After approving the project last year, the City Council is being asked by the developer of a 51-unit affordable housing project to kick in additional funding of up to $4.4 million to make it feasible, bringing the city's costs for the $23 million project to $12.5 million.
The additional subsidy is necessary to help the project compete for a tax credit it was unable to receive last year. That tax credit had been counted on to help fund the project. The project ranked lower last year against projects in San Mateo County and Santa Clara County because its 36-percent city subsidy was not high enough, a city staff report says. This year the project is up against another from Palo Alto which is 57 percent subsidized with city funds, but there may be enough funding for two winners, the report says.
Five votes on the City Council will be required to approve the additional funding in Tuesday's meeting.
Critics of the project, developed by ROEM Corporation, say it is too expensive at $450,000 per unit, but Mayor Jac Siegel and others have touted the project's quality, which will make it undetectable as affordable housing. Meanwhile downtown neighbors have complained that the project would create a slum in their neighborhood and said even during the planning stages that it lowered their property values.
"I would prefer housing policy that creates more affordable housing rather than a few gold-plated units for people who happen to win a housing lottery," said council member John Inks when he voted against the project last year.
In June the council approved the project and a 65-year lease of the city property it would sit on.
City staff also report that, if not budgeted towards a project, a substantial portion of the city's housing funds may be used by the state for other purposes under legislation proposed this year. It is proposed that these "housing set-aside funds" be used for the increased subsidy.
The project's units will be divided equally among three groups, those who make 30 percent, 40 percent and 50 percent of the area median income, which is $96,000 a year for a family of four. Applicants who qualify are chosen in a lottery.
Depending on a family's income level and the size of apartment needed, rents will range from $563 to $1,600 for one-, two- or three-bedroom apartments, saving residents from $215 to $1,157 compared to a market-rate apartment of the same size.
The funds would come from the substantial housing funds that the city has accumulated, now totaling $25.6 million, with $8.85 million budgeted. Council members have complained over the years that the city has not been able to effectively spend that money for affordable housing, which has led the city to make $12 million of it available in a new "Notice of Funding Availability" process to encourage affordable housing developers to come forward and make use of it.