Mountain View officials are moving full-steam ahead with plans to add thousands of new homes throughout the city, everything from low-income apartments to luxury penthouses.
But the city's roll-out of new housing has a gaping hole. New residential development is essentially nonexistent for moderate-income families -- those earning roughly between $85,000 and $130,000 a year.
The news was most recently highlighted last week in a status update on the city's Regional Housing Needs Allocation. The allocation is basically a recommended quota for how much housing should be built in Mountain View and other Bay Area cities from 2014 through 2022. During that period, Mountain View should build 527 moderate-income units. But three years in, the city hasn't built a single one.
In contrast, the report notes a glut of new high-end housing built in Mountain View. Over the last two years, the city has built more than 650 homes priced for high-earners -- more than half its quota through 2022.
Asked about this disconnect, senior city planner Martin Alkire said that the housing numbers represent a snapshot in time and might not reflect the full picture for the city. But he acknowledged the city had a growing problem on its hands.
"This is a missing income category," he said. "Before, in different economic times, this wasn't such a highlighted need, but now with incomes escalating, it's harder for the natural market to hit those numbers."
It might seem counterintuitive from a market perspective that developers aren't rushing to build more middle-class housing. Moderate-income households account for around 30 percent of Mountain View, according to 2015 U.S. census data. So if there's significant demand in the city for this type of housing, then why aren't private developers responding?
The costs just don't pencil out, said Tim Steele, vice president of the local development company Sobrato Organization. Any new housing development costs a huge sum after taking into account inflated land value, construction costs and city fees. After those expenses, housing developers see little option but to charge what the market will bear.
"There's a huge need for the middle, but there's no way to build for middle," said Steele. "The costs won't get you a return without some form of subsidy."
Moderate-income housing seems stuck in this dilemma as private developers pencil out the costs. Just like a luxury condominium, a middle-market apartment project must also pay a variety of city impact fees, including a $17-per-square-foot surcharge on new developments.
The money from these fees typically goes to help finance low-income affordable housing, usually reserved for households earning less than $85,000 annually. Affordable housing has an established supply chain of tax credits, private investors, government subsidies and nonprofit advocates to help get it built.
But most pieces of that support system aren't available for moderate-income housing, leaving it with most of the drawbacks but few of the advantages of other housing categories.
Mountain View Housing Director Wayne Chen pointed out that developers don't typically set out to build moderate-income units. Instead they aim for whatever price the market rate will fetch, which in Mountain View is currently surpassing $3,000 per month in rent.
"If you boil it down to a basic supply-and-demand curve, developers are going to try to supply where it's feasible to turn a profit," Chen said. "This is the dilemma that most, if not all, cities are struggling with; moderate-income housing is the hole that everyone is trying to figure out how to fix."
Other Peninsula cities have recently reported similar numbers. San Jose, Santa Clara and Menlo Park reported an overabundance in newly built above-moderate housing and a complete lack of any moderate-income units.
The silver lining of this problem is that low-income housing is doing relatively well. Mountain View has built out 24 percent of its quota for affordable housing, putting the city on track to meet its goal. Last year, Mountain View put $36 million in development fees toward three affordable housing projects, which is expected to bring 233 new subsidized apartments by the end of next year.
Elected leaders throughout the Bay Area are searching for options to nurture more mid-market housing. Mayor Ken Rosenberg dubbed it the "doughnut hole" -- not expensive enough for the market to build, but too pricey for most public funding.
For now, Mountain View officials have tried to exert pressure on developers to consider more mid-market housing as projects come forward for review. That effort will be tested in the coming weeks as city staff fine-tune the North Bayshore precise plan, which is being heavily revised to allow Google to build around 10,000 housing units.
Traditionally, new residential projects in Mountain View are required to dedicate 10 percent or more of their housing as subsidized affordable units, usually for low-income households. Alkire, the senior planner, said his team is trying to figure out the right balance to encourage Google to dedicate a higher percentage to mid-market units.