Below Market Rate Programs

A letter to Mountain View Mayor Matt Neely and the Mountain View City Council recommending that the Council authorize a study of its BMR ordinance. Ideally, a revised ordinance would result in affordable housing units dispersed throughout the community, as intended from the start.

Mayor Matt Neely
Mountain View City Council
Tuesday, Aug. 22, 2005

Dear Mayor Neely and Members of the Council,

The Los Altos/Mountain View League of Women Voters has been studying the Below Market Rate programs of Los Altos, Mountain View, and other neighboring cities for the last six months.  We have shared this comparative information with you and with staff.  This letter summarizes our findings, which we hope will be helpful to you as you proceed with a review and revision of this program.

While the BMR program in Mountain View has generated an appreciable amount of money from in-lieu fees paid by housing developers, we believe that it could be improved so that its end goal of providing BMR housing for those who need it would be better met.  Our main concerns are:

1.Very few BMR units have been purchased by first-time homeowners and so far none have been built as rentals.  Relevant factors are:

• The resale restrictions are so stringent that the BMR owner might have to sell his home at a loss.  This could simply not happen under the Sunnyvale, Los Altos, or Palo Alto BMR programs.
• The calculation of the BMR sale prices in Mountain View uses different assumptions than are made in neighboring cities, making the prices too high, or too close to the market price, for would-be purchasers to find them attractive.  The "discount" off market price is not sufficient relative to the restrictions imposed on buyers.
• Mountain View has a complicated formula for targeting units, with units priced to sell to households having 80%, 85%, 90%, 95%, and 100% of area median income.  Although the goal of this varied targeting is commendable, we would recommend simplifying it to one or two income ranges.

2.    The program is very time-consuming for City staff to administer.  Sunnyvale has sufficient staff for this.  Several other cities have agreements with a nonprofit housing organization to handle most of the administration.  Mountain View could consider outsourcing the administration, especially with many units in the development pipeline.

3.    The BMR in-lieu fees in Mountain View are too low, less than half of what neighboring cities require from developers.  These fees, expected to be paid if the market-rate units are selling for over $515,000 (today's number), are not sufficient to allow an affordable housing unit to be built elsewhere in the City.  We believe the fees should be raised and that the criterion of $515,000 should be raised significantly.  An additional alternative to consider is that developers should build units unless the Council waives this obligation.  This alternative would allow the Council to be responsive to changes in the economy.

4.    Flexibility for providing units should also be built into the ordinance, since some projects may not be appropriate for including BMR units.

• Dedication of part of the site to the City, which would then do a "Request for Proposals" to nonprofit developers to build whatever type of affordable rental housing the City thinks is most needed, could be another allowed option.
• In some instances, a developer might be allowed to build the affordable units offsite.

5.    The percentage of BMR units required is low, relative to that in neighboring communities.  This has not been an impediment to developers wanting to build in these cities.

For all of the above reasons, we recommend that the Council authorize a study of its BMR ordinance.  We think it is important to do this as soon as possible, because so many housing units are in the pipeline, including those at the Mayfield site.  Ideally, a revised ordinance would result in affordable housing units dispersed throughout the community, as intended from the start.  We would also like to see provisions for the ordinance to be administered cost-effectively, preferably by an organization with expertise in this area.

Sincerely,

Susan Russell, Chair
Housing Committee

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