Developers have found a way to bypass Berkeley’s labor standards for housing construction

“It’s unfortunate that we find ourselves here tonight witnessing the dismantling of hard-fought worker protections,” Daniel Gregg, a representative from the Nor Cal Carpenters Union, told the zoning board at a hearing last Thursday.

Members that night voted to approve a 23-story complex on University Avenue in downtown Berkeley that would be exempted from requirements to provide health insurance and apprenticeships, as well as another ordinance mandating large buildings use glass designed to prevent bird collisions.

Developers say Berkeley’s mandates would add millions of dollars in extra costs and make their projects too expensive to build. They contend California’s “density bonus” law — which allows builders to bypass local regulations if their projects include a share of affordable apartments — is on their side.

“Our former City Council adopted a set of standards that put enormous cost pressure on housing development in Berkeley,” consultant Mark Rhoades said at the same zoning board meeting. “They set the unions up for failure.”

The labor groups’ appeal will go before the City Council in February, forcing that body to choose between letting the project proceed without the labor standards many of its members voted to impose, or take on what could be a costly legal battle to enforce Berkeley’s ordinances.

Berkeley’s mandates would cost millions, developer says

The density bonus law is best known for allowing projects to exceed density and height caps in exchange for including affordable apartments — it’s why a 169-unit project the zoning board approved last month at 2425 Durant Ave., which includes 32 below market-rate units, was allowed to rise to a height of 20 stories, more than double the eight-story limit on the books for the Southside neighborhood.

But the law also entitles developers to claim exemptions from a long list of other local regulations that would drive up the cost of building housing.

The Durant Avenue project from the Berkeley firm Collab Home, which is the subject of the unions’ appeal, exempted itself from requirements to provide health care coverage and apprenticeships on job sites. The City Council created those requirements in a 2023 ordinance dubbed “HARD HATS,” or Helping Achieve Responsible Development with Healthcare and Apprenticeship Training Standards. Collab Home also seeks to bypass a mandate that projects in the Southside neighborhood pay workers a prevailing wage, a requirement the council imposed in a set of zoning changes later that same year.

Another project a couple of blocks away at 2298 Durant Ave. is using the density bonus law to claim exemptions from the health care and prevailing wage requirements as well. The 65-unit project submitted by Berkeley private equity firm Valiance Capital includes seven affordable units.

Walnut Creek-based Laconia Development submitted two versions of its project at 2029 University Ave., both of which were approved by the zoning board last week. One version has 240 units, 36 of which would be rented for below market rate, with a bigger share of studio and one-bedroom apartments; the other has larger apartments, totaling 160 units, 24 of them affordable.

Travis Brooks, an attorney for Laconia Development, wrote in a letter to the zoning board that the mandates the company sought exemption from “are exactly the sort of costly ‘development standards’ the (density bonus law) requires local agencies to eliminate when incentives are requested.”

The company contends the requirements would cost just over $5 million, on top of $8.4 million in other city, school and utility fees the project must also pay. Those estimates, which Rhoades presented to the zoning board, claim the health insurance requirement would cost $2.8 million, apprenticeships at the site would run $1.9 million and bird-safe glass would be $400,000 more expensive than conventional materials.

Rhoades, who also consulted on the 2425 Durant project, said developers can’t absorb expenses that great.

“Especially now, when construction costs are so high, financing is iffy, the economy is volatile,” he said, “it’s just another layer of cost that Berkeley has put on housing production.”

Several developers and business groups opposed the HARD HATS ordinance, which applies to projects submitted since 2024, and the San Francisco Business Times reported firms sent in a flurry of housing applications in the final weeks of 2023 to avoid being subjected to it.

If developers had to comply with the mandates, Rhoades predicted, “We would probably stop building housing in Berkeley again.”

Construction unions say developers are abusing law

Staff in Berkeley’s Planning Division agreed that the law entitled Laconia, as well as the developers of the Durant Avenue projects, to the exemptions they requested. Members of the zoning board concurred and found they wouldn’t have legal grounds to reject the project — though several said they were reluctant to approve it.

“Our hands just are tied due to the way the state has phrased this,” Zoning Adjustments Board Chair Kimberly Gaffney said shortly before voting to approve the University Avenue project. “It does make it very hard for us to deny (the project).”

(Architect Yes Duffy, who sits on the zoning board, designed and submitted the project at 2425 Durant; he was not present at the Oct. 9 meeting where it was approved, according to minutes from the meeting.)

But construction unions argue the density bonus law was meant to address limitations on the physical size and shape of projects — not the regulations that affect how they are built — and say developers can afford to comply with Berkeley’s mandates. They contend the requirements ensure construction workers do a dangerous job without risking devastating medical bills and get training to bring more people into the field.

In their appeal of the zoning board’s decision to approve the 2425 Durant Ave. project, the Building and Construction Trades Council of Alameda County and the Northern California Carpenters Regional Council ask the City Council to reject the project, approve it without granting the concessions sought by Laconia, or send the proposal back to the zoning board.

“The requested concessions are an attempted misuse of the (density bonus law) to avoid important labor standards that the city enacted to protect public health and safety,” attorneys Jolene Kramer and Andrea Matsuoka wrote.

Will City Council risk a lawsuit to uphold labor standards?

State Sen. Jesse Arreguín backed the unions’ appeal in a letter to the City Council last week, saying he is concerned by the precedent the Durant Avenue project would set, “And the impact it would have on the application of various critical labor policies the Council has adopted over the years including prevailing wage requirements and the HARD HATS Ordinance.”

Arreguín led the charge for the ordinance when he was mayor of Berkeley, announcing the legislation at a press conference flanked by construction union leaders in 2022. He launched his campaign for state Senate a few months later, and unions in the building trades were among his biggest donors.

“I never anticipated that the ordinance’s seminal requirements could be circumvented through use of the (density bonus law),” Arreguín wrote in his letter.

Rhoades said the concessions developers are entitled to under the law are not limited to physical zoning restrictions, and have been used “up and down the state” to exempt projects from local fees and mandates.

Rejecting the Durant Avenue project, or even just its exemptions, could open the city up to a lawsuit from Collab Home. Brooks’ letter to the zoning board about the University Avenue project reminded the city, none too subtly, that failing to grant its exceptions “would result in an actionable violation of state housing law,” and that Laconia could sue to reverse the city’s decision and recover attorney’s fees.

It remains to be seen whether the City Council has the appetite for that kind of fight.

Berkeley lost a similar lawsuit brought by a Yes-In-My-Backyard advocacy group over its attempt to block a housing development nearly a decade ago. More recently, the City Council backed away from an ordinance prohibiting landlords from using rent-setting algorithms earlier this year after one of the companies targeted by the legislation sued to block it.

Andreas Cluver, secretary-treasurer of the Alameda County Building and Construction Trades Council, told Berkeleyside the law isn’t clear about whether developers are entitled to the exemptions they have sought from Berkeley’s mandates, and the solution may have to come from Sacramento.

“What we’re looking at is really a legislative loophole that allows developers to circumvent these really important labor standards,” Cluver said. “Obviously we need to change state law at some point to close the loophole.”

Asked whether Arreguín plans to write any legislation to address the unions’ concerns about the density bonus law, spokesperson Stefan Elgstrand wrote in an email, “It is too early in the process to say what bills he plans on introducing.”

This story was originally published by Berkeleyside and distributed through a partnership with The Associated Press.