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The city of Mountain View will have to go back to the drawing board on its draft Housing Element after state officials identified some major inconsistencies with California law.
The Housing Element is a state-mandated, once-every-eight years process in which jurisdictions prove how they’ll meet housing targets set by Sacramento —and this time around, the state’s requirements are more stringent than ever before. Mountain View’s housing target, also called the Regional Housing Needs Allocation (RHNA), is more than 11,000 net new units.
The city submitted a first draft Housing Element to the state earlier this summer, in which city staff forecasted that Mountain View will not only meet its RHNA obligation, but exceed it by nearly 4,000 units. But in a Sept. 29 letter from the Department of Housing and Community Development (HCD), the state identified some problem areas the city needs to address.
“The draft element addresses many statutory requirements,” the letter states. “However, revisions will be necessary to comply with State Housing Element Law. In particular, the element must clarify its use and definition of ‘pending projects’ in the sites inventory, and provide further analysis to demonstrate its local density bonus requirements are not in violation of State Law.”
The sites inventory is a list of sites that the city can prove may reasonably be developed into housing in the next eight years. The state wants the city to clarify where pending projects are at in the development process so it can determine whether those units can count toward the city’s RHNA obligation.
The state also has concerns about how the city applies the state density bonus law with its local Community Benefit Zoning program, “namely the implementation of floor area ratio (FAR) as a measure of density, and the incompatibility of the State waivers and concessions process with the City’s program,” the letter states.
While the city’s draft identified a number of programs it wants to implement to encourage and promote affordable housing — a key requirement of the Housing Element update process — “most of these programs do not appear to facilitate any meaningful change,” the 12-page letter from HCD states. “Given that most of the city is considered a high-income community, the element could focus on programs that enhance housing mobility and encourage development of more housing choices and affordable housing in an inclusive manner.”
The state also identified some issues with the city meeting its RHNA obligation for affordable units.
The city’s housing element draft indicates that “379 units affordable to very low-income and low-income households have been built or are under construction or approved, but provides no information documenting how affordability of the units was determined,” HCD said. “ … Additionally, the element identifies a number of ‘pending’ projects that are listed in the sites inventory with no additional analysis as to where these projects are in the development process.”
In a statement, Mountain View Chief Communications Officer Lenka Wright said the comments that the city received from HCD “are apparently not unusual.”
“We have learned other cities in our area and across the state have received similar feedback from HCD,” Wright said. “Over the coming weeks, our city team is meeting with HCD to discuss their feedback and clarify the findings. Staff will also be meeting with community members and advocacy groups to discuss their comments to HCD.”
SV@Home, an organization that advocates for affordable housing in Silicon Valley, said in a statement that HCD’s letter to Mountain View is “not a surprise,” but still raises big concerns.
“Given the dire affordable housing needs of our communities, we cannot afford to get this wrong,” Regina Celestin Williams, executive director for SV@Home, said of the Housing Element update process. “(The letter) really spells out how much additional time and work it is going to take to meet the state’s requirements. … We hope this letter serves as a wakeup call to jurisdictions, our necessary partners in this work.”
All Bay Area jurisdictions are required to submit a final, compliant Housing Element to the state by Jan. 31, 2023.
“Mountain View’s draft Housing Element was the first to be submitted from Santa Clara County and the first to be measured against the new, more stringent, state requirements, but the expectations have long been clear,” SV@Home said in the statement. “If the local Housing Elements are not fully certified by May 2023, the state will apply sanctions.”
Mayor Lucas Ramirez told the Voice that, when looking at other jurisdictions that have already gone through the Housing Element update process, receiving this level of feedback from HCD isn’t a huge shock. He said HCD has told jurisdictions to expect up to three rounds of back and forth on Housing Element drafts.
“What this letter reveals is the expectations from the state are much higher than they ever have been,” Ramirez continued. “So while the letter isn’t a surprise, it really is a wakeup call for Santa Clara County jurisdictions that what HCD will require of us is far greater than what we had been accustomed to in previous Housing Element cycles.”
Ms. Martin, thank you so much for keeping us updated on this important topic. Your reporting raises many TREMENDOUSLY IMPORTANT questions.
“If the local Housing Elements are not fully certified by May 2023, the state will apply sanctions.”
A key question is this one: “What exactly are those sanctions?”
From Sept 29 letter from HCD: “For your information, pursuant to Assembly Bill 1398 (Chapter 358, Statutes of 2021), if a local government fails to adopt a compliant housing element within 120 days of the statutory deadline (January 31, 2023), then any rezoning to accommodate the regional housing needs allocation (RHNA), including for lower-income households, shall be completed no later than one year from the statutory deadline.”
I literally GASPED when I read “including for lower-income households”.
The state has mandated that MV build 6,225 BMR units (2773+1597+1885=6,225). But they have not provided FUNDING to allow us to reach that goal.
If we rely on developer-funding alone, there is no way on earth that we can meet this target unless we “zone for” 56,590 housing units. This would MORE THAN DOUBLE THE SIZE OF OUR CITY.
It does not make financial sense for a developer to build BMR units at a rate greater than 11 BMR units for every 89 market-rate units (see comments on https://www.mv-voice.com/news/2022/09/28/mountain-view-city-council-approves-residential-project-on-east-el-camino-real )
The mathematically HONEST targets for MV that take the STATE DENSITY BONUS LAW into account are
Income Level : Number of Housing Units
Very Low (<=50% AMI): 2773 (4.9%) Low (51%-80% AMI): 1597 (2.8%) Moderate (81%-120% AMI): 1885 (3.3%) Above Moderate (>120% AMI): 50,365 units (89%)
—————————————————————-
Total: 56,590 (100%)
If MV does not “comply” by January 31, 2023, then we will be forced to “zone for” 56,590 housing WITHIN THE NEXT YEAR. And all because we didn’t do “what exactly”? Our “crimes” are written in legalese that ordinary voters cannot even understand. Our definition of “pending projects” is wrong? So is our “implementation of floor area ratio”?
What the heck is even going on here? Why are state Dems playing this weird form of hardball with the MV Town Council?
Setting RHNA targets that would force MV to grow by over 30% were unfair and mathematically unsound in the first place. And now Big Brother is demanding “something” within 4 months and if we don’t get that right, our “sanction” will be to DOUBLE THE SIZE OF MOUNTAIN VIEW?
This stinks to high heaven. Citizens please pay attention. Follow the Money.
Who benefits financially from these political actions? Developers and Google.
Who loses? Everyone who believes that government without consent of the governed is tyranny.
Correction: I should have written
“If MV does not “comply” by 120 days from January 31, 2023, then we will be forced to “zone for” 56,590 housing units by January 31, 2024.” I regret the error.
This should come as no surprise to anyone, all of the local housing advocacy groups were pointing out the deficiencies in the draft housing element, but staff insisted it would be fine.
People being shocked that the state is demanding the city ensure enough low-income housing can be built is really a mask-off moment, though. In the interests of accuracy, the state makes no demand on the city to provide BMR homes, it just demands that the city make sure there are homes for people of all incomes, with a minimum amount set for each group. They are free to come up with whatever realistic plan they think will achieve those goals, but saying “no, give me money” isn’t really going to work out well for Mountain View. If they do that, and do not have a compliant housing element, the city will not be able to block *any* project in the city that is 20% low income or 100% moderate income.
Statement: “People being shocked that the state is demanding the city ensure enough low-income housing can be built is really a mask-off moment, though.”
This is a completely false characterization of what is happening here. However, the words are actually useful this time because that is how state Dems will SPIN this situation.
Consider:
A) The state has provided RHNA targets to MV that are not fair or even explainable. https://www.mv-voice.com/news/2021/08/16/mountain-view-seeks-to-update-housing-plans-following-new-requirement-to-allow-11k-new-homes
– “Despite being a smaller suburban city, Mountain View is expected to build nearly the same amount of housing as Sunnyvale and Santa Clara, while other North County cities are being asked to build much less.”
– “A total of 28 cities filed appeals seeking to adjust their allocation, including Palo Alto, Los Altos and Los Altos Hills. Mountain View did not file an appeal, but did send a letter with concerns about the high amount of growth being asked of the city. [Note that our city council did not even file an appeal]
“The letter notes that Mountain View is being asked to build the most housing, as a percentage of existing households, in the region among cities with more than 5,000 residents, and that it’s unclear how ABAG arrived at some of its numbers.”
B) A scathing report about deficiencies in the RHNA process was issued by acting state auditor Michael S. Tilden https://www.auditor.ca.gov/reports/2021-125/index.html
– “As directed by the Joint Legislative Audit Committee, my office evaluated the Regional Housing Needs Assessment (needs assessment) process that the Department of Housing and Community Development (HCD) uses to provide key housing guidance for the State’s local governments …. Overall, our audit determined that HCD does not ensure that its needs assessments are accurate and adequately supported.”
C) Readers, do you think these words from HCD can HONESTLY be paraphrased as “the state is demanding the city ensure enough low-income housing can be built”?
– “The draft element addresses many statutory requirements … However, revisions will be necessary … In particular, the element must clarify its use and definition of ‘pending projects’ in the sites inventory, and provide further analysis to demonstrate its local density bonus requirements are not in violation of State Law.”
– “The state also has concerns about how the city applies the state density bonus law with its local Community Benefit Zoning program, “namely the implementation of floor area ratio (FAR) as a measure of density, and the incompatibility of the State waivers and concessions process with the City’s program”
One needs a Phd in housing law to even understand these complaints! Ordinary voters don’t understand, which makes them vulnerable to spin-meisters.
Growing rice in the desert requires a great deal of WATER.
Building affordable housing in a place with high housing costs requires a great deal of MONEY.
This idea that zoning is the cause of high housing costs is simply wrong. The problem is FUNDING.
State demands low-income housing, but does not provide funding to achieve those goals. Hence, we rely on developer funding, which gives developers WAY TOO MUCH POWER over the city council. [Hint: “Follow The Money”]
State Law also provides perverse rewards to developers for building only token amounts of affordable housing. State Law is actually IMPEDING the development of affordable housing for lower-income people.
You literally said you gasped when HCD told the city it had to zone for lower-income households.
Had you actually read the audit report, or even fully read the press release, you’d have noticed the specific issues identified in that audit led HCD to *undercount* the needs for certain areas. If you want to hang your hat on that, you’re welcome to, but any change would only lead to *higher* RHNA numbers. As for transparency, the RHNA process is transparent and clear, one of our own planners even approved the allocation!
Finally, if money is the issue, perhaps this is a case where Li Zhang can tip her hand and tell us about the funding sources she knows about that will let us build our low income allocation! Surely she doesn’t need to be elected to tell staff about these sources, then our Housing Element will easily be approved!
Even better, let’s refuse to submit a compliant Housing Element until the state gives us $6B!
Thank you for allowing me to clarify, Frank.
A) I gasped when I realized the mathematical implications of the game that HCD is playing. MV has to dance to whatever jig HCD demands or else we will face sanctions (and this comes AFTER the fact that MV was handed an unreasonably large RHNA target of 11,135 total units).
I gasped when I realized the sanctions we might face: having to “zone for” 5x as many housing units than we were originally given (that is, having to “zone” for 56,590 total units instead of 11,135 total units). And even worse, that zoning will need to be completed by January 31, 2024! I certainly hope I am wrong, that “sanction” would be absolutely outrageous (but outrageous RHNA targets are not really new, now that I think about it).
MV’s new RHNA targets don’t make any mathematical sense (see comments in https://www.mv-voice.com/news/2022/09/28/mountain-view-city-council-approves-residential-project-on-east-el-camino-real ). Due to the perverse incentives under State Law, developers qualify for awesome benefits when only 11% of a project is BMR. So that’s what they propose in project after project (otherwise the numbers “don’t pencil out”). And that’s what the City Council approves in project after project too (over the last 8 year RHNA cycle, only 12% of all housing units were BMR).
11% of 11,135 = 1225
“Zoning for” 11,135 will normally yield 1225 BMR units. But 1225 is about 5x smaller than what RHNA demands: 6,225 BMR units. In order to build 6,225 BMR units, we’d need to “zone for” 5x more units than our target of 11,135: we’d need to “zone for” 56,590 total units.
11% of 56,590 = 6,225
B) I did read the report, did you Frank? Did you see the part where it says the State Auditor was requested to conduct an “emergency audit” but cost limitations prevented them from satisfying all of their objectives? That stinks. Did you know that our area was not audited because of a pending lawsuit against HCD? That stinks too. The audit found
“HCD does not have a formal review process for the data it uses to determine its needs assessments. As a result, the needs assessments for two of three regions we reviewed included errors. One data error reduced a region’s needs assessment by nearly 2,500 housing units.”
It is dishonest to imply that errors will always be undercounts when this conclusion was not reached by the auditors. It is also dishonest to imply that I would be de facto against higher RHNA numbers. I want a process that is FAIR to ALL towns and cities, and numbers that are accurate.
Statement: “As for transparency, the RHNA process is transparent and clear, one of our own planners even approved the allocation!”
Can you provide a source that explains exactly how the targets for MV were calculated? That would be lovely!
Remember our own city council sent a letter to ABAG which noted that “Mountain View is being asked to build the most housing, as a percentage of existing households, in the region among cities with more than 5,000 residents, and that it’s unclear how ABAG arrived at some of its numbers.”
C) Money certainly IS the issue, and Li Zhang is the only candidate for the city council who has stated that one of her PRIORITIES will be to identify additional funding sources for affordable housing. https://www.liformountainview.org/priorities She is a newcomer, yes, but she is clearly a fast learner because she has figured out that relying on developer funding alone to build affordable housing is a LOUSY solution. It builds fewer BMR units than we need, and it gives developers too much power over the city council.
And Frank, you seem to be attacking her for that. Why?
Just curious.
Now that Alphabet, Apple, Meta and more are going to lay off many people, the demand for housing, especially luxury housing is going to be way down in 2023. That on top of the higher interest rates and the leveraged state of the housing in Mountain View.
What will happen? The cost of operations are going to go way up. The vacancies will begin to increase. The property values will correct from what I see at least 20%.
The facts are the Fed WILL increase the rate again AT LEAST 50 basis points or .5%. The reality is that it is safer to NOT GAMBLE on the local housing market and simply buy bonds from the fed, the state, or the county.
The current housing Cap Rate is about 4.5% but the current Fed 2 year notes are at 4.25%. Ad the Fed 5 year note is 4.13%. Which means when doing nothing but sit for 2 years you are going to receive 94% risk free return with no effort versus having to be the best property manager and only get a increase of 6%. With regards with the 5 year notes it is 91% risk free with only an increase of 9% if you invest.
Face it the city cannot afford the cost of luxury housing because it is the highest risk in development. In the end you will have to drop rents just to avoid vacancies at this time.
Seems confusing!
@JAFO, I agree with you. DEMAND will drop for the reasons you mention. Those of us who have lived here awhile remember all of the booms and busts we have endured over the years. Busts are awful, housing construction will slow.
But economies are complicated things, they are not ruled entirely by “supply and demand”. For reasons that most of us don’t understand, property managers do not always rush to ensure that their vacancy rates are 0%. Rents will drop, but perhaps not as much as people hope. Ditto for the price of ownership housing.
2020 Census data https://data.census.gov/cedsci/table?q=Mountain%20View%20city,%20California&t=Income%20%28Households,%20Families,%20Individuals%29 shows that the median household income for MV was $157,243.
The mathematically HONEST targets for MV that take the STATE DENSITY BONUS LAW into account and replace AMI with dollars (to make it more understandable to more people) are:
Income Level : Number of Housing Units
Very Low (<=$78K): 2773 (4.9%) Low ($78K-$125K): 1597 (2.8%) Moderate ($125K-$188K): 1885 (3.3%) Above Moderate (>$188K): 50,365 units (89%)
——————————————–
Total: 56,590 (100%)
Observe: In order to obtain ~6,000 housing units for persons who earn less than $188K, incentives from state Democrats are such that we need to build OVER 50,000 UNITS for persons who earn MORE THAN $188K. We don’t have 50,000 units in MV today!
Is this a solution that will make rents fall all over MV?
Statement: “In the interests of accuracy, the state makes no demand on the city to provide BMR homes, it just demands that the city make sure there are homes for people of all incomes, with a minimum amount set for each group.”
These words are technically true, but HIGHLY MISLEADING. The state is making sure there is ONLY A TRIVIAL amount of affordable housing for those who need it. The LION’S SHARE of housing will be expensive units built for the highest wage earners in the land. And all of this is happening under a banner of “affordable housing”.
2020 Census data shows that our median household income was $157,243. What does that mean? Half of all households earned less than that number, the other half earned more. Shouldn’t our housing policy be such that half of new housing be built for those earning less than the median income?
Look at the mathematically HONEST RHNA targets for MV that take the STATE DENSITY BONUS LAW into account. Add the total percentages in the bottom three categories, the answer is 11%. The RHNA targets don’t require that half of new housing be built for those workers, it only requires 11%! What does this mean?
Answer: The RHNA process is a lot of sound and fury, but simply will not create enough affordable housing for those in the lowest income categories to effect any kind of meaningful change. The state is actually rewarding developers for building a highly disproportionate amount of market-rate units (which they already wanted to do!).
Why would state politicians craft such incentives? Answer: Follow the Money. Who wins? Developers get zoning that allows them to build in ways that maximizes their profits, regardless of how the plebians who live in a place feel about that construction.
Anyone who sincerely believes that rents will fall if we build 89% of new housing that is unaffordable to everyone except the highest wage earners is in for a big disappointment. We are on a path to GENTRIFICATION.
In other words, the emperor has no clothes. Is anyone other than me willing to acknowledge that? Or are we just going to continue pretending that all is well and just dance whatever jigs that HCD is demanding?
Stripping communities of their power to manage construction in ways that are beneficial to them is an abuse of separation of powers. But if the abusers face no consequences, in five years the kids won’t even know what happened.
You’re telling me with a straight face that you don’t think rents would drop if we added 50000 homes to Mountain View? That’s completely unserious analysis.
Just substituting in your own “mathematically accurate” table to make your claims is one of the standard “lying with statistics” tactics.
By January 31, the city has to make a realistic plan to build low-income homes, end of story. That you can’t provide a path in the next 8 years to build those homes does not mean it’s impossible, but if you think the best path is for the city to thumb their nose at the state until they cough up $6B, you are going to have a bad time on February 1.
(P.S. here’s the housing methodology committee on ABAG: https://abag.ca.gov/our-work/housing/rhna-regional-housing-needs-allocation/housing-methodology-committee they have a nice PowerPoint presentation here: https://abag.ca.gov/sites/default/files/documents/2021-05/Template_Final_RHNA_Methodology_Appeals_Presentation.pptx )
Just another observation, if a city intends to only sell 94 octane gas in all of the gas stations in the city for the price of that gas, practically NO ONE will buy gas in that city.
This has been the premise of the City of Mountain View housing strategy. Only providing the housing that are far more expensive to build and operate. But again with the significant drop in higher income workers in the region, which is long term because IT contractors cannot work in the state of CA now. In fact there was a recent news story about that.
The facts are we have way over the RHNA needs for luxury housing in Mountain View and Santa Clara County. This causes an artificially high average rent because there is simply no proper distribution of the classes of housing. A NORMAL Bell curve would mean at least 60% of the housing would be around 1 standard deviation of the median income. Not the 80% plus construction of luxury units in the City.
Simply put when you do not sell 87, 89, 91 octane gas in a city, the “average” price of gas is inflated. That is exactly what this market is regarding housing, and its is about to get VERY ugly. Now that the Fed WILL raise the next interest rate by another .75% given todays employment news.
I figure a LOT of housing here is about to be foreclosed on, given that the properties will be 20% underwater. It will require large payments to prevent mortgage lenders from cancelling their accounts.
Is it really even believable that if the city were to encourage development of 50,000 new housing units that this would even occur during the prospective 8 year period under consideration? Wishing does not make things so. The HCD is hiding its true meaning which needs to be clarified. Are they demanding a local funding source for 10,000 BMR units, or are they not?
This is pretty much an exercise in conforming local virtue signaling to HCD’s but without clear communication. I don’t think it’s so clear that the expectation is inflating market rate numbers to have the 20% BMR in their provide sufficient BMR units total. Could be but not clear.
JAFO, isn’t that good news? Prices and rents will come down. Why is that a problem?
LongResident, I pointed out above, HCD makes no demand on any number of BMR units. It demands that the city draft a realistic plan to build enough homes for low income people.
Just an observation:
Frank, there is a real problem when the real estate bubble never corrected in 2008. Thus the fact that the NORMAL Fed Rate should be at 5% based on history is the problem.
Yes price corrections are good on the most part, but radical price corrections will lead to lower property taxes, and other side effects that are likely going to drive the City, The County, The State, The Country and The World into a major correction.
That in top of the lost workers due to Covid, and the lack of innovation and the loss of any market expansion is going to be a social and economic implosion of the kind we haven’t seen in generations.
I remember a quote, “human beings on a one on one basis are great, but put them in a group and they self-destruct”
The fact is that the labor shortage is making it impossible to stop raising interest rates. The only way to increase unemployment at this time is to choose to in effect go out of business. Companies are not productive enough to deal with the labor shortage. The market is so underpopulated at this time that it is still a disaster.
But yes I think it is good overall because people will not gamble on stocks, and real estate for the long term, that business model was too dangerous and risky. Especially the so called “flipping” in real estate. The economy is going to have to adjust to this.
Under our prevailing local situation and aside from zoning, we are in a situation where any housing newly constructed will be out of reach for most low income persons. This is simply due to current construction costs and local land values and operating costs.
SO, yes, the only way Mountain View can house with NEW UNITS is BMR provisions for subsidized housing. Just look at the way the city now mandates replacing naturally affordable rent control units when they are displaced by gentrification—BMR unit creation to match the number removed.
The fact that out in the desert or up in rural Mendicino County land prices are lower and housing there would be more affordable doesn’t help people here.
Below market rate is key to affordability given the high value renters place on the cachet of newness. Anything new commands a high market rate.
Couple that with the fact the some of the naturally affordable units are used by households who could well afford a much more expensive unit. The builder can’t query the income levels of the current occupants of units being torn down and then claim that what is being built will still be affordable. No, the full number of units must be placed under BMR program administration with income limits on who can live in the designated affordable new units….
Leslie’s plan of building 50000 homes would be affordable to low income people even without BMR units. More homes on the same land brings the price of those homes down.
If it’s impossible though, the city can’t submit a compliant housing element. We’ll have a real tough time ahead on February 1, then! How’s Los Altos’s plan coming along? Do you think your city will be compliant, LongResident?
I would say that the plan as submitted was sufficient once all the questions are answered. One way to make it more likely that more affordable units will be built is to simply cut back on the market rate goal, effectively saving more land for sale to affordable housing developers, and enabling them to get the various subsidies that are needed. No land, no subsidy. The way I look at it, the main glaring error was the over emphasis on the market rate housing component. Unlike Market rate housing, low income housing will continue to be needed even in an economic downturn. Funding sources for low income housing will not be affected as much as will financing sources for speculative projects of a market rate nature. Such projects need to make a profit, which is harder in the economic downturn we are likely to see for quite a while. High interest rates are a problem going forward for all development, but potentially public housing can utilize tax exempt municipal and state bond!
As far as density automatically making units cheaper, hmm, how do you explain the rental rates in Manhattan and even Brooklyn in New York City. Seems the density increases are pumping up prices there….. and the luxury of the units. IN other words, we need to limit density to all affordable projedcts so as to make THEM cheaper. The market rate will be expensive no matter what.
The average rent in Brooklyn is lower than Mountain View and Mountain View has far fewer homes, but what you’d have us believe is that adding more homes to Mountain View would *increase* prices. Like Leslie above, that’s just completely unserious analysis.
If Mountain View doesn’t put forth a realistic plan for building those low-income homes, either through Leslie’s 50000 homes or otherwise, we’re going to have a very rough time starting February 1.
A) “If the local Housing Elements are not fully certified by May 2023, the state will apply sanctions.”
A key question is this one: “What exactly are those sanctions?”
Big Brother is unhappy with MV, and is threatening “sanctions”. Seems to me that the residents of MV have a right to understand both “our crimes” and what those sanctions might be. How many voters know the details of our “definition of ‘pending projects’ in the sites inventory” or our “implementation of floor area ratio (FAR) as a measure of density”? These are crazy, scary, overly bureaucratic times. If voters don’t push back on state Dems, we should expect more of the same.
SV@Home says that MV draft Housing Element was the first to be submitted from Santa Clara County. But the MV Chief Communications Officer says “We have learned other cities in our area and across the state have received similar feedback from HCD.” Who is telling the truth? Mayor Lucas Ramirez indicated that “receiving this level of feedback from HCD isn’t a huge shock. He said HCD has told jurisdictions to expect up to three rounds of back and forth on Housing Element drafts.“ In other words, nothing to see here folks, move along.
Wait, what? Please, somebody tell us, WHAT ARE THE SANCTIONS?
B) I’m going to play Nostradamus here and predict that HCD will continue to be unhappy with our draft Housing Element because “it’s not clear that MV will meet its RHNA targets for affordable housing”.
You know, the targets that don’t make any mathematical sense because THE STATE gives developers perverse incentives to provide funding for at most 1225 BMR units for a project involving 11,135 units, and yet demands 6,225 BMR units from MV. The targets where our own city council doesn’t understand “how ABAG arrived at some of its numbers.”
We can’t meet the target of 6,225 BMR units without SIGNIFICANT ADDITIONAL FUNDING.
But we DON’T HAVE additional funding. Too bad, so sad. Whatever will we do? I guess we have no choice but to increase MV’s total target, which is already the LARGEST TARGET FOR CITIES OF OUR SIZE!
See how the game works? The state gets to pretend that they are “champions of affordable housing”, when the TRUTH is THEIR state bonus density law actually REWARDS developers for building the vast majority of housing units (89%) that are only “affordable” to those who earn >120% AMI (or about $188K in MV). If/when the total targets for MV are increased, that will allow developers to build EVEN MORE market rate units. Ka-ching! And HCD even requires that OUR FINE CITY put in the time and energy to identify exactly where the developers should build (instead of, oh I don’t know, working on other projects that those plebian residents care about).
State Dems are clearly working to help developers maximize their profits.
C) Statement: “You’re telling me with a straight face that you don’t think rents would drop if we added 50000 homes to Mountain View?”
Rents are not going to drop for households who earn less than 188K, because only a TRIVIAL amount of housing is being created for THEM and because OVER HALF THE HOUSHOLDS in MV will compete for them. You know, all of the teachers, service workers, kids, etc, that we hear so much about? State Dems have set POLICIES that only create a TRIVIAL amount of housing for THEM.
Furthermore, 50000 will not be added all at once. Projects are approved and built one by one; developers are not required to build any approved project. In the HOT MINUTE when developers conclude that they won’t make enough ROI because the market for market-rate homes is saturated, construction will stop. It is nothing but a FANTASY to believe that builders will continue building beyond that point.
Just an observation.
Leslie, remember that the housing system is a PRIVATE system, thus the City is simply going to NOT ALLOW luxury development because of over supply. The facts are a civil lawsuit can be filed and all state and federal funds can be cut off from the city. Those include educational funds.
As the DEMAND of housing for luxury housing crashes, there will be many of those “investments” going up in smoke. You seem to believe that the demand for housing is infinite. A MAJOR error.
You also think that the City is REQUIRED to subsidize BMR housing, that is WRONG too. Since the housing market is private, it simply has to be allowed to have those investments fail. Perhaps those investments can be converted to affordable units after a bankruptcy.
And developers may NOT get approval for developments as more legal requirements from state laws become more strict. That has nothing to do with the city. And I think that is a good thing. This city has too many luxury units and not parity with demand. In the end either developers are going to have to adjust, or the city CANNOT approve any projects.
Just an observation. Leslie, remember that the housing system is a PRIVATE system, thus the City is simply going to NOT ALLOW luxury development because of over supply. The facts are a civil lawsuit can be filed and all state and federal funds can be cut off from the city. Those include educational funds.
As the DEMAND of housing for luxury housing crashes, there will be many of those “investments” going up in smoke. You seem to believe that the demand for housing is infinite. A MAJOR error.
You also think that the City is REQUIRED to subsidize BMR housing, that is WRONG too. Since the housing market is private, it simply has to be allowed to have those investments fail. Perhaps those investments can be converted to affordable units after a bankruptcy.
And developers may NOT get approval for developments as more legal requirements from state laws become more strict. That has nothing to do with the city. And I think that is a good thing. This city has too many luxury units and not parity with demand. In the end either developers are going to have to adjust, or the city CANNOT approve any projects.
JAFO,
Fact: Over the last 8 year RHNA cycle, the average construction rate in MV was 12 BMR for every 88 market-rate units.
Fact: The recent project described here https://www.mv-voice.com/news/2022/09/28/mountain-view-city-council-approves-residential-project-on-east-el-camino-real is constructing new units at a rate of 11.3 BMR units for every 88.7 market-rate units, and was unanimously approved by the city council.
Fact: Main article states:
“The project will provide 11% of the project’s base density for units affordable to very low-income households, making it eligible for a 35% density bonus and up to two concessions under the state density bonus law, plus development waivers. Concessions allow developers to build higher in exchange for providing affordable units.”
Translation: the state density bonus law awards goodies to developers when they construct projects that have 11 BMR units for every 89 market-rate units. Another way of saying that is that the state is awarding developers for building a lot, a lot, a lot of market-rate housing units.
You wrote: “You also think that the City is REQUIRED to subsidize BMR housing, that is WRONG too.”
??? Respectfully, you are mistaken. I never said that. HCD has set RHNA targets for MV, and those targets specify explicit numbers for each income level. MV is required to meet those targets. HCD is threatening sanctions, if we don’t. This puts MV between a rock and a hard place, because we don’t have funding lying around that we can use to subsidize the construction of ~5000 BMR units.
Not sure why but the whole housing element process (and the back and forth with HCD) reminds me of the “Shrubberry” skit in Monty Python’s Holy Grail
Wondering who will be asking for the timber used for housing to be cut with a herring 🙂
Jsst an observatin,
Leslie you are proving my theory, that the City of Mountain View luxury housing is going to collapse. As you pointed out, if 80% of all production is luxury housing, it will result in as much as a 20% vacancy rate due to the “normal” bell curve demand.
Also, the City of Mountain view is NOT responsible to support ANY private housing. Thato is on the private housing market to solve. Granted no amount of subsidizing would ever create “AFFORDABLE” housing. This was the design of the so called Reagan Affordable Housing Solution of the 1980s. An absolute failure.
You are assuming that it is the responsibility of the City, County and State to insure profitability in the housing market. That is WRONG. In fact that was the point of PRIVATIZING the housing market starting in the 1980s.
The private market said they were able to more efficiently and effectively produce housing better than public housing. The history especially in CA proves that is wrong. In the end the vacancy rate in Mountain view for luxury units are being underreported by owners not listing them. Afraid to cause investor pull outs.
Leslie, I thought Li Zhang had those magic funding sources we could achieve our low-income housing goals with, why can’t we just tell HCD about those in our plan?
But, yet again, HCD makes no demand that the city produce BMR units, I don’t know why you keep saying that. They require the city to produce a plan that will lead to enough homes that are affordable to various income levels. Just because you believe that adding 50000 homes to the city wouldn’t bring prices down doesn’t make it true.
SRB, plenty of cities have already had their housing elements approved. That Mountain View’s staff decided not to learn from those cities and the other cities that were denied is not HCD’s fault. There’s clear statutory requirements for the Housing Element that city staff simply chose to ignore, HCD provides training and guidance on how to write a housing element, but staff decided to just submit an obviously non-compliant one.
Market rate development of 50,000 new apartments in Mountain View would cost well over $50 Billion. That much new investment in just one city in California is highly unlikely. The capital likes to spread itself around. This is the reality of relying on pricate profit-motivated investment to do anything. Anything that is built will be seen as incremental luxury housing, because of the mere newness. Investors will require that there me at least some concessions to this aspect, i.e. they won’t seek to minimize rental value and they will expect some amenities in the new building, such as parking, gyms, pet facilities, meeting rooms, rooftop decks, or all of the above and more.
In Brooklyn there is rent stabilization of long duration. You’d need to look outside that to gauge the rent of new construction for sure. But my point is look at the rent on what has been built market rate in the last decade. Compare that to out situation, and you see that the denser Brooklyn has no advantage pricewise.
LongResident, frankly, your analysis is incoherent. That’s market rate rent in Brooklyn, Brooklyn has vacancy decontrol. You said that it “density was pumping up prices”, but it’s cheaper to live there than it is in Mountain View. You’d have to assert that adding enough homes to Mountain View to match Brooklyn would raise rents (“pump up prices”), even though Brooklyn rents are lower. Unless you want to say that there is more demand to live in Mountain View (Pop 80K) than there is to live in Brooklyn (Pop 2.5M). Simply put, none of what you said hangs together.
Honestly, it is important to have a logical argument when talking about differences between geographic locales. Brooklyn has had rent stabilization for 50 years and that would seem to override any issue of vacancy decontrol when comparing it to a city that just adopted a version not covering as much and much more recently. But look at Rent Cafe. Brooklyn rents average $3200 per month for 650 sf and Mountain View averages $3400 per month for 850 sf. That doesn’t seem like Brooklyn is cheaper at all. The population density is 6x what we have in Mountain View or 36,000 people per square mile. The density didn’t save on rent, even with rent stabilization.
But my point was what could be done to massage the rent rates. Build a new market rate project and it will rent for ABOVE average prices. That doesn’t seem like a winning strategy to lower average rent. So HCD is RIGHT that MV has over emphasized the market rate production at the expensive of a believable achievable goal for low income housing. You can see their logic using this example Brooklyn vs. Mountain View. Density isn’t the thing they have in mind, but rather encouraging BMR units at the expense of not so many speculative market rate projects.
What’s incoherent is how anyone can fail to follow this argument. It may not be the only approach, but it merits consideration. I agree with Leslie that IF we could get 50,000 new market rate units with 20% inclusionary BMR units that would facilitate a lot of low income housing. I just don’t see how we could EVER expect that much investment in one city. It would suck away the ability for neighboring cities to get their own investment, because the overall area only has so much demand. It’s like expecting water to sit in a pail with different levels at different points on the top of the contents. It all evens out. 50 Billion dollars is way omre than the city would ever expect, and it would basically double the assessed tax base. Not gonna happen….
You said “density increases” are “pumping up prices” there, and they’re way more dense than Mountain View and still cheaper to rent an apartment there. Let’s not try to rewrite what you said.
But, hey, if you all want to pretend it’s impossible until the state gives us $6B, let’s see what happens on February 1. How do you think your city will do? Honestly, seems much more likely Los Altos won’t have an approved Housing Element.
Just another observation. The rents in Mountain View are nowhere close to recovered after Covid. First remember an average rent is NOT the median, it is significantly biased to the supply profile of the City which has over 50% of the units being premium, and not even close to a normal distribution.
First let’s make sure we have a good basis for comparison the CPI starts at 241.53 in Dec 2014 Now it is 322.05, an increase of 33%. That means if the rents did not increase by 33% from December 2014, you are losing money in that business
For example, one MLS indicates that an average studio is renting at $2930. It peaked at $3290 in May 2022. However, it was starting at $2199 Dec 2014. It means you just broke even in that market. No increase in revenue.
For example, one MLS indicates that an average one bedroom is renting at $3190. It peaked at $3990 in June 2018. However, it was starting at $2350 Nov 2014. That is only a 2% increase in revenue.
For example, one MLS indicates that an average 2 bedroom is renting at $3999. It peaked at $5000 in June 2018. However, it was starting at $2930 Dec 2014. That is only a 4% increase in revenue.
For example, one MLS indicates that an average 3 bedroom is renting at $4490. It peaked at $5540 in Jan 2019. However, it was starting at $4190 Dec 2014. It means you just broke even in that market. You lost 26% in revenue.
For example, one MLS indicates that an average 4 bedroom is renting at $6530. It peaked at $9000 in March 2016. However, it was starting at $5388 Dec 2014. You lost 12% in revenue
And people claim that this market is good? And just realize that Santa Clara County is losing population in 2021 we lost 2.3% of the population, and most of those were relocating High Income earners. Alphabet LOST 32% in stock, Meta lost 61% in stock, Apple lost 23% in stock, Microsoft lost 30%in stock, Cisco LOST 37%. ALL THIS YEAR
Face it, this area is going to see a lot of pain in the next year
But a poor economy can be a good time to add BMR units. There could be less competition for construction resources and even for city planning resources due to a drop off in market rate projects. The speculative factor isn’t there for BMR units as the units are DESIGNED to be below market rate and hence cheaper than any other option for eligible renters. The cost to the public agencies for building 6,000 units at $1M each isn’t all subject to loan reviews as to the prospects for profitability, as they aren’t trying to turn a profit. The agencies can fund part of the project with tax exempt bonds at lower interest rates than what’s available to profit making builders. There are other tricks such as escaping property taxes which can help with providing some of the affordability. It’s a good time to be adding BMR units which have a backlog of need. If there is truly a big setback in the economy, having the BMR units is more likely to reduce the rental rate on older market rate housing for lack of tenants with current tenants moving into BMR units newly built. The whole dynamic of new cost more doesn’t apply to BMR units, not for the renters.
That’s part of why I don’t think we need to be thinking about 50,000 market rate units to generate 10,000 included BMR units as part of those projects. We’ll see more all affordable projects for various income levels, and it will take public money, but no where near the full cost of building the new units. Mountain View’s plan to stray from the 55-45 ratio of affordable BMR units to market rate units is contraindicated by current conditions, I agree.
What does that have to do with getting an approved Housing Element?
Just an observation.
Too many times have I heard the PRIVATE housing industry say that the PUBLIC has to bail them out. This housing collapse is going to be different and there will be NO BAILOUT for the PRIVATE housing sector this time.
Also the idea of the PRIVATE housing industry is that it satisfies the needs of customers, it does not require the PUBLIC to fund the affordable housing parity in development. Stop even thinking about that idea, that again is a PUBLIC bailout that will not happen this time.
So what is likely to happen?
New federal and state laws will continue to force building the affordable units. The PRIVATE sector will NOT get subsidies and instead these will return to PUBLIC projects. Why? Because PRIVATE development inflates costs via accounting trickery.
This economic cycle we are in has a strong chance to break down the PRIVATE housing industry because it cannot perform what it promised as far back as the 1970s. They have become obsolete and ineffective. Thus, they are going to eventually either become a very small industry or none at all.
The PRIVATE housing industry has a CHOICE right now, either adjust its business model early and survive, or fight it and see a major reduction in the market forever.
JAFO, respectfully, you seem to be having a different conversation than the rest of us. The news item and most other comments are related to state efforts to address the housing affordability crisis. Key points:
– RHNA targets are mandated to “quantif[y] the need for housing within each jurisdiction during specified planning periods.”
– MV is in the middle of revising it’s Housing Element, also mandated by State Law, with a deadline coming soon. We will be subject to “sanctions” if we don’t submit a “compliant” document by the appropriate deadline, and we will need to endure the agreed-upon revisions for a long, long time.
– Three seats on the City Council are being voted upon as we speak.
Naomi Klein wrote “The Shock Doctrine: The Rise of Disaster Capitalism” to explain how, during times of crisis, questionable policies are often put forward to exploit the public. People in pain are distracted and willing to embrace “solutions” that are deeply flawed. Proposals have been embraced by the state that will do little to achieve what is being promised: lower rents for most people.
What do the schemes actually achieve? They consistently make it easier for developers to make money. Why is the state engaged in this way? The dirty little not-so-secret: many politicians do what is best for their DONORS instead of what is best for “we the people”. The ENTIRE COMMUNITY of MV is being thrown under the bus in order to help both developers and Google. I am beyond outraged.
Normal human beings who lack PHds in housing law are simply not able to recognize that what the public is being sold does not match what we have been told we are buying. The details in the schemes are mind-numbing. The devil is in the details, which means that many voters’ eyes glaze over when one tries to explain what is happening. Consider:
A) The newest RHNA targets in MV are such that for every 100 housing units built, they should be distributed as shown in order to “meet the need”:
Income Level : Number of Housing Units
Very Low (<=$78K): 25 Low ($78K-$125K): 14 Moderate ($125K-$188K): 17 Above Moderate (>$188K): 44
–——————————————–
Total: 100
Guess what? Put this way, the ratio looks great to me! The numbers basically match the existing population of MV; we need to build in that ratio to enable those with lower incomes to live here. Census data shows that in 2020, half of MV households earned $157K or less, and half of MV households earned more.
Note: the bottom three income categories sum to 56: according to the state, we NEED to be building housing at a rate of 56 BMR (Below Market Rate) units for every 44 market-rate units.
B) The bad news
1) Over the last RHNA cycle MV built 12 BMR units for every 88 market-rate units. Clearly we have been OVER BUILDING for the highest wage earners, and UNDER BUILDING for everyone else.
2) No legislation has been passed to change this ratio going forward
3) State Law actually REWARDS developers who build housing at a rate of 11 BMR units for every 89 market-rate units
“”The project will provide 11% of the project’s base density for units affordable to very low-income households, making it eligible for a 35% density bonus and up to two concessions under the state density bonus law, plus development waivers. Concessions allow developers to build higher in exchange for providing affordable units.”” – https://www.mv-voice.com/news/2022/09/28/mountain-view-city-council-approves-residential-project-on-east-el-camino-real
How serious can state Dems actually be about solving the housing crisis if they reward developers for building such a TRIVIAL amount of BMR units?
4) NONE of the hoops that HCD is now asking us to jump through will result in funding for more BMR units.
Growing rice in the desert requires a great deal of WATER.
Building affordable housing in a place with high housing costs requires a great deal of MONEY.
Some people believe that building 11 BMR units for every 89 market-rate units is enough, even virtuous. I disagree. There is no possible way that MV can meet the RHNA target of 6,225 BMR units – what state politicians say that we need – without SIGNIFICANT ADDITIONAL FUNDING.
Li Zhang is the only candidate for the city council who has stated that one of her PRIORITIES will be to identify additional funding sources for affordable housing. https://www.liformountainview.org/priorities She is a newcomer, yes, but she is clearly a fast learner because she has figured out that relying on developer funding alone to build affordable housing simply will not get the job done.
Statement: “I thought Li Zhang had those magic funding sources we could achieve our low-income housing goals with, why can’t we just tell HCD about those in our plan?”
Note how the ONE CANDIDATE who has the COURAGE to admit that relying on developer funding alone is a path to failure is regarded. Finding additional sources of funding will be very difficult, but staying on our current path – that is, relying on developer-only funding alone – will keep the housing crisis going for everyone except for the highest wage earners.
Leslie, respectfully, you seem to have very little understanding of the issues and very little interest in alleviating that. Consistently, you take tiny pieces of information and weave them together incorrectly without diving any deeper.
For example, you seem to think (and repeatedly state) that cities rely exclusively on developer funding for housing subsidies. This is simply false, one need only look at the Project HomeKey programs in Mountain View for a simple counterexample to that. Pretending otherwise demonstrates a lack of understanding or a willingness to fudge the truth to support one’s cause. This has been pointed out before, but for some strange reason counterexamples never stick and the misinformation continues to get repeated.
But, at the end of the day, this doesn’t really matter because if the city doesn’t have an approved Housing Element on February 1, I doubt the strong local control people will be very happy. I hope Li can figure out those funding sources by then!
Just an observation.
I just read a great article discussing the fact that the pandemic has resulted in the Bay Area encountering the worst economic demographic in history in the area. The article titled “S.F. area’s exodus of rich people led to biggest drop in household income of any U.S. city”
This is exactly why this area is about to see a major economic Earthquake. The median income dropped 4.6% in the SF area, and it is historically matched with Santa Clara County. And with this housing demand gone, that results in again a significant vacancy problem for the kind of housing developers gambled on to fill.
Again, the is NO SUBSIDIES going to be provided for these units to be made affordable to lower incomes. That is just another attempted BAIL OUT. The last one in2008 will NOT be repeated this time. The Fed cannot afford to do anything because it is going to be underwater itself.
A lot of RMBS and CMBS is owned by the fed, they cannot sell them. They cannot lower rates because of inflation. The chronic labor shortages are going to continue for years causing a period of statistical low unemployment, but in reality a critically ill economic system. The facts are Covid has also reduced the workforce permanently too, one report indicated that 4 Million people cannot return to work because of it.
In the end this areas housing market is on a train going through a tunnel that hasn’t been completed with no brakes.
I believe in facts, data, math, and the scientific method. I especially love math, we can use it to analyze the affordable housing crisis. We could establish a metrics board to compare our progress to our goals for every RHNA cycle. I’d love to see the city create and maintain such a board.
What are our goals? They exist in the form of RHNA targets. The newest ones for MV are such that for every 100 housing units built, they should be distributed as shown in order to “meet the need”:
Income Level : Target Housing Units
Very Low (<=$78K): 25 Low ($78K-$125K): 14 Moderate ($125K-$188K): 17 Above Moderate (>$188K): 44
–——————————————–
Total: 100
This allocation basically matches the existing population of MV. Census data shows that in 2020, half of MV households earned $157K or less, and half earned more. We need to be building significant amounts of housing for EVERYONE, right? These goals would accomplish that.
Since we are starting a new cycle, our metrics board (under Units Built) would mostly have zeros, which isn’t so helpful. In the meantime, we can look at the historical record to see what we should expect to achieve based on our current approach. During the last RHNA cycle, here is the average of how we built every 100 housing units:
Income Level : Target Housing Units / Units Built / (Percentage of Target)
Very Low (<=$78K): 25 / 4.5 / (4.5/25) = 18% Low ($78K-$125K): 14 / 4.5 / (4.5/14) = 32% Moderate ($125K-$188K): 17 / 3 / (3/17) = 18% Above Moderate (>$188K): 44 / 89 / (89/44) = 202%
–——————————————–
Total: 100
The percentage at the end shows whether we will meet the target or not; any number less that 100% indicates failure. In a nutshell, over the last RHNA cycle MV did a crap job at meeting the targets for the lower-income categories. It’s not really the city’s fault though, MV did a crap job because developers did a crap job at building BMR units. And in some way, it’s not really the developers fault either, because they lose $$$ when they build BMR units, so they really don’t want to build them. Nobody wants to build them, that’s why it is so difficult to find funding for them.
The TRUTH is, the math shows that if we stay on our current path, we are simply going to FAIL at creating enough housing to “meet the need” for every category except the highest wage earners. Wait, what? Wasn’t building more housing OF EVERY KIND supposed to be the objective of housing advocates like MV YIMBY? In order to lower the rents in MV?
The leaders of the CA YIMBY movement (in Sacramento) are very smart people, they DO understand this math. The dirty little secret is: they don’t share the same goals as the rest of us. These people are primarily interested in increasing the total number of market-rate units built. Powerful developers don’t care about the housing crisis, why would they? https://www.mv-voice.com/news/2022/08/31/mountain-view-city-council-reluctantly-approves-downtown-office-project-next-door-to-city-hall Developers want to build, baby, build, that’s how they make $$$; and they make the BEST $$$ when they build market-rate units, not BMR units.
The dirty little secret is that if we STAY on our current path – that is, PRIMARILY rely on developer funding for BMR units – the housing crisis will continue for everyone except for the highest wage earners. And I’m not sure that our current path is even a win for them either, unless they enjoy paying market-rate rents to their landlords.
Note that MV YIMBY has endorsed all of the incumbents in the race for 3 city council seats. https://mvyimby.com/ . Persons who want to stay on our current path, and build 11 BMR units for every 89 market rate units should certainly vote for them.
Li Zhang understands that our current path is a path to failure. She is the only candidate for the city council who has stated that one of her PRIORITIES will be to identify additional funding sources for affordable housing. https://www.liformountainview.org/priorities And she is being mocked for it, by persons who take pride in building any BMR units at all, no matter how small the number.
Leslie, the city prepares a housing element progress report every year and submits it to HCD.
Frankly, when you care about the *percentages* of low income homes created more than the *actual number* of low incomes homes created, you’ve lost all credibility to mock others for “taking pride in building any BMR units at all.” Some people actually care about getting these homes built, but you shouldn’t mock them for that.
What I’ve pointed out is that Li Zhang is doing the standard political “promise:” she doesn’t actually know any additional funding sources, but she’s saying she’ll find some because saying she won’t build the low income homes we need to is politically unpalatable.
There’s no magic solution to this that doesn’t involve building vastly more homes than we have in the last few decades. Sticking our heads in the sand and telling HCD we won’t do it unless we get $6B is a recipe for disaster, and I hope staff takes this round of work on the Housing Element far more seriously than they took the first one.
When you consider that there were 2 big economic slowdowns since 2000, and that those impacted home construction, we are not doing too bad. It’s kind of a mass hysteria to say that this is a crisis. Most of the population growth in California has been in the Inland Empire, which has been ahead of the rest of the state in building homes. What’s happening is people are relocating there from within the state as well as moving in from outside the state. This is the place where the most new home growth was needed, and it has worked out that way that construction took place.
In our area the concern is for the increase in rent prices affecting lower income people, and the only fix for that is to build more BMR units. We don’t really need the market rate housing for current needs, but only for the speculation that population will continue to increase further. All the RHNA quotas have a bias in that they assume an optimistic rate of continued economic and population growth. This means that even if we drop back to very low to no growth, but don’t lose population, we will be overbuilt if the targets are met.
I see what JAFO is talking about and how it relates to the situation and the housing element. He’s just coming at what I said in the last paragraph, from a different angle.
All this relaltes to the housing element, because it is expected by HCD to be based on the same beliefs as the RHNA numbers. That means the belief that what’s needed is continued market rate growth, and then BMR unit creation 10% more roughly than the expected market rate growth. Mountain Views’s housing element included the claim that here we’d produce 4000 units of market rate new housing BEYOND the RHNA quota. That’s a problem in my view, and something on which HCD wants explanations.
As for as the secondary effects on the housing industry, well, we have had a terrible shortage of construction personnel and capacity, so if building drops off it will even that out.
Just an observation.
I have been watching a person called Jeb smith who has been saying for more than 6 months there is no risk to buy a home in the market. But he is a real estate agent. Now he finally is conceding that the housing market is in trouble.
As I pointed out before in 2021 there was only 12,500 property sales in Santa Clara County, but there are 6,500 real estate agents. That meant on average only about 2 sales a year per agent. The current trend is indicating at least a 20% reduction in sales in the county.
The facts are Frank is correct about the real problems. Yes, the permits and plans are approved, but MANY projects are going to be frozen, and those projects are going to stop. At the same time, those developers already spent a lot of money on them, which is going to be a loss.
Also developers are starting to go bankrupt, and non-banking mortgage companies are also in the same situation.
The PRIVATE industry is RESPONSIBLE for the mess they are in. They chose to neglect building a diverse scope of housing for more than 20 years. And they keep on telling all of us, GIVE US SUBSIDIES OR WE WILL NOT BUILD AFFORDABLE HOUSING. That is extortion. But worse as pointed out they overproduced units that are going vacant.
NO ONE is going to provide the PRIVATE housing industry any BAIL OUT this time, and the public funds are going to be used for only PUBLIC projects.
Again if this industry is actually working under NORMAL market rules they are going to be forced to change their business practices, of simply close shop. I suspect the closing shop is going to be a major trend.
The facts that interest rates are going to crash property values too is just another major problem.
Proof again is the fact that rents are still lagging behind regarding the last 8 years. And this is the tip of an iceberg because of the continuing interest rate increases.
LongResident provides a beautiful class in how to lie with statistics. They say that people are moving out of state and to the Inland Empire, and then points out that the system is working properly because that’s where construction ended up happening. As if the restrictions on growth in the wealthy coastal reasons and the insufficient amount of homes is disconnected from people having to choose to relocate elsewhere. There’s plenty of homes here, people just like the Inland Empire and Texas better than the Bay Area!
Just an observation.
Her is another thing to think about the current 2 year fed bond is 4.3% and the 5 yr is 4.17%, but the housing cap rate is 4.5%. What does this mean?
IF you succeed to perform well you can say earn $45,000 for every $1,000,000 in the housing market
But by investing in the fed note you receive $41,700 for every $1,000,000 for the 5 year note and $43,000 for every $1,000,000 on a 2 year note annually.
So if you go into the market for 2 years you gain about 2 times $2,000 or $4,000 in return if you are good. For a 5 year you earn $16,500 more on a 5-year note.
BUT if you are doing this work part time, that is 1000 hours a year you have to take those hours into account regarding cost. This also does not take into account other factors
For the 2 year note advantage you will have to divide $4,000 by 2000 hours to calculate your wages on that, which comes to only $2.00 an hour. For the 5 years note you have to divide $16,500 by 5000 hours to get hourly earnings of $3.30 an hour.
Simply put that proportional cost will be relative no matter how much property values you have.
Is that worth all that time? To me this is why investing in housing for at least 2 years is going to be a waste of effort. Without investors the developers and non-bank mortgage companies are basically in critical if not terminal condition.
Face it housing was a short term business, primarily in flipping, that has burned up all the fuel and is burned out.
E
Frank, let me try to spell this out slowly for you.
The RHNA targets spell out THE NEED. Over half the population falls into the three lowest income categories. We have not been building enough affordable housing FOR THEM. The RHNA targets show that we need to build 56 housing units out of every 100 FOR THEM. I am not making this up.
Instead, almost 90% of the housing built by developers is EXPENSIVE, market rate housing! In other words: housing that is UNAFFORDABLE to MOST of the people who live here! And SHOCKINGLY, State Law gives developers wonderful REWARDS for doing just that. What the heck is going on?
If we only build 11 housing units out of every 100 for lower income people, we are not doing a good enough job. Obviously. Do I really need to say that? Apparently I do.
The Yimby movement says we need to build more housing of every kind. What they don’t say (at least out loud) is that they think that building 11 units out of every 100, instead of 56!, is “good enough for the poors”. This is HIGHLY DISHONEST! People who are hurting because “the rent is too d*MN high” have been suckered into believing that Yimbys are fighting for them all of the way! But this is simply not true. Your words, Frank, are a testament to the fact that some people take great pride out of the trivial amount of BMR units that have been created. Because of laws that were created by MV residents before the Yimby movement ever existed, btw.
Here are three ideas for generating more funding:
1) Get Prop 15 passed, so Google pays its fair share in taxes. The money would go to schools and the city. The city could use those funds to create BMR units. Google is causing housing inflation, and is one of the richest corporations on the planet. I love this idea.
2) Get the State “density bonus law” changed. Require a higher percentage of BMR UNITS before the goodies are awarded. How about 20% instead of 11%?
3) establish a municipal tax for MV, similar to the one for SF. 1.5%
Leslie, when you care about *percentages* of low income homes built more than *how many* low income homes are built, you give away the game on what you actually care about. I’d rather get 100 low income homes that make up 11% of the total than 10 low income homes that are 56% of the total, because I want those 90 families to have homes. You prefer getting a “better” percentage, and you’re happy to sacrifice the well-being of those 90 families. You own a multimillion dollar home, so you have the luxury of waiting and stopping everything until you are perfectly satisfied. Those families don’t.
It’s all moot on February 1 if city staff doesn’t submit a compliant housing element, though. I hope they get their act together!
I give away the game about what I actually care about? Like Li Zhang and many other current residents, I care about the quality of life in MV. I fell in love with this once not so charming little city because of its heart and soul. Most of the other communities were leafy and green, MV was down to earth, and progressive, and full of racial and socio economic diversity. I wanted to raise my family in such a place.
I don’t mean to be unkind, Frank, but those who understand math understand that often percentages are the best way to measure something. For example, it is only by looking at the percentages that we can see that MV has been doing a crap job at building affordable housing for over half of those who live here. I agree with Yimbys when they say we need to build more housing in order to bring rents down. But Yimbys also have this weird belief that it doesn’t matter what kind of housing gets built, so they don’t mind if almost ALL of the housing that gets built are UNAFFORDABLE market rate units. I think that’s crazy, especially in MV, where demand for housing is extremely high in comparison to everywhere else in the world because we are Silicon Valley.
Do you know where percentages are also used? They are used to evaluate charities. Most people don’t want to donate to a charity that only gives 15% of gifts received to those who are actually in need. Most people think that the people running those “charities” are scam artists.
Who benefits most when 11 BMR units are constructed out of every 100 that are built? That is the question. Is it those who are in desperate need of affordable housing? We know that building at that rate will not produce the amount of affordable housing THAT IS NEEDED according to our RHNA targets. 11/100 IS NOT ENOUGH for them, they NEED 55/100. So why are we building so many market rate units? I wonder … who loves to build and sell market rate units? If only we could figure that out …
Exactly! You don’t care about getting the most homes for low income people, you care about “quality of life.” If that means 90 low income families don’t get to live here, that’s a sacrifice you’re willing to make.
I don’t mean to be unkind, Leslie, but those who understand math understand that 100 is bigger than 10. You have this weird belief that because 56% is bigger than 10%, that makes it better to get 10 low-income homes than 100. RHNA does not prescribe a *rate*, it prescribes a *minimum number of homes.*
Just an observation.
I just read that the Biden Administration is about to extend employee status to the so called “gig” worker’s in ALL jobs, not just Uber and Lyft NATIONWIDE.
This is a good thing for here because it will return the possible economic advantage of the valley again. In effect all outplaced workers are going to be able to move back here with better REAL jobs.
As a graduate with an HR Business Degree, I KNEW it was an illegal operation for decades, it was just not being enforced. ABOUT TIME.
This may be the only way that this area can have any hope of getting close to pre-pandemic economic health.
But also, I strongly urge that the housing market get its act together and adjust itself so that the usability of all available units conform with the normal demand profiles of housing.
The current individual median income in the county is $50K Meaning that take the median income of the area and build or provide housing based on 30% of that income per month or $1.500.
WOW I didn’t know the income for an individual was THAT LOW!!!
Then set the prices so that there is 13.6% of housing based affordable to 2 standard deviations negative of the mean for very low income. 34.1% for 1 standard deviation negative for lower income housing, 34.1% 1 standard deviation positive for the moderate income housing and 13.6% for the 2 standard deviation positive high income housing needs.
Adjust our supply to meet that and you will be not likely to have any housing problems. But that means a major change in the market.
Frank, SHAME ON YOU. It is EXACTLY because I care about the most homes for low income people that I have spent so much time and energy to educate others about the false promises of state Dems and the Yimby movement. I agree with Li Zhang: the cost of housing is ITSELF a quality of life issue. The rent is too d*MN high, people are MISERABLE because of it. The quality of life would improve for so many if housing was more affordable.
Our housing policy is bonkers. REWARDING developers when they build 11 BMR units for every 89 market rate units is bonkers. That’s like doing business with someone who “shares” the pizza by saying, “One slice for you, nine slices for me”. People like you like to brag about how great they are for giving one entire slice of pizza to people in need. But the truth is that they are giving NINE FAT SLICES to developers. Does that deserve a halo? I think not.
Frank, you and MV YIMBY leaders clearly want to stay on the path we are already on. It is a scheme that primarily helps DEVELOPERS, not people in need. The Yimby movement is like a charity that gives 11% of the proceeds to people in need, and siphons the rest away as “administrative costs”. And it makes a big show about how much good they are doing, as if MV residents were indifferent to the plight of low income folks until the Yimby’s came along.
You mock Li Zhang for wanting to INCREASE the amount of funding for BMR units. How can you defend that? You sound like you want to KEEP developers sitting in the cat bird seat, playing chicken with the town council to accept one of the crappy alternatives that is offered to them. Because if the council has the GUTS to say no, all city Requirements NEED to be met, then a chorus of (not lower income) Yimbys will trash them on social media.
JAFO, the housing industry is not going to “get its act together” unless they are forced to do so. They primarily want to build market rate homes, and state Dems actually REWARD THEM for doing so.
Maybe this pizza party analogy of yours will help highlight how absolutely absurd your stance is.
One person throws a pizza party where they bring 1 pizza and give half of the slices away to the homeless, and charge entry to everyone else. 4 homeless people are fed, but it’s 50% of the pizza!
Another person throws a pizza party where they bring 10 pizzas and give one slice out of every pizza to a homeless person and charge entry to everyone else. 10 homeless people are fed, but only 12% is given away!
You’re so mad about those additional people paying to get into the pizza party that you think it’s better that those 6 homeless people don’t get fed. It’s absurd.
As for Li, I’m calling Li Zhang out for empty promises. If you (or she) can tell me how much additional funding she’ll secure, and from where, I’ll stop doing it, but until then it’s just vapor.
Just an observation
Well, ABC News and others are reporting that RENTS are starting to stop increasing.
In fact in San Luis Obispo they are dropping. They are also in LA and Anaheim.
Face it, the market is just starting to see another major reduction in rent due to new covid this winter, the recession, the increased interest in mortgages, and the liquidation of investors seeking better deals.
If they increase LESS than inflation, then landlords are DEAD. Especially here in Mountain View where the rents are still way off the level necessary to make more than inflation costs.
So what is going to happen is that rental rates ARE going to go down. They are going to go along the reductions of property values that is occurring at the same time.
So yes the PRIVATE housing industry either gets “it’s act together” or they will be out of business.
Frank, let me try to draw a picture for you.
Here is what nine slices of pizza looks like, which we are giving to the highest wage earners in MV:
XXXXXXXXX
Here is the one slice of pizza that we are forcing more than half the population to share (including teachers, service workers, and our kids who don’t work in tech):
X
I know you are extremely proud of the fact that we are giving ANY pizza to low income residents. You seem to think that one slice is plenty for them.
I disagree. One slice of pizza to feed OVER HALF OF MV is not enough. We need to be fighting for ways to give them more. You seem to think that one slice of pizza is the most that can ever be supplied, and anyone who thinks differently is a liar. I find it outrageous that you would say such a thing, I’ve already mentioned 3 different ways to get more funding for affordable housing. It will not be easy, but it is possible.
Oddly enough, it is you and the YIMBYs who are actually working to block the supply of AFFORDABLE housing, not persons like me. You seem oblivious to the obscene amount of market rate housing that YIMBYs want to build.
I hope voters keep that in mind. Li Zhang actually wants to solve the affordable housing crisis, instead of blindly sticking on our current path to failure.
Just another observation.
In the year of 2022 the fed rate was 0.08% and the inflation rate was 7.48%. The inflation rate peaked at 9.06% in June. During that time the fed raised the rate to the current 3.08%, however it only reduce inflation to 8.2%. That means that the Fed rate has a lot more to go up to control inflation.
In January the Average Mortgage for a 30 yr was 3.45% and the current rate is 6.11% from Freddie Mac. That rate is typically lower than everyone else. That make a difference of 2.66% or an increase of 77%. You can use this to predict what will occur regarding the next fed rate increase.2.66%/3.0% is the trend, which means that if you take that ration and multiply it to the new rate, this will give you the Freddie Mac prediction which is about 6.75%. But as we all know the real rate is about 6.92%. So, you can then take that and get the real interest rate prediction which is 7.2%.
Imagine that borrowing costs for housing have increased by a factor of at least 200%, and that demand has gone down to levels we haven’t seen since 2010. This is going to be a real problem for the PRIVATE housing business. Especially it is going to put a lot of real estate sales professionals out of work, mortgage companies are slashing workers or going bankrupt, developers and other housing professions are also in job losses and bankruptcy too.
I half think you’re just messing with me at this point, Leslie, because otherwise I’m seriously doubting your mathematical literacy. I thought the pizza party analogy was going to be effective, since 10 homeless people getting fed is better than 4 homeless people getting fed. Instead, you just made a condescending response with a bunch of Xs (and don’t even seem to know how many slices are in a pizza?); your fixation on *percentages* instead of *actual numbers* makes no sense, and you use them interchangeably (“one slice”).
Just an observation,
ABC news is reporting a increasing level of layoffs in the tech industry in Santa Clara.
There are too many “Ghost Jobs” meaning there are job listings that are fake, there is no hiring in this area.
The Chamber of Commerce knows about it. And this area is simply not able to maintain the current rates of home prices or rents, and now that 8% mortgage rates are NOT out of the question, it appears things are getting worse.
Since the PRIVATE housing industry could NOT walk and chew gum at the same time. They built only 93 octane gas stations. This crazy strategy I think was based on TURNOVER, meaning more premium housing WILL degrade to lower levels in a short time.
NOW REAL ESTATE TRANSACTIONS ARE CRASHING, AND EXCESS HOUSING OF PREMIUM TYPE WILL NOT BE BAILED OUT THIS TIME.
Again, this market either adapts or dies, its up to the market to choose.
The Draft Housing Element is missing an important element – the preservation and enhancement of of natural highway vegetation barriers located between freeways and expressways and nearby residential areas. The city needs to place a higher priority on the protection (and enhancement) of these natural tree canopy barriers. These pollution barriers are the last line of defense against public health exposures to toxic and carcinogenic vehicle emissions from cars and trucks. These exposures are especially concerning to the health and welfare of our infants and children who are most susceptible to harm during the growing stages of their life. The EPA has done research and the results indicated under certain criteria these natural highway vegetation barriers are highly effective in filtering particulars from tire and brake wear and absorbing gaseous pollutants, such as byproducts of incomplete fuel combustion, through the leaf stomata of these evergreen trees. The protection of these land features are critical because there is no effective replacement for these natural barriers. Once these trees are removed by housing developers it is game over. The uncontrolled emissions and the exposures will be 24/7 and last for 20-30 years.