A long surface parking lot next door to Mountain View City Hall will be replaced with apartments for low-income families, after the Mountain View City Council voted unanimously Tuesday to lease the city-owned property to an affordable housing developer.

The project, located along Bryant Street between California and Mercy streets, includes 120 apartments in five-story buildings facing downtown, tapering down to three stories as it approaches single-story homes to the west. It also has ground-floor retail and community space, designed with the intent to attract pedestrians, in sharp contrast to the "dead zones" created by office buildings in the downtown area.

The 7-0 vote has been a long time coming, with the city spending the last six years considering what to do with the 1.5-acre property known as "Lot 12." In 2015, the city flagged affordable housing and hotels as uses for two city-owned lots, which were always considered temporary parking and intended for future development.

The developer, Alta Housing, is proposing to build 120 apartments aimed at housing some of the lowest-income residents in the county, with 20 units set aside for those facing homelessness. Another 20 will be available for those making up to 30% of the area's median income (AMI), or $49,700 for a family of four, while 40 will be for those making between 30% and 50% of the AMI. Most market-rate housing projects do not include affordable units at these income levels.

But on the ground floor, the project has a different identity. About 2,200 square feet will be devoted to retail space, and another 8,000 will be devoted to community uses ranging from nonprofit and city meetings to maker space for start-ups, classes and workshops. Councilwoman Alison Hicks said the retail and community space is what's needed in the downtown area, and should be a template going forward.

"I'm glad that this has more public interface, and that's something that I'd like to make sure we do more in the future," Hicks said. "I think that's what downtowns are all about -- not excluding the public."

Housing advocates have also come out in full support of the project, with regional groups sending letters praising the use of public land for badly needed affordable housing. Kelsey Banes, regional director of the group YIMBY Action, told council members the project fills an unmet need for housing for extremely low-income families and those experiencing homelessness, and that it's a big improvement over a long stretch of parking.

"This is an excellent proposal that would replace surface parking with homes," she said. "On the Peninsula I think we have prioritized having public spaces to store cars for too long, and this is reversing the trend to really prioritize our public land for housing."

With the Tuesday vote, the project will largely wind its way through the planning and development process without another look from the council. Alta Housing plans to receive approval from the city through Senate Bill 35, which allows for streamlined approval of affordable housing projects.

Though the project has a lot to like, it still had some sticking points that had council members worried. The project's financial feasibility teeters on economic forces out of the city's control, and it may require some future financial tweaks to stay viable. On top of that, the city is removing 160 parking spaces at a time when parking is already considered inadequate on parts of the downtown corridor.

For its part, Alta Housing is pitching in $10.1 million, described as upfront cash for leasing the property, in order to help the city finance more parking elsewhere in the downtown area. Later in the meeting, council members weighed building a five-level parking garage that would replace Lot 5, located along Hope Street between Dana and Villa streets, and increase the number of parking spaces from 98 to 400.

The project will have its own parking, with 90 residential parking spaces and an additional five spaces for the first-floor retail space.

The loss of Lot 12 parking would also spell trouble for the Mountain View Farmers Market, which uses the parking lot on Thursdays for part of the year.

Financing the project has been an ongoing struggle, beset by higher construction costs and difficulty obtaining subsidies to pay for the apartments. Between early 2020 and today, Alta Housing said the cost of building the housing has spiked by an additional $16 million -- prompting the developer and the city to go back to the drawing board and find a way to pay for the project.

"There has been a significant funding challenge for affordable housing projects, not only in the region but statewide," said Wayne Chen, the city's assistant community development director. "There have been significant increases in development costs, the economy has been impacted and external funding sources are fluctuating."

In order to cobble together enough cash to pay for the project, which now exceeds $114 million, Alta Housing is tapping into more funding from Santa Clara County's Measure A bond and more funding through federal housing vouchers. The project also leverages $8 million in state funding, which was appropriated through SB 129 with help from State Sen. Josh Becker (D-Menlo Park).

Perhaps the most unusual provision to keep the project financially afloat is the use of a so-called "float-up" provision, a mechanism based on expected annual rent income, in which apartments originally planned to be available for families making up to 30% of the AMI would be converted to units for families making up to 60% AMI. This gives Alta Housing more rental cash, and can be an emergency tool for keeping the project from becoming infeasible. Doing so would be considered temporary and a last resort.

Council members voted to allow the project to slide through the planning process, but flagged a need for plenty of landscaping, trees and public art. They also agreed that the project's design needs some work to break up any massing to keep the building from looking like a stark, vertical wall.