In some ways, it was a perfect deal -- a new development by nonprofit Palo Alto Housing to build 70 affordable studio apartments came before the Mountain View City Council with a ready source for nearly all its funding.
But the subsidized housing project at 950 W. El Camino Real still faced a skeptical audience at the City Council's April 30 meeting. While council members all agreed the housing was sorely needed, some members balked at its immense cost: $49 million, or just under $700,000 per studio. Of that sum, nearly half would be paid by the city.
City leaders clearly felt compelled to raise concerns over the price. While the project was approved Tuesday night in 5-1 vote, it demonstrated new signs of impatience among city leaders.
"We're spending a lot of money on this particular property because of its location, but if we continue to not change the narrative, then we're going to continue losing a lot of people to displacement," said Councilman John McAlister. "We need to look for different solutions because we're just doing the same thing and it's not working."
McAlister cast the lone opposition vote against the affordable housing project even though he claimed to support the idea in concept. But he returned to a familiar suggestion -- why didn't the city preserve affordable housing by buying up older apartments on the cheap?
Those cost concerns resonated with Mayor Lisa Matichak, who said her support was wavering over the high costs. She urged the Palo Alto Housing delegation to trim its costs for future projects.
But there was little to be hopeful about in the current housing market. Speaking before his former colleagues in Mountain View, former planning director Randy Tsuda, who's now the Palo Alto Housing CEO, pointed out that a bevy of costs linked to housing development have shown a trend of sharply increasing. Land values, especially along lucrative spots like El Camino, have increased by about 17% annually, he said. Meanwhile, construction costs and materials have also been on a steady ascent, he said.
The city's own chronology of affordable housing projects proved this point. A 49-studio affordable housing project finished in 2015 at 819 N. Rengstorff Ave. cost about $355,000 per unit. In just four years, the expenses had steadily risen with nearly each development, to the point they had now nearly doubled on the new 950 W. El Camino.
"The escalation of land costs in Mountain View blows everything else away," Tsuda said. "When you put all of it together, it's just significantly more expensive to build today than in 2012 or 2013."
The proposed project would build 70 new affordable studios as well as one two-bedroom apartment for the property manager. Most of the studios would be about 380 square feet in size.
Tsuda urged city officials to focus on the positive aspects of the project. While pricey, the El Camino location was picked because it was near bus lines, Caltrain and light rail, freeing residents from relying on vehicles, he said. Palo Alto Housing intends to set aside 15 of the future housing units for developmentally disabled adults, a concession that made it harder for the project to qualify for Santa Clara County Measure A funding.
Mountain View wasn't lacking the money to support the project. Earlier in the evening, the City Council gave a unanimous approval to a large, 471-unit market-rate housing development that would occupy all of the property along East Evelyn Avenue known as the Flower Mart site. Developer Prometheus Real Estate had offered the city an unorthodox deal last year to "pre-fund" $22.7 million in affordable housing in-lieu fees, significantly more than what it was obligated to pay under the city's fee structure. Even better, the offer allowed the city to immediately put the money toward the Palo Alto Housing project instead of waiting years for the Prometheus housing to be fully developed.
But while no one mentioned this, the arrangement also painted council members into a corner as they considered the Prometheus project. If they rejected it, then they would lose all the funding needed for the Palo Alto Housing project.
Given that the funding was in place, most council members said they needed to support the project, despite its flaws.
"We need to send a signal that we're sticking by the council goals that we set last week to find ways to mitigate and prevent displacement," said Councilwoman Ellen Kamei. "Now more than ever, we're feeling the effect of what it means to rent in our city and we need to put tangible steps forward to address that."
Councilman Chris Clark recused himself from the vote due to a conflict of interest.