Below Market Rate (BMR)

Below Market Rate units (BMRs) are financed and built by market-rate developers; this requirement is often referred to as inclusionary zoning. Typically, a certain percentage of the total units in a development are built to rent at below-market-rate rents. These are dispersed throughout the market-rate development, either in exchange for certain concessions from the city such as higher density, or because of a requirement to build these units due to local inclusionary zoning ordinances. Mountain View and Los Altos have inclusionary zoning requirements, which differ in terms of the percentage of units required and income levels targeted. Mountain View requires 10% of the units in a rental development to be affordable to those at 65% AMI and 10% of the units in a condo development to be affordable to those with incomes from 80 – 100% AMI. However, Mountain View has had a policy of allowing developers to pay fees instead of building ownership units. The in-lieu fees are 3% of the sales price, which is far lower than the cost would be to the developer to build the units. Los Altos requires 10% of the condos to be affordable to moderate-income households. In rental developments in Los Altos, the developer can provide 10% very-low income units or 15% low income units. In either case, if more than one unit is required, one unit must be an LI unit.

In 2009 a California appellate court ruled in the Palmer decision that cities could no longer require BMR or inclusionary units for rental housing (with certain narrow exceptions such as when the developer is using the State Density Bonus Law), as this violates the Costa-Hawkins law passed in 1995. Inclusionary zoning for ownership housing was still allowed. BMR units in Mountain View are exempt from the rent control part of CSFRA, but not exempt from the just cause requirements.

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