Bonus Approved For Affordable Housing Units

PALO ALTO, CA - Palo Alto's 34 year old affordable housing program received its first overhaul Monday night when the City Council approved more than 30 recommended changes to the complex below market rate (BMR) program. Most critical to many current owners is a new $2,000 per year bonus for keeping units in good condition. Someone who purchased a unit in 1988 stands to add $40,000 to the price of the unit, for example.

Many current owners have expressed concerns about their units' low rates of appreciation, which climb about 1 percent a year. Future BMR owners, however, may see their units' prices pegged to Santa Clara County's median income, a change from the current process of valuation that is linked to the Consumer Price Index (CPI).

At the request of council members Greg Schmid and John Barton, the council unanimously (minus an absent Councilman Pat Burt) asked city staff to investigate switching to income-based valuation. The median income is directly related to housing affordability, while CPI is only tangentially related, Schmid said. Planning and Community Environment Director Steve Emslie said city staff has avoided using income in the past because it fluctuates more than CPI, which has remained around 3 percent since the mid-1980s.

The council also voted to launch a low-interest-loan program for BMR maintenance; to require developers building three or more units to provide affordable housing (for small developers, often in the form of a fee); investigate the current affordable-housing "in-lieu" fee formula, which a consultant found is too low; and several other changes. BMR owners qualify by income to purchase a unit. Many remain on a waiting list, maintained by the Palo Alto Housing Corporation for more than a decade.

Emslie said planners intend to return with their recommendations about the appreciation formula within two months. This summer, the city also plans to launch a revision of the housing element of the Comprehensive Plan, a state-mandated component of its governing document. The revision will provide an opportunity to revisit some issues related to the BMR program, he said.