Affordable Housing Fees

Should the City of Mountain View increase affordable housing fees on new development?

On December 9, the City Council held a public hearing to determine whether to increase any of the City’s affordable housing fees. The following is a summary of the Council decisions:

  1. Below Market Rate In-Lieu Fees on Ownership Housing Development – No change to the fee.
  2. 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.
  3. Housing Impact Fee on Office/High Tech/Industrial Development – increase the current $10.26 to $25 per net square foot effective as of February 7, 2015. The increase in the fee will not apply to any office/high tech/industrial projects entitled prior to December 10, 2014.
  4. Housing Impact Fee on Commercial/Retail/Entertainment/Hotel Development – No change to the fee.

Public Input

While stakeholder input was gathered through City focus groups on November 7, 2014, additional public input is still welcome via our online forum at Open City Hall through December 1.

Click here for other ways to provide input on this topic.

Frequently Asked Questions (FAQs)

1. What are the City’s current affordable housing fees?

The City has three types of affordable housing fees:

  • Below-Market-Rate (BMR) In-Lieu fees on new ownership housing development, which are 3 percent of the contract sales price for each new market rate home.
     
  • Rental Housing Impact Fees on new apartment development, which is $10.26 per habitable square foot.
     
  • Housing Impact fees on new nonresidential development, which range from $5.13 to $10.26 per square foot for office, high-tech or industrial development and $1.30 to $2.60 for hotel, retail, commercial or entertainment development.

BMR fees were adopted in January 1999, followed by Housing Impact fees in January 2002. Rental Housing Impact fees were adopted in December 2012 in response to the Palmer/Sixth Street Properties, L.P., et al., v. City of Los Angeles, court decision that prohibits cities from requiring BMR rental units. Both the Rental Housing Impact Fee and the Housing Impact Fee are adjusted annually based on increases in the Consumer Price Index (CPI) for our area. The BMR In-Lieu Fees naturally adjust as the price of new ownership housing changes, since it is a percentage of the new home price.

2. What options are under consideration to increase these fees?
The City Council held a study session on October 14 to discuss affordable housing fees when they directed staff to gather input and return for consideration of:

  • Make no change to the current BMR in-lieu fee or increase the BMR in-lieu fee from 3 percent of the sales price on new ownership housing units to 4 percent of the sales price.
     
  • Increase the Rental Housing Impact Fee on new apartment developments from $10.26 per habitable square foot to $15.00 per habitable square foot.
     
  • Increase the Housing Impact Fee on office, high-tech, and industrial developments from $10.26 per net square foot to between $20.00 - $25.00 per net square foot on building area more than 10,000 square feet and half of that fee on building area up to 10,000 square feet.

3. What is the basis for determining the fee levels?

Studies were performed to evaluate the impact of new development on affordable housing and to determine the fees required to mitigate that impact. An Affordable Housing Fee Analysis was prepared by Economic and Planning Systems in September 2011 for the City’s BMR in-lieu fee and the Rental Housing Impact Fee. A Jobs Housing Nexus Study was prepared by Keyser Marston Associates in November 2012 when Council considered an increase to the Housing Impact Fee.

For office and commercial development, a nexus study evaluates the number of jobs produced by new development, the percentage of those jobs that would be filled by lower-income workers, and the fees required to produce housing affordable for those lower-income workers. For ownership and rental housing development, the nexus study determines the goods and services needed by new residential households, the jobs created by that demand, the number of lower-income workers in those jobs, and the fees required to produce affordable housing for those lower-income workers.

The potential fee increases under consideration are well below the maximum fees supported by the nexus studies. Impact fees are rarely set at the maximum levels.

4. When will the City Council consider the potential fee increase?

The City Council will hold a public hearing in the evening on December 9, 2014 to receive public testimony and make decisions on the possible fee increases. An agenda and Council Report will be available on December 4 after 5:00 p.m. on the City’s website.

5. When would the fee increases go into effect?

The fees would typically go into effect 60 days after approval by the City Council. The Council has the option to set a later effective date.

6. How do Mountain View’s fees compare with other cities?

Palo Alto, Sunnyvale and Cupertino all have BMR in-lieu fees and Housing Impact fees. Mountain View was the first city in Santa Clara County to adopt a Rental Housing Impact fee, although this fee is currently under consideration in two other cities. Mountain View’s BMR in-lieu fee of 3 percent of sales price is the lowest of our neighboring cities, with the highest being 12.5 percent of the sales price. The City’s $10.26 per square foot Housing Impact fee for office/industrial development is in the middle of the $6.00 to $19.31 per square foot range for neighboring cities. A handful of cities in the region have rental housing impact fees that range from $15.00 to $26.70 per habitable square foot, with Mountain View’s fee of $10.26 per square foot being the lowest fee.

7. What types of development pay affordable housing fees?

Nearly all new development in Mountain View must either pay an affordable housing fee or include affordable units in new residential projects instead.

8. How are affordable housing fees used?

Affordable housing fees are primarily used to provide loans for new residential development that serves households earning less than 50 percent of the Area Median Income (AMI). In 2014, a family of four earning 50 percent AMI equates to a $50,950 annual household income. The City provides loans to affordable housing developers in order to reduce rents to affordable levels for lower income households.

The City loans also make it possible for affordable housing developers to secure outside funding sources that complete the financing for their projects. In the last decade, the City has funded five new affordable housing projects that produced 351 units for lower income families, seniors, workforce and special needs households. The City made $35.0 million in loans to these five projects, which resulted in securing $61.0 million in additional outside funding.

Affordable housing fees also are used for first time homebuyer assistance programs administered through the Silicon Valley Housing Trust and for emergency rental assistance administered through the Mountain View-Los Altos-Los Altos Hills Community Services Agency.

9. What is the definition of an affordable housing project in Mountain View?

Affordable housing is also known as subsidized housing, since all of the rents are made affordable to lower income households through local, state and/or federal subsidies. The City’s 13 subsidized housing developments are owned and operated by five different affordable housing agencies. These agencies specialize in building and managing affordable housing. They have high standards for maintenance and stringent screening requirements for tenants. Affordable housing projects in Mountain View are well-designed and indistinguishable from market rate development. The Franklin Street Family Apartments located at 135 Franklin Street recently earned a national award of excellence for project design. For more information on the subsidized projects in Mountain View, please click here.

10. How can I let the City Council know my opinion?

To learn more about the potential fee increases, view the October 14, 2014 Study Issue session or download the upcoming Council Report available after 5:00 p.m. on December 4, 2014 on the City website under City Council Agendas. A mailed copy may also be provided by calling the City Clerk’s Office at (650) 903-6304. You can also submit your opinion to the City Council by:

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