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For decades, Mountain View has required developers to build affordable homes as part of their market rate projects, but it has not always worked out the way the city envisioned. Developers have often opted to pay in-lieu fees instead, resulting in fewer affordable units getting built.
That option is no longer a possibility for all but the smallest residential projects. On Tuesday evening, the City Council unanimously signed off on changes to Mountain View’s below market rate housing program, including removing the in-lieu fee provision.
“I’m really proud of this program, but it’s good too that it’s not a static program,” Council member Pat Showalter said at the May 12 meeting. “It needs to change with the times and so this is an opportunity for us to update it appropriately.”
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Mountain View requires market rate developers to set aside at least 15% of their units for low- and moderate-income households. That covers both rental and ownership projects, although townhouses and rowhouses are subject to a higher, 25% standard. The requirement for BMR units within market rate projects is distinct from fully affordable developments, which are administered separately under the city’s affordable housing program.
While the BMR program requires on-site affordable units, a developer can propose an “alternative means of compliance.” The city’s existing ordinance lays out four options: donating land to the city for future housing, building BMR homes on a separate site, paying an in-lieu fee, or a “catch-all” provision that allows other alternatives, according to a city staff report.
Under the new rules, the city is eliminating the in-lieu fees and catch-all provision, and adding an option for developers to acquire existing residential units and convert them into affordable housing. Developers will also still be able to propose off-site development and land dedication for their projects.
However, some tweaks have been made to these requirements, based on the city’s experience administering the BMR program. Mountain View will now use maps developed by state housing officials to require that developers locate off-site BMR units in areas with access to resources, like schools, stores and public transit. The updates also stipulate that off-site BMR residents should have shared access to the amenities of the market-rate project, if the two are in close proximity.
If a developer opts to buy and preserve existing residential units, the current tenants would be eligible for relocation assistance and have first dibs on returning to the renovated site, according to the staff report.
There are also now rules around developers partnering with other entities to create the affordable units. These largely focus on setting up a vetting process to try and ensure that a market rate developer does not partner with an affordable housing developer with a history of poor performance or compliance issues, the staff report said.
Where in-lieu fees will still apply
While market rate developers no longer can use in-lieu fees to meet their BMR requirement, the fees will still be used to determine how much an alternative compliance proposal needs to be worth, according to the staff report. This will be based on the California Construction Cost Index, which reflects changes in the price of labor and materials, and will be adjusted annually.
Projects with six units or less will also still pay an in-lieu fee to meet the city’s BMR requirement, according to the staff report. The logic is that because the BMR requirement is set at 15%, projects with less than seven units would only be on the hook for a fraction of a single affordable unit.
The council backed a “graduated in-lieu fee reduction” for small projects to incentivize applicants to maximize the building potential of a site. This means that the more units a developer builds, the lower the per unit fee, maxing out at six units.
The city also plans to adjust the fee reduction based on the number of units legally permitted on a site, the staff report said.
Council member Lucas Ramirez expressed support for using this objective standard, noting that it would make the city’s regulations “more robust, more defensible [and] more in line with state law.”
