Mountain View Voice

News - March 11, 2011

City pays growing bill for housing project

More backing needed to win subsidy for affordable apartments

by Daniel DeBolt

The City Council on Tuesday approved an additional city subsidy of up to $4.4 million for a 51-unit affordable housing project downtown that was approved last year.

Developer ROEM corporation said an additional subsidy of $2.2 million is necessary to help the project compete for a lucrative tax credit the project was unable to receive last year. If the project does not win that tax credit, the council approved up to a $4.4 million additional city subsidy to make the project feasible.

The Council voted 6-1 to release the funds, with John Inks opposed. The move brings the city's costs for the $23 million project to $12.5 million, or $245,000 per unit. The four-story building will be located at the corner of Franklin Street and Evelyn Avenue.

Responding to a proposal by Gov. Jerry Brown that would take redevelopment district housing funds and use them for schools and other local services, the City Council also approved a last-minute move to spend $8 million of the Downtown Redevelopment Authority's "housing set aside funds" on the project instead of Below Market Rate housing funds as previously proposed. In a presentation on Brown's proposal at the end of the meeting, City Attorney Jannie Quinn said city staff are concerned about losing $11.2 million in "set aside" funds, and that the proposed state legislation could be passed within weeks that would seek to retrieve such funds spent after January 1, 2011, potentially creating legal battles across the state over the funding of such projects.

Worth the cost?

While more costly than some market rate projects at $450,000 per unit, Mayor Jac Siegel and others have touted the project's quality, which will make it undetectable as affordable housing. That appeases downtown neighbors who have complained that the project would create a slum in their neighborhood and lower their property values.

Inks, who has said he'd prefer a housing policy that makes all housing cheaper, said that he had been "talking to market rate developers building projects cheaper than this one."

"I don't see how spending more money really helps low-income people in Mountain View anymore."

Council member Laura Macias defended the project, saying it would meet the council's long time goal of building affordable housing downtown, while providing a safe place for low-income residents. Several members noted that much of the subsidy would return to the city in loan and lease payments, with better interest than most financial investments.

Council member Tom Means noted that an affordable housing project in Palo Alto will cost $588,000 per unit. "We're a little cheaper at $450,000."

In June the council approved the project with a 65-year lease of the city property it would sit on.

In competing for the tax credit last year, the project ranked lower than two other 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 that is 57 percent, but there may be enough funding for two winners, the report says.

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 money is to come from the substantial housing funds that the city has accumulated, now totaling $25.6 million. 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.

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