Why hasn’t UC Berkeley built more student housing?

UC Berkeley does not maintain historical data on the number of students living in university housing by year. The chart above gives a rough picture. The individual data points come from a number of sources, including Clark Kerr’s memoir, a history of the UC system, statistics provided by Cal, articles in the Daily Cal, and Berkeleyside’s own calculations.

The tension between the rising number of students and the lack of housing boiled over in February in a neighborhood lawsuit that drew national attention. Save Berkeley’s Neighborhoods sued UC Berkeley in 2019 over an environmental impact report the university did for a housing project on Hearst Avenue. The university folded an examination of a five-fold enrollment increase between 2005 and 2018 into the EIR, prompting an Alameda County Superior Court judge to say Cal “abused” its discretion for the way it addressed the study. The judge then capped enrollment for the fall of 2022 at the 2020-21 levels. 

After failing to challenge the court ruling in a timely fashion, UC Berkeley announced in February that it would have to curtail the number of admissions offers it made for the fall. The notion that 5,000 high school students would pay the price for the fight over development by not being offered a place at Cal incensed state lawmakers. In March, the Legislature passed an amendment to the state’s environmental law, CEQA, in record time that essentially negated the enrollment cap. The California Court of Appeal will consider the suit later this year.

There is a glimmer of hope, though. A change authorized in January 2021 by the Board of Regents will help, but not solve, UC Berkeley’s decades-in-the-making student housing shortage. The Regents amended the University of California’s debt policy to give each campus more flexibility in issuing something known as limited project revenue bonds. They are used to raise funds for “auxiliary” projects such as dorms, athletic facilities and museums that generate sufficient revenue to pay for themselves. The change will make it easier for UC Berkeley to raise capital to pay for new housing projects.

“Prior to this policy change a year and a half ago, it would have been really difficult for us to have put the financing together for a housing project because we couldn’t meet the test of the debt capacity,” said Rosemarie Rae, the campus’ chief financial officer and vice-chancellor of finance. “The project revenue bonds now give us more ability to make progress on housing.”

Post-WWII enrollment boom prompts Cal to build more housing

The end of World War II both brought more GIs to campus and sparked a baby boom that would result in higher student enrollment once those children came to college. 

In 1944, the Regents accepted federal funds for the first time and built temporary housing for 700 at the Smyth-Fernald tract, rented war-time apartments the federal government had built at the Gill Tract in Albany, and leased apartments from the Housing Authority of Richmond. But the Regents didn’t develop other plans to expand residential offerings. There was an informal compact with the city of Berkeley at the time not to compete with rooming houses, Kerr wrote.

But in 1948, the Alumni Association published an influential report, “Students at Berkeley,” that recommended the construction of more student housing. “To put it bluntly, the student body is not served outside the classroom in a manner consonant with the size and importance of the University,” the report concluded, according to Kerr. 

No action was taken until Kerr was appointed UC Berkeley’s first chancellor in 1952, he wrote. It was becoming increasingly clear that other universities were attracting students because they could live on or near campus, he said. At that point, UC Berkeley only housed 4.8% of its students while Stanford housed 36% of its students and the University of Michigan, modeled on the English system, housed 49.4% of its students, wrote Kerr.

Kerr became convinced that the German model was no longer serving the University of California and that the system had to cater to the “total student” — their housing, dining, and social needs — not just their academic success. He initiated UC Berkeley’s first long-range development plan which called for the creation of 4,800 student beds as well a student union and performance hall. The Regents approved the plan in August 1956. Kerr was appointed president of the UC system in 1957 and a year later gave a speech about his embrace of the university’s new approach.

“This statement was my formal repudiation … of the German approach and support for the English model,” Kerr wrote in The Gold and the Blue.

California’s financial retreat 

Building more housing became more difficult because the university had less money.

In the Golden Age of Clark Kerr, California contributed as much as two-thirds of the University of California’s budget. But as UC added more schools, eventually growing to 10 campuses, that percentage dropped. In the 1980s, about half of Berkeley’s funding came from the state. By 2016, that had dropped to 13%. In sheer numbers, Cal saw its state support drop by 53%, from $575 million in 2002 to $269 million in 2012. (It has since increased to $430 million.)

In addition, California changed the way UC could raise funds through debt financing, or bonds. 

For many decades, California sold general obligation bonds backed by state revenues to raise funds for UC. But the state stopped doing that in 2006, handing responsibility for selling bonds to the UC system, said Rae.

After that, the University of California system started to issue general revenue bonds, secured by the revenues of campuses, including tuition, donations and other unrestricted funds, as well as a state allocation to pay for debt service, according to Rae. General revenue bonds are used to finance projects critical to UC’s core mission of education and research. But instead of having the resources of the state to guarantee the bonds, they were backed by UC’s now declining revenues. 

In 2004, UC decided that campuses should finance so-called auxiliary projects like housing by the sale of another kind of bond, the limited revenue project bond. Each campus was allotted a certain amount of debt they could carry.

The 2008 recession hit California’s revenues hard. The state’s retreat from supporting UC destabilized UC Berkeley’s finances and made it much more difficult to raise money to pay for major projects.

“What that did to our financial statement was what prohibited us from our ability to issue more debt,” said Rae.

In addition, UC Berkeley lost other levers to raise revenue.

To make up for the declining revenue, UC, for a time, raised tuition and fees, until student pushback and a deal worked out by then-Gov. Jerry Brown and then-UC President Janet Napolitano paused the increases in 2011 for five years. Brown then extended that freeze until 2017-18. To help make up for the drop, the Board of Regents ordered UC Berkeley to accept more students, including out-of-state students who pay three times higher tuition. Cal increased its student enrollment by 11,285 students between 2007 and 2019. 

As competition to get into UC Berkeley and other campuses increased, the policy of taking out-of-state students became increasingly unpopular. The Legislature in 2021 ordered the campuses to reduce the number by about 4,500 over the next five years— a politically popular decision but one that removed another revenue source for UC. For the last seven years, since the fall of 2014, out of state and international students have made up 24% of the undergraduates at UC Berkeley.

It was during this period, when UC had fewer mechanisms to raise revenues, that the Regents approved the sale of $474 million in bonds to fund the seismic upgrade and renovation of Cal’s Memorial Stadium and build the Barclay Simpson Student-Athlete High-Performance Center. With interest, the projects would cost $1 billion, making it “the most expensive intercollegiate athletics capital project in the nation,” according to Cummins, the former UC Berkeley vice chancellor. He wrote a paper about the situation titled “A Cautionary Analysis of a Billion Dollar Athletic Expenditure.”

UC Berkeley was not the only public university turning to bonds to raise capital as state support dropped. Between 2003 and 2012, the use of debt doubled, Cummins noted.

Seat license sales and charitable donations were supposed to service the debt on the bonds, but they failed to generate the amount of money initially predicted, upsetting UC Berkeley’s plan on how to pay for the bonds. 

John Wilton, who served as the vice-chancellor of finance and administration from 2011 to 2016, wrote an article in 2013 called “Time is Not on Our Side.” He said declining state support and UC’s budgeting strategy of refusing to raise revenues through tuition increases and other mechanisms would undermine the system’s finances and lead to a huge deficit. There would be an increasing number of students on campus, not enough professors to teach them, not enough classrooms to hold them and not enough beds for them, he predicted. That would lead in time to a mediocre system.

“Many of the policies that shape the financial outlook for Berkeley – the state’s flagship public university and a bellwether for the sector – are likely to create budgetary pressures that could compromise our current standards of excellence and access,” Wilton wrote.

Wilton’s prediction came true. In 2016, under Chancellor Nicolas Dirks, Cal’s deficit was $150 million. It increased to $169 million in early 2017 as Carol Christ became chancellor. By making major cuts and other changes, Cal eliminated its deficit in 2019.  (University revenues plummeted because of COVID-19 and the ensuing lockdown, however, forcing  Cal to borrow more than $200 million from the UC President’s Office.)

Rae insists that the bonds sold for the stadium and performance center are not a huge contributor to the university’s debt capacity. Cal issued Century bonds for the project, which are payed out over 100 years. Currently Cal only pays interest on the bonds, about $18 million annually.

In 2017, Christ announced that the university, not the athletic department, would start paying the debt service on part of the bonds — the $200 million it cost to seismically upgrade the stadium. The university has traditionally paid for earthquake safety improvements.

Today, Cal carries $2 billion in debt and only has another $200 million in debt capacity, according to Rae. 

University considers alternative ways to create housing

Because of its financial constraints, UC Berkeley has moved away from spending public funds on housing and has looked for other ways to provide student beds. The last time UC Berkeley used public money for the construction of a new dorm was in 2012 when the $70 million Maximo Martinez Commons on Channing Way opened to great fanfare. UC Berkeley sold limited project revenue bonds on the complex.

In 2013, the university hired Robert Lalanne, an alum, developer and member of the UC Berkeley Foundation Board of Trustees, to serve as the vice-chancellor of real estate. The idea was to streamline how Cal approached building by putting real estate operations under one department instead of scattered throughout the school and to explore using private capital to build new structures.

Lalanne quickly helped Cal form a number of public-private partnerships. In P3s, as they are known, Cal leases out land to private entities that then would raise capital to build or renovate dorms. Public-private partnerships have the benefit of not affecting Cal’s bond capacity. Historic 185-bed Bowles Hall was renovated with a P3 between the Bowles Hall Foundation and developers, Education Realty Trust. No campus funding was used and the project generates more than $500,000 in lease payments annually for the campus, according to Lalanne.

UC Berkeley also partnered with American Campus Communities, a publicly-traded real estate investment trust with 206 properties and 141,000 student beds under its management. UC Berkeley leased land on Dana Street between Bancroft Way and Durant Avenue to ACC. The REIT financed the construction of the eight-story, 775-bed David Blackwell Hall, which opened in 2018. The project generates about $2 million in rent and revenues for the campus each year, according to Lalanne.

Cal and ACC have a P3 agreement for a new 760-bed building for graduate students at University Village in Albany. Construction on that complex could begin in 2022. ACC also is currently in the planning stages for a 150-apartment complex for faculty at the Upper Hearst Project — the project currently held up in court. 

Not everyone thinks P3 partnerships are beneficial to the public. Davarian L. Baldwin, a professor of American Studies at Trinity College and the author of In the Shadow of the Ivory Tower: How Universities are Plundering our Cities expressed his skepticism at the direction Cal is taking in an April 18 virtual conversation with UC Regent John A. Pérez. “Universities are shaping our cities in ways we have not fully explored,” he later said in an interview with Berkeleyside. Baldwin is concerned in general about how universities have amassed power as they have grown, established police forces with jurisdictions outside campus borders, and taken over private property or city land on which they do not pay taxes. By not building enough student housing, UC Berkeley has forced students into surrounding neighborhoods and that has forced out low-income residents who can’t afford to pay escalating rents or buy expensive houses, he argues. He was particularly critical of UC Berkeley’s decision to tear down a 112-year-old rent-controlled building at 1221 Walnut St. in order to build the privately financed Anchor House. Is the privatization of public land, which happens in P3 partnerships, really beneficial to the broader public which institutions like Cal are set up to serve? Baldwin asked. 

(In July 2021, after the city of Berkeley complained for years that Cal was not paying enough for the city services it used, the university agreed to start making a $4.1 million annual payment toward sewer, fire, and police services. The university had been paying around $1.8 million annually since 2005.)

Lalanne left the university in 2016 as Dirks pulled back from his commitment to having one department oversee all aspects of real estate, including student housing, he said. 

Cal pledges to build 11,730 beds for students by 2036

As student enrollment accelerated and the housing crisis grew more severe, Chancellor Nicholas Dirks appointed a committee, headed by then-provost Christ, to look at UC Berkeley’s housing situation. Concerned by the severe housing crunch and reports that as many as 10% of Cal students sleep in cars or couch surf, Christ helped outline a plan in 2017 that identified nine potential sites on which to build housing. If housing was built on each and every site, the university could build 8,800 new beds, doubling the existing student housing stock, the report noted. No funding mechanisms were detailed in the report. The university’s plan has grown more ambitious since then. In its 2021 long-range development plant, Cal announced it would aim to build 11,730 student beds by 2036.

Five years later, the plan is moving slowly, hampered by space constraints, funding challenges and the lawsuit filed against the Upper Hearst Project. 

But the idea to build housing in People’s Park is moving forward, both because Christ has been the first chancellor willing to take on the politics of building in the park and the change in financing the Regents authorized in January 2021 that will make it easier to raise funds for the project.

People’s Park has been contested ground since 1969 when community members and students carved the park out of an old parking lot. The park has been the site of a tug of war in the ensuing 50 years with Cal trying intermittently to reassert its authority like when it built volleyball courts in the 1990s. Park lovers have pushed back, stating that it is a historically important green space in crowded south Berkeley and serves as a community hub for those who are unhoused or who prefer to live outside the mainstream.

Christ was the first chancellor since the 1960s to push for housing in the park and by 2017 the politics of Berkeley had changed enough that she found support. Many residents had tired of the crime in the park and the homeless people living in and frequenting it. Most importantly, Mayor Jesse Arreguín declared his support for housing there, particularly since Christ promised to build about 100 beds for formerly homeless people, too.

The People’s Park project, like all housing projects in the UC system, is considered an “auxiliary” project and will be funded by the sale of limited project revenue bonds. Auxiliary projects have to produce enough revenue through rents or eating costs to pay operating costs and the cost of borrowing the money to pay for construction. 

The Regents’ action reduced by 10% the amount of money a project had to generate to qualify for a bond. This will allow Cal to proceed with the sale of the $312 million in bonds for housing at People’s Park.

“That change in policy was really important for Berkeley because we have been experiencing fits and starts in our financial performance, and because our financial performance was weak over the last decade, we haven’t had access to debt,” said Rae. “That policy change … gives us more ability to make progress on housing.”

Whether UC Berkeley will be able to issue other limited revenue bonds for other housing projects is unclear, according to Kyle Gibson, director of communications at UC Berkeley’s Capital Strategies department.

Cal leases out entire apartment buildings for students

Cal has also pursued a strategy of working with developers to do what is known as a “master lease” meaning the university leases an entire building and then offers the rooms directly to its students. It then sets up residential advisors and other support amenities usually offered in dorms. UC Berkeley currently has three master leases housing 550 students: at the New Sequoia building at Telegraph and Haste, with beds for 116 students; at Panoramic Berkeley at 2539 Telegraph Ave., with beds for 180 students; and at the Enclave Apartments at 2503 Haste, with beds for 254 students

Master leases allow Cal to take advantage of the nimbleness private developers have.

“UC Berkeley is like an ocean liner,” said Patrick Kennedy, who leases out all the apartments at the New Sequoia, but not the commercial spaces, to Cal. He has built hundreds of student beds in Berkeley over the last 30 years. “Private developers are more like speed boats. UC Berkeley has a lot of constituencies it has to be mindful of — the professors, the labs, the students, the employees, the Regents, the Legislature and the public. Those are all massive constituencies that have a significant and valid interest in what Cal does on private property. And sometimes, of course, they have different interests. Some professors want lab space, some professors want agricultural space, some groups want parking. We don’t have to deal with any of those issues because we can be focused just on finding property and building housing for students.”

But the city of Berkeley, as part of the $83 million 15-year settlement it negotiated with Cal over its 2021 long-range development plan, has asked the university to stop executing master leases. Cal has agreed.

“The city felt its housing production goals with regard to the non-campus-affiliated population are frustrated when the campus rents entire buildings,” Gibson wrote in an email.

For a brief time in 2021, UC Berkeley had hoped to alleviate its student housing and classroom space shortage by creating a new freshman program for 200 students at the Mills College campus, nine miles from Cal’s central campus. That women-only college had announced plans to shut down because of declining enrollment and Cal quickly announced that it would rent dorms and classrooms to create a special program for incoming students. But those plans evaporated after Mills College trustees shifted course and decided to merge with Northeastern University instead.

Private developers step into the void

Since about 70% of UC Berkeley students don’t live in university-supplied housing, there is a huge demand for housing supplied by others. Students live in thousands of apartments around Berkeley. So many have crammed themselves into what once were single-family homes that the buildings have earned their own terminology: mini-dorms. In some parts of South Berkeley, as many as 12 to 18 students pay $1,000 to rent a bed in a single-family home. Other students have to live in substandard housing.

In the meantime, private developers have stepped into the void. According to Berkeley’s 2020 housing pipeline report, about 1,351 units have been constructed since 2015. There are 3,880 other units either proposed and pending review, approved without a building permit, or have a building permit but are not yet occupied. Not all of those are aimed at students, but many are.

Are lawsuits slowing down the construction of student housing?

Rae, Berkeley’s CFO, noted in an interview that the university now includes a budget line item for legal costs for every housing project it proposes. And there is no question that in recent years, Berkeley residents have filed numerous lawsuits challenging UC Berkeley’s plans. Currently, there are four lawsuits challenging the plan to build housing in People’s Park. The lawsuits ask the courts to overturn the Regents’ July 22 certification of UC Berkeley’s 2021 long-range development plan (LRDP) and an accompanying environmental impact report that examined the impacts of the People’s Park and Anchor House projects. Work on the latter has already begun. Cal hopes to start building in People’s Park this year but it is too early to know if the legal challenges will delay the start.

A legal challenge to the Upper Hearst project to build housing for faculty and graduate students has slowed down construction, but not because the plaintiffs have issues with it. In 2019, both the city of Berkeley and Save Berkeley’s Neighborhoods filed a suit challenging the university’s EIR for the project. They both said they mostly approved of the proposed housing but objected to how Cal slipped in an analysis of the impacts of a 34% student enrollment into the EIR. A judge agreed and ordered a new EIR. UC Berkeley has appealed and the Court of Appeal will take up the issue in the fall. In the meantime, construction is stalled.

What housing will Cal build next?

In the last few years, UC Berkeley has been the beneficiary of two large gifts, which will create 877 beds for students. These are the first such gifts to create housing since 1942, when Stern Hall was built.

In 2021, an unnamed donor bequeathed The Intersection Apartments, a 105-bed complex for graduate students in Emeryville to Cal. And the Helen Diller Family Foundation is paying for the $300 million Anchor House project, which will hold 772 transfer students. Work on the Anchor House began in February and it is expected to be completed in time for the 2024-25 academic year. When it’s finished, the foundation will gift it to UC Berkeley.

Combining those beds with other fast-tracked projects including Blackwell hall and the forthcoming People’s Park and University Village projects, Cal projects it will add 3,512 more beds within the next two to three years.

Other properties on the list developed by Christ’s task force in 2017 have dropped off and some sites have been added. The Richmond Field station, for example, is no longer being considered because it has virtually no infrastructure, making it very expensive to develop, said Gibson. The Oxford Tract, one of the last remaining local vestiges of Cal’s agricultural past, has fallen down on the list due to the difficulty of relocating its operations. Ditto for the Channing-Ellsworth site, which currently houses a parking lot with tennis courts on top. The Smyth-Fernwald site sits right atop the Hayward Fault, so housing is not appropriate for that site. But programs for the Rausser College of Natural Resources, which operates the Oxford Tract, might be. That could then free up the Oxford Tract. Densifying existing housing complexes at Unit 3, Foothill North and Beverly Cleary also present challenges.

UC Berkeley also wants to add more housing to the Clark Kerr campus but cannot do so until at least 2032. When the university acquired the former California School for the Deaf in 1982, it agreed to restrictions on its use, development and occupation for 50 years and signed covenants with neighbors to that effect. However, as part of a push to create new state-of-the-art softball facilities for women, Cal is trying to overturn those covenants in court. If successful, that could allow Cal to build more housing on Clark Kerr earlier than 2032.

A project at 2200 Bancroft Way, the current home of public affairs, has been added to the list. That $200 million complex could produce 750-800 beds.

Some of UC Berkeley’s critics have asked why the university isn’t building housing on the 160 acres that make up its core campus, called Campus Park. They point to the huge vacant space on the campus’ north side that once was the home of Tolman Hall until it was torn down in 2019.

Gibson pointed out that the 2021 long-range development plan identifies how UC Berkeley will develop through 2036.

“Housing is not identified for the Campus Park,” he said.

Rae said that as the university’s finances stabilize in the next decade, Cal will be able to grow its debt capacity which should allow it to build more.

“We’ve got a lot on the horizon with planned housing projects,” said Gibson.

Berkeleyside reporter Nico Savidge contributed reporting to this article.

Before you go… 

Can you help us make a difference? 

The reporters and editors at Berkeleyside are dedicated to covering our city and providing you with the information you need to be an informed citizen. If you value what you get from Berkeleyside, please join us with a tax-deductible donation so we can continue doing the local reporting that matters to you. 

Will you chip in to Berkeleyside today

Related Articles

Stay Connected

22,912FansLike
3,912FollowersFollow
0SubscribersSubscribe
- Advertisement -

Latest Articles