it should be a temporary state until some sort of permanent assisted living is made available through public social safety nets. And for those who are incapable of working due to mental disabilities or addictions, it should be a temporary state requiring shelter while they are encouraged to seek out help through other social services to help them recover. Temporary shelters should not require the city to invest in a profit making venture. Below I outline what I think should be done in the short term. The long term solutions should be resolved by trained professional social workers, architectural experts from non-profits, and by representatives of the homeless. 

If the city wants to help the homeless, the first thing to do is to stop the police raids that threaten their lives by taking away the few possessions that are keeping them alive. 

Second, the city should provide several safe locations where the homeless can camp with no fear of attacks until better shelters can be found. 

Third, the city should construct permanent facilities needed by the homeless – public bathrooms located throughout the city – bathrooms not only for the homeless but for the public at large. These should be maintained at a standard the pubic expects – like our parks. As part of the infrastructure needed to deal with the homeless and make their lives tolerable, the city should also construct public showers and laundry facilities that are tied to homeless service outreach. These might also include areas where food could be prepared. These services should be free. 

Fourth, the city should contract to non-profits to develop low cost solutions to provide better spaces with safe and secure shelters for the homeless. These shelters need not duplicate the public facilities (bathrooms, showers, laundry) already created and therefore can be had at much lower cost. 

Fifth, solving this problem will require multiple solutions because the homeless are not monolithic. For some homeless, a temporary camping area near a public bathroom may be adequate. For others with disabilities and no means of support, permanent facilities with a support structure may be required as part of the social safety net. For others tiny houses on wheels with no plumbing, or even minimalist stacked shipping containers with access stairs, could provide a better solution then camping under bridges or in doorways. 

In all these cases, the social workers and city representatives should be inclusive in talking to the homeless so that they buy into the solutions. There is no point in coming up with a top-down solutions and attempting to impose them on the homeless. An authoritarian, top-down response will likely result in the homeless resisting any such solutions. 

Lastly, we may have to accept that even after the multiple solutions discussed above are completed, this will not cover everyone. You can’t force everyone to act in a manner deemed suitable by society. What we can do is create paths to help them exit their homeless state or to provide them with some level of dignity if they are in a permanent state of poverty. These solutions should be designed to help those who are asking for help and willing to accept it on their terms. This starts by bringing the homeless into the discussion in efforts to find solutions. 

Finally, a word about the skyrocketing costs of Berkeley housing. This is a separate issue from providing shelter for the homeless. If the city wants to construct low cost housing to hold down rents for the public, it should not be subsidizing higher than market rate micro-housing. The only way to control long term housing costs is to develop true public housing that is owned by the city and provides a check on market-rate development. And as regards the economy of Berkeley, why would the city participate in a venture that ships our construction jobs to China? If the city is to solve the housing crisis for the lower and middle income citizens, it should also think about using this effort to create local jobs which will boost the local economy. Again, non-profits will provide the best solutions. 

Finally, I toured the tiny box apartment sitting across from Berkeley High School. If anything these tiny boxes appear to be more suitable as studio apartments for student housing. If these boxes are such a great value, why isn’t the UC Berkeley Administration forming a joint venture with Kennedy to construct such housing? I suspect it is because the university has access to architects and economists who can do the calculations and demonstrate it is a bad deal. The university probably knows that long term student housing is much less expensive when using standard construction methods and UC ownership rather than the rentier solution proposed by Kennedy. 

I’ve talked to six architects to ask their opinions – and they all suggested it was a boondoggle. For comparison, one can purchase a trailer with roughly the same dimensions and same level of interior accessories for about $25,000 – one tenth the cost. One could construct a parking garage and park the trailers in that garage for about one fifth the cost. The Kennedy plan is a boondoggle. This deal looks so lucrative for the developer, that the Council should investigate who is backing this plan and look for some sort of kickback or quid pro quo. The entire deal smells of corruption.