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The high price of affordable housing

Original post made on May 2, 2019

In some ways, it was a perfect deal, but a 71-unit affordable housing project still faced a skeptical audience at a Mountain View City Council meeting.

Read the full story here Web Link posted Thursday, May 2, 2019, 1:04 PM

Comments (20)

141 people like this
Posted by nihilist
a resident of Sylvan Park
on May 2, 2019 at 1:54 pm

Building affordable housing in one of the most expensive parts of the city is a very good way to waste money.


51 people like this
Posted by Dan Waylonis
a resident of Jackson Park
on May 2, 2019 at 2:12 pm

Dan Waylonis is a registered user.

Wow. That's exorbitant. Alternatively, the city could focus on actually encouraging developers to create housing in the city by reducing development costs and regulations.


245 people like this
Posted by OnceAgain
a resident of Whisman Station
on May 2, 2019 at 2:27 pm

Why would the City spend the TAX PAYERS money to build affordable housing in prime locations for people who cannot afford to pay taxes? There's a lot of people who are paying taxes who live in much crappier locations and older apartments and spending years to save money to buy something that's just a bit above a shack in Mountain View.

Yes, build affordable housing. But build it in less expensive areas so the money goes further and more units can be built for more people. Instead, the city builds something brand new in the best location and spends more to get less. Who the hell votes these people in?


193 people like this
Posted by Total Sham
a resident of Bailey Park
on May 2, 2019 at 3:45 pm

Of course the project is overpriced. A private developer could build these units at half the price. Unfortunately nonprofits like to make huge profits to pay for their outrageous perks.


132 people like this
Posted by Why?
a resident of North Whisman
on May 2, 2019 at 4:12 pm

Why? is a registered user.

Why is it ok to spend tax payer $$ on subsidized housing? It absolutely won’t work and just lines the pockets of developers and anyone involved.

In the scheme of things, this approach is ridiculous. If the city is truly serious about keeping residents here, they’d prevent the low cost housing from being torn down, and they’d do something to dump rent controll, since rent control basically forces lower cost older housing out of the market, by bankrupting small landlords, drowning them in legalities and causing property values to plummet.

Go back to the drawing board and start where the problem is- too much development too fast, and allowing high tech companies to by up and develop large real estate plots. Just stop the madness.

Put a moratorium on development, and I guaranty you, this will retain low cost housing.


1 person likes this
Posted by Mr. T
a resident of Cuesta Park
on May 2, 2019 at 6:02 pm

Mr. T is a registered user.

What about our Taco Bell?


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Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 2, 2019 at 7:28 pm

The Business Man is a registered user.

Yo quiero Taco Bell!


6 people like this
Posted by Diablo
a resident of Monta Loma
on May 2, 2019 at 7:39 pm

from OnceAgain:

"Why would the City spend the TAX PAYERS money to build affordable housing in prime locations for people who cannot afford to pay taxes? There's a lot of people who are paying taxes who live in much crappier locations and older apartments and spending years to save money to buy something that's just a bit above a shack in Mountain View."

This is my problem exactly! I have always struggled to pay a Silicon Valley inflated mortgage, and many of these affordable housing sites are in better locations than I could afford, like: Moffett and Central, W. Evelyn and Bryant, and now this one on El Camino and Castro. I couldn't afford to live downtown when I bought my place years ago, and certainly can't afford it now.

The other problem I have is that who gets the help comes down to a lottery, since at most, we can only build enough to serve a small percentage of the population.

Build affordable housing in more affordable locations. The price per unit of these should give anyone pause. $700K per studio, outrageous. Spend the money on services to help people. Spend it on food banks. Spend it on schools to educate our future residents.


41 people like this
Posted by Price Tag Please
a resident of North Whisman
on May 2, 2019 at 7:54 pm

I get a kick out of the Voice, they always try to hide certain items from the public.

They stopped posting the rents from these "affordable units" and the income needed to live in them.

One recent low income project was $1,849 for a 1 bedroom. There are market rate apartments very close to that right now. Why are we spending these tens of millions of dollars per project, when all that would need to be done is cut a check for $200 a month for these low income people and let them chose what place they want to rent.


4 people like this
Posted by Marcin Romaszewicz
a resident of Old Mountain View
on May 3, 2019 at 7:20 am

Marcin Romaszewicz is a registered user.

Since this is a partially publicly funded project, is there a way to see the cost breakdown?

I found the parcel that it's being built on at the Santa Clara County assessor's office, it's 158-07-019. It changed hands last year for $8,088,000. Amortized over 70 units, that's $116,000 per unit, quite a bit, but that leaves $584,000 per unit to build! This is seriously insane. You could build two really nice houses for that price in the rest of the country. Building multiple units, even in a multi-story building, is generally cheaper per unit than a standalone house of similar size.


12 people like this
Posted by History Buff
a resident of another community
on May 3, 2019 at 10:08 am

Dan suggests: “Alternatively, the city could focus on actually encouraging developers to create housing in the city by reducing development costs and regulations.”

I think by “development costs” he actually means impact fees, since the city has no control over cost of labor and materials. Impact fees contribute to the cost of roads, schools and city services that are impacted by new buildings and residents.

If the city lowers impact fees, which it has done in the past in order to convince developers to build, we taxpayers have to pay for the impacts!

For example, Mt. View recently let Sobrato off the hook for impact fees , including reducing the school fee by half. The school district said it would need $24.4 million to offset the cost of new students generated by the project. Sobrato offered 1/3 that amount and council caved in by accepting only $12 million. Guess who will pay the difference. Web Link

Developers are constantly complaining that impact fees prevent them from building. It’s a ploy, and cities are not good at negotiating against billion-dollar development companies.


4 people like this
Posted by Political buff
a resident of Blossom Valley
on May 3, 2019 at 10:36 am

History buff must work for the city. No one knows how much to charge for impact fees. Most of these fees are set by the city. They can set any price and justify any amount. New Home buyers pay the market rate and their property fees more than cover the cost of educating children. Remember these fees are collected forever and not every home has children. Schools and cities waste millions of dollars to justify excessive spending on labor and capital. Most economic research supports the bureaucracy model of local government.


15 people like this
Posted by Yimby #2
a resident of Another Mountain View Neighborhood
on May 5, 2019 at 9:42 am

Here is the fee schedule to fund "Affordable Housing"
Web Link
* A lot of people paying full price to subsidize a few affordable housing units
* Affordable housing supporters cheer when a small number of affordable units are
built. But don't talk about all the people paying full price + fees so others
can get subsidized shelter. It's not free money.
* Affordable Housing is not an effective way of solving high housing prices
* The way forward includes:
- Build more
- Improve transit
- Eliminate Rent Control


4 people like this
Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 5, 2019 at 11:16 am

The Business Man is a registered user.

In response to Yimby #2 you commented:

“Here is the fee schedule to fund "Affordable Housing"
Web Link”

Actually, that resource indicates:

“Rental Housing Impact Fee on Apartment Development – increase the current $10.26 fee to $17.00 per habitable square foot effective as of February 7, 2015. The increase in the fee will not apply to any rental projects entitled prior to December 10, 2014 or a project that has filed a formal application that includes a master plan and is entitled by June 30, 2015.”

So your complaining about a fee of $17.00 per square foot that is a one time fee. The average rent for San Francisco is $3,600 a month and the average size is 792 square feet. So if you take $3,600 times 12 and divide by 792 you get the yearly income by square foot which is $54.00 per square foot per year. Given that such a building is likely to be used for at least 30 years you get an earnings of $54.00 times 30 which comes to $1,646 per square foot. So that fee comes to .1% of the earnings of the projects.

Simply put, your claim it is expensive is proven incorrect. You also stated:

“A lot of people paying full price to subsidize a few affordable housing units”

You know that the timing of people moving into a unit will always be to the advantage of those who moved in first. That is impossible to eliminate in the way this business works. Unless you want to make it so that existing units are automatically going to have the rent raised to the same price as the newest rentor. Is that what you are suggesting? You said:

“Affordable housing supporters cheer when a small number of affordable units are built. But don't talk about all the people paying full price + fees so others can get subsidized shelter. It's not free money.”

I have already demonstrated that that is not accurate as I demonstrated above. You are trying to mislead the City regarding the real life impact of that fee. You said:

“Affordable Housing is not an effective way of solving high housing prices

The way forward includes:

- Build more”

Yes, I agree, but the current situation is rife with kickback deals being made by developers on projects and developers inflating costs by taking advantage of any means to not cost control on the projects. This is done so that the property values are inflated artificially. I expect that to move forward, any authority necessary to approve a project must now require disclosure of the cost breakdown and have them audited to see if they are in fact legitimate. Of course, the developers will object because they know the independent audits would disclose that the accounting is questionable. You also said:

“- Improve transit”

No argument, but as I have discussed in order to do so, sometimes an entire square mile of land will need to be leveled in order to achieve that kind of improvement. Because there are existing structures and land constraints. Roads may ne4ed to be wiped of the map. Entire regions will need redesign. But that cannot be avoided because of thecurrent problems we have in the area. You said:

“- Eliminate Rent Control”

Rent control does not impact new projects. And you know that because of Costa Hawkins. BUT new state laws require “INCLUSIONARY” housing minimums which are based on proportions of area median income. Granted it is not called a “rent control” but is definitely means that price controls are in place. But the INCLUSIONARY housing does not cover all units. Thus your argument doesn’t seem to apply here.



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Posted by Yimby#3
a resident of Slater
on May 6, 2019 at 12:53 pm

Excellent points by YIMBY#2. It shows you understand basic economics and how city policies distort housing prices.


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Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 6, 2019 at 6:14 pm

The Business Man is a registered user.

In response to Yimby#3 you said:

“Excellent points by YIMBY#2. It shows you understand basic economics and how city policies distort housing prices.”

I need to revise my comments I made earlier.

I stated:

“So your complaining about a fee of $17.00 per square foot that is a one time fee.

Let’s look at my apartment which is rent controlled per square foot.

It would be an example of an affordable unit given the design and build.

My rent annually is $1400/month times 12 which is $16,800 a year.

My unit is 650 square feet. That means my landlord earns $25.00 a square foot.

I recently read that an apartment can have a 50-60 year lifetime. After 50 years with 3% rent increase, that earnings per square foot is $ 2,929.52. with a total revenue of $1,904,187.57. WOW!

So if the initial build fee applied to my unit in initial build it would come to $11,050.

If you compute the proportion of that feel to the total earnings (fee/total revenue) you come to a 0.5% cost regarding the earnings of my unit. Does that sound like it is unreasonable even with my cheap apartment?

The owners are simply not wanting to address this reality. They take the one time feel and make it sound like it is annual. Simply put, WOW


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Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 7, 2019 at 6:28 pm

The Business Man is a registered user.

Very interesting news regarding Real Estate (Web Link)

Only 79% of Real Estate Agents are renewing their license.

In 2006 there was 5,500 agent licenses issued in a month and there were 60,000 home sales a month in a 12 month moving average. In 2008 it was 3,500 agent licenses issued and there were 31,000 home sales in a 12 month moving average. In 2010 it was 850 agent licenses issued and there were 39,000 home sales in a 12 month moving average. Today it appears that it is 1,700 agent licenses issued and there were 38,000 home sales in a 12 month moving average.

It appears that the actual sales of homes has never recovered since 2006. And the article appears to indicate that there is a choice made to leave the business occurring with a loss of 21% of the real estate agents.

Brokers are not much better, they are renewing only at 91% of last year. Is there something they know that we don’t?

Also, approximately 60% of new sales agents who were issued licenses from 2005 to 2007 have left the real estate profession by letting their licenses expire at the end of their first four-year license period. Further, one-third of all sales agents who renewed their licenses are not employed by a broker and thus not involved as sales agents in real estate transactions.

What is this a sign of? Look here (Web Link)

36,600 new and resale home transactions closed escrow in California during March 2019. The number of homes sold was 12% lower than a year earlier, amounting to 4,900 fewer sales in the single month of March. This continues the trend of falling year-over-year sales volume, which began in the second half of 2018.

2018 ended with 442,000 home sales in California. This was 19,900 fewer sales than took place in 2017, amounting to a decrease of 4.3%. For perspective, 2018’s 442,000 homes sales volume was 41% below peak sales volume experienced in 2005. 2019 year-to-date home sales are 11% below 2018 as of February 2019.

Home sales will continue to decrease throughout 2019, slowing the flow of agent fees. Rapidly rising prices and interest rates in 2018, along with uncertainty brought on by shifting economic policies, have discouraged potential homebuyers and derailed sales. Therefore, home sales volume won’t rise significantly until after home prices bottom with the next recession, expected in 2020-2021.

It would appear that these professionals know about real problems coming up in their business, and either leaving it, or moving to another state.


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Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 9, 2019 at 10:42 pm

The Business Man is a registered user.

Here are points to consider regarding the claim that the high cost of building makes it impossible to provide affordable housing. I have heard that most projects cost $700,000 to per unit for an apartment to be constructed in Santa Clara.

Let’s understand that that construction will have a lifetime from 50-60 years. Thus you can right off do math to divide the cost by the number of years to establish the annual cost of the unit. But I will go even further by showing an example regarding affordable prices and their results.

Say it is $700,000 to build a 1 bedroom 650 square foot. If you look at that information you can state that $1,077 per square foot for building lifetime.

Say that it could cost another $2,500 annually to maintain that single unit, which adds $4 pes square foot for the year.

So first you divide that the lifetime cost by 50 years for the lifetime, which costs $22 for each year and add the yearly $4 you come to a total of $26. Per square foot per year

You divide that by 12 months and the monthly cost per square foot is $2.16.

That means you will break even on a 650 square foot apartment with a rent of $650 times 2.16 which comes to $1,408 a month.

Now let’s say that the owner wants to get a 20% profit on the monthly rent, then that rent should come to only $1,670 per month. THAT’S a TOTALLY NEW UNIT. THAT IS AFFORDABLE HOUSING FOR THIS AREA. Because if the goal proportion of earnings for rent is 30% of earnings than a person would need to earn $5,666 a month. Which comes to $33.00 an hour for all earners in the unit. There could be 2 in a one bedroom apartment which means the earnings if both earn the same would be only $16.50/ hr workers.

So it is possible to make a significant profit with a rent as low as $1,670 a month, and realize if the rent is increased an annual rate of 3%, that profit does not decrease. Also I took into account operating costs on the specific unit annually so that has been already been accounted for.

What is amazing is the average rent for a 650 sq. foot apartment is $2,533 a month. What makes Mountain View so expensive? If a new unit can make 20% profit at $1,680, then this doesn’t seem to explain what explains the current prices other than price manipulation due to the critical shortage of housing, or collaboration between the current providers to prevent cost competition.

The fact is that if builders would build affordable units they would make a significant profit even if the cost is based on the disproportionate cost of what is likely a luxury unit.

There is no excuse for affordable housing to be built in the Santa Clara County at all.


2 people like this
Posted by perfect sense
a resident of Bailey Park
on May 10, 2019 at 10:17 am

"The fact is that if builders would build affordable units they would make a significant profit even if the cost is based on the disproportionate cost of what is likely a luxury unit."

There is no excuse for affordable housing to be built in the Santa Clara County at all.

Makes perfect sense to me.


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Posted by The Business Man
a resident of Another Mountain View Neighborhood
on May 17, 2019 at 8:40 pm

The Business Man is a registered user.

In response to Stephen Levy’s argument regarding affordable housing. I will revise my earlier comments. I used the Terner Center report in coming to this information

I looked up that group, much of their reports are “Self-Published” which indicates that they do not undergo any “Peer Review”. In almost all of their research, they use their own publishing resources, thus there is no independent certification of their information.

But even their own report found here (Web Link) indicated that:

“These construction costs contribute directly to San Francisco’s affordability crisis, and increase the amount of subsidy needed to make affordable housing feasible. To provide just one example from a review of LIHTC cost certifications, in 2000, it cost approximately $265,000 per unit to build a 100-unit affordable housing building for families in the city, accounting for inflation. “

Ok let’s calculate the inflation on the $265,000 per unit for today which comes to $386,625.

However take into account that this is only having “studio” units and the cost abouve is most likely for at least 1 bedroom apartments.

Now look at the recent 70 unit example of 49,000,000. But if it actually costs $386,625 times 70 which comes to $ 27,063,750.00 that means you have a markup of 81% Now anything above 35% would be suspicious of Mortgage fraud, there is simply no way to justify this.

Now let’s calculate the loan cost:

On the website Web Link the following information was provided:

It takes say 12 months to build and a down payment of $13,531,875. And let’s say we charge 5% interest on it and calculate a monthly unit cost for 29 years, the monthly cost is $72,822. Divide that by 70 units and it costs $1,040.

With an interest rate of 4.5% and a term of 29 years the principal and interest payment is $69,688.25, let’s divide this by 70 units which comes to $996.

Reasonable maintenance would cost $13,750 per month based on this report (Web Link), let’s divide that by 70 and you get $196.43 per unit

The property taxes are estimated a .79% thus the yearly tax on this property would be $213,803.63 or $254 per unit month

So the total cost without any grants or subsidies on a REAL project per unit in this breakdown is the monthly payment for the down payment plus the mortgage payment plus property taxes and the maintenance cost would come to $2,487 per unit.

Let’s say you want 6% profit, than the unit would be priced at $2636 a month, but this only accounts for a 29 year lifetime on the property.

If this is done as is, then the only cost after 29 years is the monthly maintenance cost $196 and $254 per unit, which would mean the monthly cost per unit after 29 years is $450.

Now let’s do some prorating regarding that the property will be useful for at least 50 years. That is multiplying the actual cost per month by (29/50) which results in $1442. Let’s take into account a 20% profit that would come to $1,731.

But again, given this information I got from the Terner Center there is a clear difference regarding what people claim is the cost of building and the actual cost.


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