The city of Oakland is witnessing a significant increase in the construction of affordable housing, a trend that has not been observed in over a decade. According to a recent housing progress report, the city issued permits for around 700 low-income homes and 100 moderate-income units in the past year. Oakland also completed construction on 681 new affordable apartments and various other housing types.
This surge marks a stark contrast to previous years, notably 2016 when only 39 affordable homes were permitted. The rise in affordable housing construction can be attributed to several factors, starting with the 2022 election where Measure U was passed. This bond measure allowed the city to raise $350 million specifically allocated for the construction and preservation of affordable housing, representing the largest fund of its kind in Oakland’s history.
Emily Weinstein, director of Oakland’s Housing and Community Development Department, stated that the current number of low-income units reflects the positive impact of having resources dedicated to housing development. As of now, there are 25 affordable housing projects in the city’s pipeline that could deliver over 2,000 additional apartments once funding becomes available. Weinstein emphasized that the main hurdle is not the lack of project proposals but rather overcoming financial obstacles to secure funding.
The costs associated with constructing a single apartment range from $800,000 to $1 million. Developers of affordable housing typically rely on a mix of funding sources, which may include state and federal tax credits, city subsidies, and larger state grants or loans. The financial backing from Measure U has substantially amplified the funding resources available to Oakland.
While affordable housing production has increased, the construction of market-rate housing has significantly dropped. The once bustling scene of cranes on Broadway has faded, and developers are hesitant to secure permits for new market-rate projects. This downturn in private development is not unique to Oakland; it is driven by various factors including rising construction costs, elevated interest rates, reduced rental demand due to an oversupply, and ongoing concerns regarding crime in the city.
Moreover, builders have raised concerns about the city’s slow permitting process, which has added to the complexity of development in Oakland. Interestingly, for the first time in at least ten years, the city permitted more affordable housing units than market-rate ones in 2024.
In a broader context, Oakland is achieving notable success in overall housing construction. In the previous year, the city completed a total of 2,249 housing units spanning various price ranges, accounting for approximately 45% of all housing constructed in Alameda County despite Oakland housing only 26% of the county’s residents. This achievement highlights a remarkable outflow of housing production when compared with neighboring cities like Berkeley and Newark.
Since the onset of the pandemic, Oakland has constructed nearly 14,000 new housing units, which equates to almost half the total homes in Alameda, or approximately a quarter of Berkeley’s entire housing supply, according to Caleb Smith, a senior policy analyst for the city’s housing department. Much of this uptick can be attributed to a building boom prior to the pandemic, primarily driven by market forces. Weinstein also noted that specific city plans, such as the Broadway Valdez District Specific Plan, played a pivotal role in encouraging development in targeted neighborhoods.
Currently, market rents in Oakland are slightly lower compared to past years, with higher vacancy rates attributed to the increase in housing supply. However, Weinstein cautioned that the market alone is not sufficient to adequately address the need for extremely-low and low-income rentals. The city’s role is crucial, as it focuses on subsidizing housing for low- and moderate-income residents but does not extend support to market-rate developments.
With targeted initiatives in place, Oakland aims to confront its ambitious housing goals moving forward. State mandates require the city to plan for the construction of roughly 26,000 new housing units by 2031, encompassing various affordability levels. Unfortunately, the city is lagging behind on these targets, having produced only 2,902 homes so far in the current cycle. Weinstein described these mandates as a “biggest unfunded mandate” that the city faces, emphasizing that reaching the set goals remains challenging due to limited affordable housing financing and market constraints.
Additionally, the city’s housing officials argue that the current methods for distributing state tax credits are flawed. Despite the state’s intentions to fund affordable housing in high-opportunity areas, several neighborhoods in Oakland rich in resources do not qualify.
As discussions continue regarding the future of affordable housing in Oakland, the question remains whether the current pace of affordable construction can be maintained. There is still $140 million from Measure U that has yet to be allocated. On the market-rate side, project entitlements—the necessary approvals that allow developers to seek building permits—have also seen an uptick in 2024, suggesting that developers may be anticipating an improvement in the market in the near future.
As Oakland eyes the potential distribution of revenue from Measure W, a county sales tax aimed at addressing the homelessness crisis, the city stands at a crossroads where the next steps will be critical in shaping its housing landscape. The anticipation surrounding these funds hints at evolving dynamics in real estate development as the city strives to strike a balance between affordable housing needs and the complexities of market-rate projects.
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