Understanding Berkeley’s New Wave of “Entitle, Demolish, and Stall”

BAHA Editorial
The Urban Observer
February 2026 – Part 1

Why Are Developers Demolishing Buildings . . . and Then Doing Nothing?

Author: Leila H. Moncharsh, California licensed attorney since 1977 (USF Law); master's degree in urban planning—2000 (Cal. State Univ., San Jose), president of the Berkeley Architectural Heritage Association.

Across Berkeley, residents are seeing the same troubling pattern: beautiful buildings, useful housing, and busy retail blocks are demolished, lots are cleared, permits are granted … and then nothing happens. No construction. No new housing. Just fenced‑off dirt. It’s not your imagination, and it’s not a coincidence. This is a new development strategy, shaped by state law, financial markets, and the rise of institutional investors; it has very little to do with actually building the much‑promised housing.

Here is what is most likely going on, and why preservationists and community members are increasingly alarmed.

A. SB 330 Turns Land Into a Financial Product
Under California’s SB 330 (the “Housing Crisis Act”), once a developer files a preliminary application, the rules governing the property are frozen: zoning, height, density, fees, and design standards. This freezing dramatically increases the land’s value – even if nothing is ever built – by eliminating regulatory risk for future buyers. An SB 330 filing is not just a housing application. It is a land‑value enhancement tool. 

For most of American history, people assumed a deed was simply a document that transferred land from one owner to the next. But deeds have always carried a second function: they are investment instruments. In the 1980s, for example, waves of foreign investors purchased California real estate not to live in it or improve it, but to hold the deeds as appreciating assets—often leaving the properties empty or neglected while they waited for values to rise. Their profit came from the deed itself, not the land’s use. By the 2000s, deeds were increasingly encumbered by mortgage liens, turning them into collateral within a much larger financial system. Homeowners could not sell without satisfying the lender’s claim, and those mortgage‑encumbered deeds were then bundled into complex financial products. When the housing bubble burst, the collapse of those mortgage‑backed securities triggered mass foreclosures, stripping owners of their deeds entirely. In each era, the deed functioned less as a record of ownership and more as a vehicle for financial extraction.

There is growing recognition that California may be experiencing a new form of speculative investment cycle — whether driven by design or by policymakers who believe they can legislate housing prices into submission. Governor Newsom has complained that “investors are crushing the dream of home ownership and forcing rents too damn high for everybody else." [quote from Gov. Newsom, CBS News 8, January 12, 2026] support Whatever the motivation, the effect is the same: these policies are reshaping Berkeley’s built environment, enriching intermediaries who profit from trading paper rather than building homes, and failing to deliver the housing outcomes the public has been promised.

B. Demolition Makes Land Easier to Sell
Once a building is demolished, the parcel becomes what investors call a “clean site.” A clean site has no tenants, no relocation obligations, no rent control, no habitability or maintenance issues, no code enforcement risk, and no historic‑resource arguments. A cleared lot with SB 330 rights attached is a highly marketable asset, even if the developer never intends to build.

Berkeley residents have also noticed that SB 330 applications often coincide with lot aggregation — multiple parcels purchased in a row, structures demolished, and merged into one large site. A single large parcel is far more valuable to investors than several small ones.

C. The Real Money Is in Flipping Entitled Land — Not in Construction
Developers, planning staff, and elected officials often claim that projects are “stalled for macroeconomic reasons” and that construction will resume when interest rates fall or materials become cheaper. But California construction has always been expensive, risky, and sensitive to market swings. What has changed is the business model.

Many entities buying land in Berkeley today are not builders. They are entitlement platforms — companies whose business is to acquire multiple parcels, file SB 330 applications, secure demolition and building permits, clear the land, and sell the entire package to another large investor. This is not development. It is financial engineering using land as the underlying asset. And it is extremely profitable.

D. Lot Aggregation Is a Red Flag
Residents opposing recent upzoning-proposals for neighborhood commercial zones have warned that these areas will be wiped out. They are not wrong. Small, one‑ or two‑story commercial buildings extremely useful and beloved by the community have little investor value. To unlock higher returns, investors must demolish the buildings, aggregate the lots, attach SB 330 entitlements, and market the site to institutional capital (investment companies, banks, real estate investment trusts, crowdfunding companies, and limited liability investment corporations).

A three‑parcel site entitled for 120 units is far more valuable than three small infill lots. That is why Berkeley is seeing aggressive acquisitions, fast demolitions, and large, generic building diagrams — followed by no action. The deed then moves into one or several investment companies, including private equity funds and REITs (real estate investment trusts). These entities may hold the land for 5–10 years, collecting investor distributions while the property appreciates.

The plans shown to the public are not merely designs. They are marketing materials for investors, signaling that the land is shovel‑ready and construction risk has been minimized.

E. High Interest Rates Make “Holding” More Profitable Than Building
With construction financing costs at historic highs, many developers cannot build profitably right now. But they can entitle, demolish, hold, refinance, or sell later when conditions improve. Vacant land has become a speculative asset, not a construction site.

What about property taxes? Demolition does not reduce property taxes.

In California, land value is the majority of the assessment. Taxes reset to the purchase price when the property changes hands. Demolition only removes the (often minimal) value of the razed structure, and vacant parcels may incur additional taxes or fees due to bond measures. For investors, the tax bill is negligible compared to the potential appreciation of entitled land.

F. The Result: Vacant Land as a Speculative Asset, Not a Construction Site
The outcome is predictable: demolition without housing, empty lots, loss of below‑market‑rate units, loss of historic buildings, disrupted streetscapes, no new housing, no community benefit, and no accountability. Turning pre‑1940 housing into dust for the purpose of creating speculative investments threatens the very qualities that make Berkeley vibrant: its architecture, its small businesses, its cultural identity, and its sense of place.

When demolition becomes a step in a financial strategy — rather than a step toward construction — the city loses its heritage, its unique qualities that differentiates it from “Anywhere USA,” and its trust in local and state officials. The public is left gazing at mud lots through chain link fencing, wondering why the promised housing is not being built.

Every round of resale, stalling, and profit‑taking gets capitalized into the land price. And when someone finally builds, those inflated land costs do not disappear — they get passed directly to future renters. No developer can or will absorb them. This means that even if housing is eventually built, it will debut at higher rents than it would have if the property had not been treated as a financial instrument. Speculation today guarantees higher rents tomorrow. That pattern has been identified by Governor Newsom and legislators. AB 1240 (Alex Lee) is designed to stop the progression to higher rents by restricting large corporations from owning more than 1,000 single family houses as investments. However, as we show you in Part 2, for Berkeley the pattern includes demolition and stalling for 5 to 10 years.  

In Part 3, we will explain the expected results from the state and local government’s policy impacts on Berkeley. 

The Hinks "mud lot" one year ago.