City's housing program under fireAfter 10 years on the books and a serious legal challenge, the "Below Market Rate" fee assessed on larger-scale development projects to subsidize housing for low income residents appears ready for a makeover.
The fees, usually 3 percent of the final purchase price of each unit in a project, are funneled into a city program that makes it possible for some lower income residents to move into a home at a price they can afford. The use of BMR fees is common in most Peninsula cities, including Mountain View, where they can add up to many millions of dollars and help subsidize affordable housing.
In lieu of paying the fee, builders also have the option of actually selling one of 10 units in a project for below the market rate. But since the program began here in 1999, only eight units have been sold, with nearly all developers preferring to pay the fee.
The legal challenge to BMR fees came from a case in the city of Patterson, which had substantially increased its assessment on builders. The case was later turned down for review by a state appellate court, which effectively cast a legal cloud over all BMR fees assessed in the state.
Now developer John Mozart and his Classic Communities group is demanding a refund for the $2 million BMR fee it paid for the recently completed Miramonte Avenue development of 58 single-family homes near St. Joseph School. The company claims the city hasn't adequately justified its BMR fee, and calls it an illegal tax on development.
Retired city attorney Michael Martello disagrees, noting that Classic Communities did not argue against the fee when the company agreed to pay it. He adds, however, that the company did have a right to object before the fee was imposed — and it is this opening that Classic Communities and possibly other developers will attempt to mine as cities scramble to justify the law.
After 10 years on the books, the city's BMR policy is up for a scheduled review by the City Council, Martello said. We believe a fair legal analysis will show that the policy, which has seen few changes over the years, is appropriate and supports a reasonable affordable housing program that is not an undue hardship on the local housing industry.
If the ordinance is stricken from the books, it is doubtful that housing prices will come down by any measurable amount, and it would signal the end of virtually all the city's efforts, small though they are, to provide reasonably priced housing to those whose earnings are near the poverty level. This is not an outcome that the city, or its residents, wants to see.