DATE:
February 25, 2025
CATEGORY:
Public Hearing
DEPT.:
Housing
TITLE: Code Amendment to Chapter 36
(Zoning)—Below-Market-Rate Housing
Program (First Reading)
RECOMMENDATION
It is recommended that the City Council:
1. Introduce an Ordinance of the City of Mountain View Amending Mountain View City Code Sections 36.40.05, 36.40.10, 36.40.15, and 36.40.20 to Make Clarifying Modifications, and Adding Section 36.40.16 Governing Rent Increases f or Below -Market-Rate Units to the Mountain View City Code, to be read in title only, further reading waived and set a second reading for March 25, 2025. (Attachment 1 to the Council Report).
2. Find that pursuant to California Code of Regulations S ection 15060(c)(2), the proposed Code amendments are not subject to the California Environmental Quality Act (CEQA) because they will not result in a direct or reasonably foreseeable indirect physical change in the environment.
BACKGROUND
On December 12, 2023, the City completed a review of the City’s Below-Market-Rate Affordable Housing Program (BMR Program) to meet Housing Element requirements. Council supported staff’s recommendations and provided direction to staff to implement other BMR provisions across five criteria, discussed further below. Toni ght’s public hearing on BMR amendments is focused only on three cleanup items as directed by Council during its December 2023 meeting and one cleanup item staff identified after the meeting . Remaining items as part of the five criteria will be brought forward for Council consideration later this year.
Since the December 2023 Study Session, staff has undertaken next steps to further evaluate and develop updates to the BMR Program, such as analyzing options for physical accessibility features/universal design; garnering stakeholder feedback through surveys and roundtables and working with the City’s economic consultant to conduct research related to additional alternative mitigation requirements and incorporating Affirmatively Furthering Fair Housing criteria.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
Due to the time needed to complete the items noted above and further discussed below, as well as advancing other City projects with key deadlines—including other Housing Element items—it is anticipated that a comprehensive set of BMR ordinance amendments will be brought forward for Council consideration in Q3/Q4 2025. However, staff recommends processing a focused set of ordinance modifications at this time. Staff continue s to review BMR projects, and these recommended modifications will assist with proje ct review and providing applicants greater clarity as they advance their projects.
Summary of December 2023 Review
The City’s BMR Program includes periodic reviews to evaluate the program’s efficacy, ensure that the program is meeting its objectives, and make relevant policy changes. The City’s state-certified 2023 -31 Housing Element incorporates this strategy in Program 1.9 —BMR Program Review, which requires two reviews (December 2023 and December 2028 deadlines).
The first BMR Program review was completed via a City Council Study Session held on December 12, 2023. The review addressed the five-criteria outlined in the Housing Element with a summary of staff’s analysis and recommendations and Council discussion as follows:
1. Continue the BMR Program, as revised in 2019, to include more opportunities for inclusionary units as opposed to fees.
Summary: Staff provided data indicating that the current market -rate residential pipeline in the City is estimated to result in significantly more BMR units under the current version of the BMR Program than under the prior version of the program, which wa s modified in 2019. Council supported the continuation of the BMR Program.
2. Review the BMR Program to evaluate program efficacy and identify potential modifications to improve efficacy based on City goals, including furthering affordable housing production across unit types, special needs, and affordability levels.
Summary: As part of Criterion No. 1, staff noted that the current BMR Program is furthering affordable housing production across unit types in terms of both unit sizes and affordability levels. Staff recommended evaluating program requirements to increas e the physical accessibility of the BMR units which could help meet special needs. Council supported this recommendation.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
3. Assess whether the BMR Program facilitates mobility and access to opportunity and if any improvements could be made to increase mobility and access to opportunity.
Summary: The BMR Program facilitates mobility and access to opportunity by requiring on-site BMR units to be integrated with market -rate units, equitable distribution of BMR unit sizes within the development, and equitable distribution of BMR unit locations within the development. Staff recommended options to enhance mobility and access to opportunity under alternative mitigations that cities are required to provide to developers, including evaluating incorporating Affirmatively Furthering Fair Housing re quirements.
Council supported this recommendation.
4. Analyze potential policy changes based on best practices, new laws, or unanticipated program outcomes.
Summary: Staff analyzed and made several recommendations to refine alternative mitigation measures. Council discussed adding acquisition/preservation and removing in-lieu fees as an option and supported staff recommendations for adding criteria to evaluate alternative mitigations and charging developers for staff time and cost -recovery fees for implementing a Request f or Qualifications/Request for Proposals process for land dedications. Council also directed staff to : explore appropriate escalators for the in-lieu fees for fractional units and benchmarking for alternative mitigations; establish a rationale for BMR Program applicability to various sized projects ; and review the City’s Homeowner Association (HOA) reserve fee calculations. Council directed staff to further explore these best practices.
5. Identify potential cleanup in guidelines/policies/ procedures.
Summary: Council supported the following staff-recommended modifications:
• Explicitly state a 3% maximum allowable annual rent increase for in-place tenants.
• Clarify the definitions for income categories.
• Clarify that the BMR requirements are based on the income levels associated with the BMR units and not the actual incomes of the households.
• Clarify Area Median Income (AMI)/weighted average requirements for ownership projects.
• Update provisions to the HOA reserve requirement.
• Update the department administering the BMR Program.
Council supported these recommendations.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
ANALYSIS
As noted in the Background section, the ordinance amendments recommended at this time are focused on Council -supported ordinance modifications to enhance project review and provide project applicants greater clarity regarding key BMR requirements, specifically three items under Criterion No. 5 and one additional clean-up item identified by staff subsequent to the City Council Study Session:
• Include a 3% maximum allowable annual rent increase for in-place tenants.
• Clarify definitions for income categories.
• Clarify unit rent/sales price calculations.
• Clarify the definition of “residential development” (identified by staff subsequent to the City Council Study Session).
Include a 3% Maximum Allowable Annual Rent Increase for In-Place Tenants
The BMR Program has implemented a maximum annual rent increase of 3% for in -place (i.e., existing) tenants based on policy. However, the allowable in-place rent increase is currently only recorded on the BMR regulatory agreements for projects and not currentl y stated in the BMR ordinance or Administrative Guidelines. This update will explicitly state that the maximum allowable annual rent increase for in-place tenants is 3%.
The ordinance update further includes the following provisions, which are common best practices:
• More than one rent increase over a 12-month period may not be imposed, and • 30-day written notice to tenants informing them of the rent increase must be provided.
Clarify Definitions for Income Categories
The BMR Program currently includes the following income category definitions:
— Very Low-Income: 50% AMI or less.
— Low-Income: 50% AMI to 80% AMI.
— Moderate-Income: 80% AMI to 120% AMI.
However, when the same AMI straddles two income categories, it can cause confusion. For example, 80% AMI is currently part of the definitions for the Low-Income and Moderate-Income categories.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
The modified definitions for the income categories are proposed as follows:
— Very Low-Income: 50% AMI or less (no change).
— Low-Income: greater than 50% AMI up to 80% AMI.
— Moderate-Income: greater than 80% AMI up to 120% AMI.
Clarify Unit Rent/Sales Price Calculations
The intent of the BMR Program is to establish requirements based on the AMI levels designated for each BMR unit, not the actual incomes of the tenant. For example, an 80% AMI rental unit could be occupied by a household whose income is 70% AMI. The initial rent would be based on the 80% AMI level for the unit (adjusted for household size based on the number of bedrooms for each unit) and not on the 70% AMI of the household’s income. However, the BMR ordinance and Administrative Guidelines are not clear whether the requirements are based on the AMI designations of the BMR units or the incomes of the BMR household.
The proposed modification will allow developers to clearly understand the requirements at the time of project application and propose the income levels and associated rents /sales prices of the BMR units to meet the program requirements. Additionally, basing costs on the AMI levels of the units is the standard practice for BMR programs across jurisdictions. Developers determine the economic feasibility of their projects on the AMI level of the units, and administering BMR rents based on the household’s act ual income provides significant uncertainty and administrative complexity. The BMR Program will be updated to clarify that the requirements are based on the income levels associated with the BMR units and not the actual incomes of the households.
Clarify Definition of Residential Development
The definition of “Residential Development” is being amended to clarify the three types of developments subject to the BMR Program, namely, developments that: (1) create one or more dwelling units; (2) convert nonresidential uses to residential uses; or (3) convert residential units from rental units to ownership units.
Environmental Planning Commission Public Hearing
On February 5, 2025, the Environmental Planning Commission (EPC) held a public hearing to review the proposed amendments (EPC Staff Report - February 5, 2025). EPC discussion included:
• Consideration of a 60-day notice period to tenants regarding annual rent increases, rather than staff’s recommendation of 30 days.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
Staff Response: Subsequent to the EPC meeting, staff conducted additional review of best practices in other jurisdictions , including those in Santa Clara County and San Mateo County. Several cities refer to s tate noticing requirements, with a 90 -day notice for rent increases greater than 10% and a 30 -day notice for rent increases 10% or less. A 30-day notice for a maximum BMR rent increase of 3% would be consistent with common practice.
Additionally, it is staff’s experience that residents are typically aware of and are prepared for annual rent increases. The 3% maximum increase provides tenant certainty and stability, which may obviate the need for a longer noticing period.
Therefore, staff continues to recommend a 30-day notice period.
• Suggested edits related to typos as well as clarifying definitions for income categories and calculating unit prices.
Staff Response : Prior to the meeting, one Commissioner provided staff suggestions for additional edits related to the proposed o rdinance clean-up amendments under consideration at this Council meeting. Some of the suggestions were also discussed during the EPC meeting. Staff have reviewed and incorporated the applicable suggestions.
Staff received one public comment on this item prior to the EPC meeting (see Attachment 2—PC Public Comment Letters) from the League of Women Voters (LWV) Los Altos -Mountain View Area. The LWV stated support for the staff recommendations, in particular the 3% maximum allowable rent increase. There was one public speaker at the EPC meeting who provided support for affordable housing in Mountain View.
The EPC considered the public comments and voted to recommend City Council approval consistent with the staff recommendation, with four votes in favor, one absent from the meeting and one vacant seat (4-0-0 vote).
NEXT STEPS
Following the introduction of the proposed ordinance amendment, a second reading will return to Council on the March 25, 2025 consent calendar. The ordinance will become effective on April 24, 2025, 30 days following the second reading.
Comprehensive Amendments
Remaining items from Criterion No. 1 through Criterion No. 5 above are anticipated to move forward as follows:
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
Date Council/Commission Agenda
Section
Topic
Fall 2025 City Council New Business Staff findings and recommendations related
to Council’s direction on
December 17, 2023
Fall/Winter 2025 Environmental Planning
Commission
Public Hearing Draft Ordinance
Winter 2025 City Council Public Hearing Ordinance First Reading Winter 2025 City Council Consent Ordinance Second Reading
Specific meeting dates will be determined later in the year. It is anticipated that the effective date of the comprehensive ordinance amendments will be in early 2026.
FISCAL IMPACT
The recommended actions have no fiscal impact.
LEVINE ACT
California Government Code Section 84308 (also known as the Levine Act) prohibits city officials from participating in any proceeding involving a “license, permit, or other entitlement for use” if the official has received a campaign contribution exceeding $250 from a party, participant, or agent of a party or participant in the proceeding within the last 12 months. A city official is similarly prohibited from accepting, soliciting, or directing a campaign contribution exceeding $250 from a party, particip ant, or agent of a party or participant to any proceeding involving a license, permit, or other entitlement for use for 12 months after a final decision is rendered in said proceeding.
Please refer to the “X” in the checklist below for information about whether the recommended action for this agenda item is subject to or exempt from the Levine Act.
EXEMPT FROM THE LEVINE ACT
_X_ General policy and legislative actions
For more information about the Levine Act, please see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html.
Code Amendment to Chapter 36 (Zoning)—Below-Market-Rate Housing Program (First Reading) February 25, 2025
CONCLUSION
The proposed amendments to the BMR Program aim to clarify key aspects of the program, including rent increase limits, income category definitions, and unit rent calculations. These updates are designed to improve the program's effectiveness, ensure clearer guidance for developers, and align with the City’s housing goals. T he comprehensive revisions to the BMR program will follow later in the year. This two-step ordinance amendment process will allow key clarifications/cleanups to be implemented sooner to streamline project review and enhance clarity for developers, while providing sufficient time to complete th e comprehensive amendments in a thoughtful manner in response to Council’s direction from the December 2023 Study Session.
ALTERNATIVES
1. Do not approve the ordinance modifications.
2. Provide other direction.
PUBLIC NOTICING
The meeting agenda and Council report have been posted on the City’s website and announced on Channel 26 cable television.
Prepared by:
Julie Barnard
Affordable Housing Manager
Wayne Chen
Housing Director
Approved by:
Kimbra McCarthy
City Manager
JB-WC/4/CAM
843-02-25-25CR
204891
Attachments: 1. Ordinance Amending Chapter 36 (Zoning) of the City Code
2. EPC Public Comment Letter