HOUSING AFFORDABILITY POSITION PAPER

By Matt Pear

Our current housing affordability crisis did not arrive overnight, but is the result of special interest policy and political impediments in the entitlement, permitting, construction, and financing of residential projects on a region wide basis. Government is the biggest impediment to affordable housing due to the numerous fees that are now levied at the municipal level and due to the takeaways imposed by the 1986 Tax Reform Act.

The only way to equitably and truly achieve affordable housing is to increase the supply to meet demand. In 2000, Mountain View was approximately 98% built-out with only seven sites remaining for residential development but this is no longer the case. Due to an increased vacancy, wherein some projections forecast as much as fourteen years to absorb existing office space, there has been a precipitous decline in office / R&D rental rates. Class C office / R&D is now being converted into housing because there is simply no demand in the foreseeable future for office space. Currently, more than 75 acres are available for housing in Mountain View, but at the expense of eliminating a portion of our City's future tax base

Mountain View has approximately 855 subsidized units of which 596 are designated for seniors and, has provided more affordable housing over the past forty years than its neighboring cities. An additional 120 efficiency units for low income residents will be added this year. Mountain View has the second highest density in Northern California (again depending on whose survey you use) and both Palo Alto and Sunnyvale have far more jobs than residents. Geographically Mountain View simply doesn't have the land to make a noticeable dent in this regional housing crisis. So what can we do?

We need to review the use of city, county, and school district surplus properties for housing in an environmentally sensitive manner, but only in areas where it is supported by the appropriate infrastructure (i.e., public safety, schools, public transportation, roads, water, gas, electricity, sewage treatment capacity, and open space). To advocate development without first addressing each of these elements is irresponsible because you risk creating future problems (common in many urban centers) that will diminish the charm and character of the area. The most important element is that we DO NOT denigrate the quality of life that Mountain View has achieved by adding housing in areas that don't fit the existing development pattern or do not have the infrastructure to support the density.

If we are serious about resolving the housing affordability crisis then we need to "think outside the box" on a regional basis and provide incentives to eliminate this housing crisis, which is the focal point of my proposal. We need to support Smart Growth principles in siting four-story, high-density housing within three-quarters of a mile from transportation nodes (mainly CalTrain and VTA) that fit within the existing development tapestry. With that said, only downtown Mountain View and four other sites are available for high-density development as previously defined. In Mountain View we:

• Are working with neighborhoods to address concerns before any project is proposed in order to provide clear direction as to the specific density and building envelope (i.e., what can be constructed). A permutation of this process is being employed at the Mayfield/HP and Palo Alto Medical Foundation sites.
• Should reduce the permitting / entitlement processing time for housing projects so that you do not spend dollars on interest carrying expense and option payments as this benefits no one.
• Should reduce fees to only pay for the "true" impacts and off-sites rather than the fuzzy nexus linkage fees, which are typically appended to all projects in support of other city projects and/or staff (staff should be completely funded through the general fund).

• Allow for accelerated depreciation on multifamily apartments (say ten years) rather than the current twenty-seven point five year straight-line depreciation.
• Allow all taxpayers to fully deduct interest and accelerated depreciation regardless of their income source and level.
• Allow for tax-free debt instruments or below market rate mortgages in addition to applying for CDBG grants as sources of low cost financing. The objective is to allow investors to recoup their expenses through lower financing, project costs, and tax write-offs, rather than completely through rents.