It was a huge price jump compared to other expensive-to-build affordable housing projects. Just two years ago, the city agreed to fund about $187,000 per apartment for a 62-unit project off Evelyn Avenue by the development firm ROEM. The new Palo Alto Housing project is asking the city to pay about 70 percent more, about $320,000 per unit, Matichak pointed out.
"I have real concerns about the cost of this," Matichak said. "Maybe El Camino Real, where property values are so high, maybe it's not the right place for this project."
The 950 W. El Camino Real project lacked enough support on the council to get about $1.7 million in requested funding for planning studies and initial development costs to help expedite the project. As a formal budget allocation, that action needed support from at least five council members to be approved, City Manager Dan Rich said.
Despite that resistance, the largest chunk of funding for the 950 W. El Camino project had sufficient support on the council. The council voted 4-2, with Matichak and McAlister opposed, to commit $22.7 million from the city's below-market housing fund to the project. City officials said this action did not require a five-member supermajority.
Councilman Chris Clark recused himself from voting on the project because he owns property nearby.
Representatives from Palo Alto Housing acknowledged the project's steep costs, but they explained it wasn't out of the ordinary given the fierce market competition. Palo Alto Housing Development Manager Danny Ross said his team had to move swiftly and take out a loan from the Housing Trust Silicon Valley to get enough funding to secure the property, a 0.61 acre site currently occupied by a Taco Bell franchise.
In the interest of moving quickly, Ross said they had to apply for a less competitive, but less lucrative tax subsidy through the U.S. Department of Housing and Urban Development. As another setback, this project also won't be able to benefit from Santa Clara County's $950 million Measure A bond because it doesn't include supportive housing for the homeless, he said. About 17 of the units are expected to go to developmentally disabled individuals, but the county measure is not providing money for this subgroup at this time, he said.
To be eligible for Measure A funding, Ross said at least half of the 71 units would need to be given to chronically homeless individuals. It would not be a good idea to mix the disabled and homeless in one housing project, because they have different needs, he said.
"We weren't able to negotiate with the county to include the developmentally disabled to make this project work," he said. "We have a couple other projects that we want to present to you soon and we hope at least one of them can use Measure A funding."
The chief funding source for the new project would come from the private developer Prometheus Real Estate Group. Under a new "prefunding" system proposed by city staff, Prometheus would pay forward the money they would eventually have to pay in affordable housing fees for a project planned at E. Evelyn Avenue.
Given that the money was available, supporters on the council said it made sense to put it to use immediately.
"This is a great opportunity to have a project in a good location on El Camino Real," said Councilwoman Margaret Abe-Koga. "To be able to prefund this is a great mechanism to make affordable housing development more competitive."
The $1.7 million that failed to gain sufficient support on the council could come back as part of the city's annual budget process, Rich said. As an allocation packaged in the budget, it would require only a simple majority to pass.
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