In April 2023, a new luxury apartment complex on Alameda’s waterfront, Launch, opened to renters, advertising views of the yacht club from its rooftop deck, poolside cabanas and a co-working lounge.
As required by Alameda’s inclusionary zoning law, the developer, Pacific Development, set aside 49 of the 368 units for low- and moderate-income households making between 50% to 120% of the area median income, $51,800 to $124,250 for a single person. The idea was to fill the complex with a variety of tenants, not just the kind of renters who could afford $3,000 a month.
Two years later, the results are mixed: units for the poorest tenants have filled, but all 19 designated for moderate-income renters — the so-called “missing middle” — remain empty, much 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 said. “That doesn’t solve any social problems.”
In other parts of the country, moderate-income households don’t need below-market rate apartments because they can afford the market. But in the Bay Area, even a couple making $300,000 a year — twice the area median income — can barely swing a starter home. The supply is so severely constrained that many high-income earners, who in other places might be buying homes, find themselves relegated to the rental market.
To keep developers from building only at the top of the market, state and city programs have sought to incentivize — or in some cases, require — new apartment complexes to reserve some units for rent-restricted housing. While those initiatives were first aimed at lower-income renters, in recent years, those policies have expanded to consider moderate-income renters, typically defined as people making between 80% and 120% of the area median income, as “below-market-rate” renters.
But according to a review of rental data by this news organization, hundreds of below-market-rate units across the Bay Area remain vacant, months and sometimes even years after they opened for leasing.
That number is likely an undercount. Just 11 of the 30 cities this news organization contacted provided occupancy data.
Moderate-income units reporting data had a vacancy rate of 7%, more than double that of units aimed at low-income renters.
“There’s never a shortage of very low-income renters, but 120s are always tough to lease,” said Stuart Gruendl, whose firm BayRock has built mixed-income apartment complexes across 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 in the East Bay, which has the most empty moderate-income units. A number of luxury properties came on the market all around the same time. Landlords have lowered market-rate rents, which are now in line with some of the 120% units.
At Launch, for example, a 120% one-bedroom apartment goes for $2,828. Meanwhile, some market-rate units are actually priced lower, at $2,731.
It may seem counterintuitive that “below-market rate” units are priced at levels, in fact, above market.
It’s a byproduct of the federal formula that determines affordability thresholds — pegged not to actual market rents, but to the area median income, a shifting figure calculated annually by the U.S. Department of Housing and Urban Development. As the Bay Area’s median income rises, so do the caps on what’s considered “affordable,” even if the real rental market tells a different story.
“‘Affordable housing’ isn’t necessarily affordable, and ‘below-market rate housing’ isn’t necessarily below market rate,” said Alex Schafran, a housing policy researcher based in Oakland.
In cities like Alameda and Oakland, where market rents have softened post-pandemic, the gap between policy and reality has become particularly glaring. Market-rate developers are offering months of free rent that undercut the supposed discount of moderate-income units. At ArtHaus Jack London, a 284-square-foot studio rents at $1,771 a month — but with two months free on a 14-month lease, the effective rent is $1,518 a month. That’s less than what the below-market renters pay.
A drone view of the Atlas apartment tower, right, and the Tribune Tower in downtown Oakland, Calif., on Thursday, May 8, 2025. (Jane Tyska/Bay Area News Group)
At Launch, Murphy said he’s hesitant to lower middle-income rents because they have to be high enough for the project to pay back its loans. If he signs a lease at a lower rate, the renter could be paying at that level for years, given the city’s rent control laws.
Despite the minimal discounts in some places, plenty of moderate-income housing has offered real relief.
In 2019, Courtney Welch was living in a West Oakland apartment when her landlord evicted her and her young son so he could move in. She found transitional housing and, while there, applied to a below-market rate unit at Avalon Public Market in Emeryville.
Two years later, she got a call she’d been waiting for: She was off the waitlist.
By 2021, she was making close to the area median income of $100,500 for a family of two — too much to qualify for one of the 80% AMI units, so she was relegated to the next tranche, capped at 120% of the AMI. Welch paid $1,695 for a two-bedroom apartment — well below the maximum rent Avalon could 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,” said Welch, who is now Emeryville’s mayor.
“Here, I’m living right next door to the Emeryville Public Market, a park, the Amtrak station,” she said. “Do buildings at this rent level exist? Yeah, but they damn sure don’t look like this.”
In 2023, her income was too high to keep qualifying for her below-market unit, but she decided to stay in the building. Today, she pays around $4,600 for a three-bedroom unit — a big jump, but she credits the restricted rent she paid previously for giving her time to get her finances in order.
Moderate-income units provide the biggest benefit to renters in high-cost cities along the Peninsula and in Santa Clara County.
At The Anson, a luxury complex in Burlingame, a short walk from downtown, a moderate-income one-bedroom apartment for a renter making up to $156,750 goes for $2,900 — $1,000 less than what a market-rate renter pays. Just down the street at The Bower, a moderate-income renter would pay $2,400 for a studio, while market-rate renters pay $2,900 a month.
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Part of the goal in building the moderate-income housing is for middle-income renters to have more choices, said Corey Smith, head of the pro-housing lobbying group, the Housing Action Coalition. In other words, give middle-income renters an option in new luxury buildings, and landlords with older properties may have to lower their rents to compete.
Affordability advocates warn that without stricter rules, though, these units don’t always offer meaningful discounts.
“We do find a flaw in the 120%,” said Murphy, the Alameda developer. He’s in the midst of planning a new building in Alameda that will also need to include a number of below-market units — but he’ll be maxing out the number of low-income units rather than building more moderate-income units. He wonders if cities should be encouraging the same.
“What are the ways these cities that want affordable housing can look at all the different metrics,” he said, “so that we don’t end up with empty housing?”