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Chipping away at a huge funding shortfall of $36 million, an affordable housing development in downtown Mountain View is another step closer to getting built with a lot of help from the city and county.
In a unanimous vote, the City Council agreed to pitch in an additional $5 million to bridge a funding gap for a housing project that has been in the city’s pipeline for years, but has struggled to secure the necessary financing to get across the finish line.
Council members Ellen Kamei and Alison Hicks were absent from the council meeting on Tuesday, May 14.
The project site, located at 444 Bryant St., has long served as one of the city’s largest municipal parking lots. Four years ago, the city picked Alta Housing and Related California to jointly develop the 1.5-acre site – known as Lot 12 – into a 120-unit affordable housing complex.
If built, the units would be for those earning between 30% and 80% of the area median income (AMI), with 20 units dedicated to rapidly rehouse homeless individuals and families with special needs. Half of the apartments also have been slated as two and three-bedroom units to accommodate larger households, according to the council report.
Since its inception, the project has secured different funding sources, with substantial commitments from the county and city. This includes $9.75 million from the county’s Measure A Affordable Housing bond and $12.25 million from the city, which had allocated $4.25 million from its housing fund and $8 million in state funding through SB 129.
The development plan also picked up 25 project-based vouchers from Santa Clara County Housing Authority and $2.5 million in funds from Destination: Home, a nonprofit organization that focuses on homeless prevention.
Even with all of these funding sources combined, it was still inadequate to get the project off the ground, and in March the developers notified the city that they were facing a massive shortfall of $36 million.
“This is a very challenging development environment with the governor’s budget and additional state funding just not being there,” said Nick Wilder, assistant vice president of development at Related California.
The project penciled out prior to the pandemic, but the economic assumptions formulated back then do not match current market realities, according to the council report, which also attributed the funding gap to higher interest rates and construction costs.
To get around this issue, the developers have come up with an alternative pathway to move the project forward, trimming expenses while also tapping into other funding sources.
For the bulk of it, the developers have turned their attention to securing state and federal tax credits that could bring in $17 million in external funding.
They also modified the project design, adding height to buildings and rearranging residential units to generate savings that combined would total $9 million. This includes temporarily closing off a portion Bryant Street and turning it into a one-way street during construction, leading to cost savings of $1 million, the council report said.
Other measures include adjusting the income levels of eight residential units from 60% AMI to 80% AMI to generate more rent and increase revenue. Drawing on county funding sources, the project will also set 15 housing units for intellectually and developmentally disabled persons
With these several changes, the project is still $10 million short of closing the funding gap. Negotiating this quandary, the developers secured another loan from the county with the expectation that the city would match the funding with $5 million, bringing its total commitment to $17.25 million.
The council unanimously agreed to approve the $5 million allocation, although not without some reservation from Council member Lucas Ramirez, who raised the issue of the in-lieu fee that was supposed to mitigate the loss of 160 parking spots currently used in Lot 12. The original project proposal in 2020 was expected to pay $10.1 million for the loss of public parking, according to a council report at the time.
“It doesn’t feel so good to take affordable housing funding to essentially pay for the parking replacement cost, the $10 million split by the county and city,” Ramirez said, adding that the housing fund was limited and should be used for better purposes than parking.
Ramirez also cautioned it would not be possible to provide the same financial relief for every affordable housing project that comes before the city, a situation that may become more common as state funding sources dry up.
“The environment moving forward is going to be very different from how we envisioned even just a few years ago,” he said.
The anticipated start of the project’s construction is early 2025 and expected to be completed in early 2027, according to the council report.
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The height of idiocy. Let’s take one of the most valuable lots in the city, and let’s build housing so un-economic that it requires government subsidies from the every possible entity/level. And why? To solve a problem that government itself created over the last couple decades (and continues to cause today) by not enabling enough housing development and adding all manner of fees, permits, and requirements making housing more expensive.
what is the total cost now projected to be? IIRC it was $114M for 120 units way back when, just slightly less than $1M/unit. That might be workable for this one project, but clearly we will never build our way out of the housing shortage at $1M unit!