In April 2023, a brand new luxurious house complicated on Alameda’s waterfront, Launch, opened to renters, promoting views of the yacht membership from its rooftop deck, poolside cabanas and a co-working lounge.
As required by Alameda’s inclusionary zoning legislation, the developer, Pacific Improvement, put aside 49 of the 368 models for low- and moderate-income households making between 50% to 120% of the realm median revenue, $51,800 to $124,250 for a single particular person. The concept was to fill the complicated with quite a lot of tenants, not simply the sort of renters who might afford $3,000 a month.
Two years later, the outcomes are combined: models for the poorest tenants have stuffed, however all 19 designated for moderate-income renters — the so-called “missing middle” — stay empty, a lot to the frustration of the developer, Sean Murphy.
“The last thing we want to do as a developer is build housing units that sit vacant,” he stated. “That doesn’t solve any social problems.”
In different components of the nation, moderate-income households don’t want below-market price flats as a result of they will afford the market. However within the Bay Space, even a pair making $300,000 a yr — twice the realm median revenue — can barely swing a starter house. The availability is so severely constrained that many high-income earners, who somewhere else could be shopping for properties, discover themselves relegated to the rental market.
To maintain builders from constructing solely on the prime of the market, state and metropolis applications have sought to incentivize — or in some circumstances, require — new house complexes to order some models for rent-restricted housing. Whereas these initiatives had been first geared toward lower-income renters, lately, these insurance policies have expanded to think about moderate-income renters, sometimes outlined as folks making between 80% and 120% of the realm median revenue, as “below-market-rate” renters.
However in line with a overview of rental knowledge by this information group, tons of of below-market-rate models throughout the Bay Space stay vacant, months and typically even years after they opened for leasing.
That quantity is probably going an undercount. Simply 11 of the 30 cities this information group contacted offered occupancy knowledge.
Average-income models reporting knowledge had a emptiness price of seven%, greater than double that of models geared toward low-income renters.
“There’s never a shortage of very low-income renters, but 120s are always tough to lease,” stated Stuart Gruendl, whose agency BayRock has constructed mixed-income house complexes throughout San Francisco and the East Bay. “In places where rents have gone down, a 120% AMI renter can go out and get a great deal on a new apartment and get pretty awful close to the below-market rate rent.”
That’s the case within the East Bay, which has probably the most empty moderate-income models. A lot of luxurious properties got here available on the market throughout the identical time. Landlords have lowered market-rate rents, which at the moment are consistent with a number of the 120% models.
At Launch, for instance, a 120% one-bedroom house goes for $2,828. In the meantime, some market-rate models are literally priced decrease, at $2,731.
It might appear counterintuitive that “below-market rate” models are priced at ranges, the truth is, above market.
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It’s a byproduct of the federal components that determines affordability thresholds — pegged to not precise market rents, however to the realm median revenue, a shifting determine calculated yearly by the U.S. Division of Housing and City Improvement. Because the Bay Space’s median revenue rises, so do the caps on what’s thought of “affordable,” even when the actual rental market tells a unique story.
“‘Affordable housing’ isn’t necessarily affordable, and ‘below-market rate housing’ isn’t necessarily below market rate,” stated Alex Schafran, a housing coverage researcher based mostly in Oakland.
In cities like Alameda and Oakland, the place market rents have softened post-pandemic, the hole between coverage and actuality has develop into significantly obtrusive. Market-rate builders are providing months of free hire that undercut the supposed low cost of moderate-income models. At ArtHaus Jack London, a 284-square-foot studio rents at $1,771 a month — however with two months free on a 14-month lease, the efficient hire is $1,518 a month. That’s lower than what the below-market renters pay.
A drone view of the Atlas house tower, proper, and the Tribune Tower in downtown Oakland, Calif., on Thursday, Could 8, 2025. (Jane Tyska/Bay Space Information Group)
At Launch, Murphy stated he’s hesitant to decrease middle-income rents as a result of they should be excessive sufficient for the undertaking to pay again its loans. If he indicators a lease at a decrease price, the renter may very well be paying at that stage for years, given the town’s hire management legal guidelines.
Regardless of the minimal reductions in some locations, loads of moderate-income housing has supplied actual reduction.
In 2019, Courtney Welch was residing in a West Oakland house when her landlord evicted her and her younger son so he might transfer in. She discovered transitional housing and, whereas there, utilized to a below-market price unit at Avalon Public Market in Emeryville.
Two years later, she obtained a name she’d been ready for: She was off the waitlist.
By 2021, she was making near the realm median revenue of $100,500 for a household of two — an excessive amount of to qualify for one of many 80% AMI models, so she was relegated to the following tranche, capped at 120% of the AMI. Welch paid $1,695 for a two-bedroom house — properly beneath the utmost hire Avalon might have charged.
“With the income that I had at that time, I could have found naturally occurring, affordable housing, but it would have been older housing with fewer amenities,” stated Welch, who’s now Emeryville’s mayor.
“Here, I’m living right next door to the Emeryville Public Market, a park, the Amtrak station,” she stated. “Do buildings at this rent level exist? Yeah, but they damn sure don’t look like this.”
In 2023, her revenue was too excessive to maintain qualifying for her below-market unit, however she determined to remain within the constructing. Right this moment, she pays round $4,600 for a three-bedroom unit — a giant leap, however she credit the restricted hire she paid beforehand for giving her time to get her funds so as.
Average-income models present the largest profit to renters in high-cost cities alongside the Peninsula and in Santa Clara County.
At The Anson, a luxurious complicated in Burlingame, a brief stroll from downtown, a moderate-income one-bedroom house for a renter making as much as $156,750 goes for $2,900 — $1,000 lower than what a market-rate renter pays. Simply down the road at The Bower, a moderate-income renter would pay $2,400 for a studio, whereas market-rate renters pay $2,900 a month.
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A part of the purpose in constructing the moderate-income housing is for middle-income renters to have extra decisions, stated Corey Smith, head of the pro-housing lobbying group, the Housing Motion Coalition. In different phrases, give middle-income renters an possibility in new luxurious buildings, and landlords with older properties could should decrease their rents to compete.
Affordability advocates warn that with out stricter guidelines, although, these models don’t all the time supply significant reductions.
“We do find a flaw in the 120%,” stated Murphy, the Alameda developer. He’s within the midst of planning a brand new constructing in Alameda that can even want to incorporate quite a lot of below-market models — however he’ll be maxing out the variety of low-income models moderately than constructing extra moderate-income models. He wonders if cities ought to be encouraging the identical.
“What are the ways these cities that want affordable housing can look at all the different metrics,” he stated, “so that we don’t end up with empty housing?”
