The $275,000 condo at 1939 Rock St., converted from a 1960s apartment in 2007, is one of a handful of homes that are price controlled under the city's below market rate, or BMR, housing program. Similar market priced units in the same complex sold for $506,000 when they were completed in 2007, but since then the value of the market priced units there has dropped by more than $100,000, according to city staffers.
Only four people attended an open house for the teacher's condo in November, and one interested buyer backed out in January because "the price was too high when compared with market rate homes elsewhere," said neighborhood services manager Linda Lauzze in a staff report.
It was a situation few people expected for a home with such a discount. A similar home in the complex was recently put up for sale for $430,000.
Lauzze said the city was obligated by an agreement to find a buyer for the home by April 13 or the teacher would be able to sell it on the open market and the city would lose it as a BMR unit forever. The teacher had informed the city of her intent to move last September.
On Tuesday the council agreed to spend $275,365 in housing funds to buy the condo, but did not support a recommendation from city staff to immediately put the home up for auction with a starting bid of $190,000. Depending on the winning bid, that move could cost the city as much as $85,000 in BMR funds. So instead, council members said they were interested in renting the unit or sitting on it until the market recovered.
The city's BMR program is designed to provide affordable housing using money obtained through fees on new housing development. BMR homes are offered to qualified buyers — typically city employees making less than a certain salary — at a reduced rate, and cannot be resold at the going market rate. Instead, the BMR home values are allowed to appreciate only modestly each year (the Rock Street condo gained about $3,000 in value since 2007). Only after 55 years can the owner sell such a home at market value, with the city pocketing the difference in value over its fixed price.
"Given the significant restrictions on BMR units, they need to be priced substantially below market rate units in order to be marketable," Lauzze said.
The owner of the condo on Rock Street, who asked not to be named, said she was still a big supporter of the city's BMR program despite the current hassle. She told the Voice she wanted to move for personal reasons, not because she no longer liked living in a BMR unit.
"A condo with upgrades in Mountain View for $275,000, that's pretty hard to come by," said the owner in a phone interview. "You could buy something like that in San Jose but in Mountain View it's very expensive. To me it's worth every penny."
The teacher also said she believed the unit could sell at its fixed price if it were more widely advertised.
The city is responsible for selling such homes, and an e-mail list is maintained for those who are interested. First priority is given to Mountain View public safety personnel, although they often make too much to qualify for such homes, second priority is given to Mountain View teachers, and third priority to residents and those who work in the city.
Lauzze said this was a unique situation for Mountain View that was not likely to repeat for other BMR units in the city, which — compared to their market priced counterparts — had discounts ranging from $250,000 for another Rock Street project to $425,000 for units at 180 Evandale Ave.
Lauzze added that other cities have had similar problems, including Milpitas, which has had to adjust the price on 12 of its BMR units.