Trudi Ryan, Director of Community Development
City Council
March 18, 2025
COMMERCIAL INCENTIVE PROGRAM
FOR VILLAGE CENTERS
2City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Below Market Rate Housing
Village Centers
Can Commercial Development Be Incentivized?
Eligibility of Village Center Sites
Proposed Program
Feedback from Developers
Recommendation
Agenda
3City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Sunnyvale’s Inclusionary Housing Requirement
Below Market Rate Housing
BMRs
• Mandatory for new residential since 1984
• Initially 10% of units, now 15%
For-Sale: serves Moderate Income (15%) HH
Rental: serves Very Low (5%) and Low (10%) HH
State Density Bonus Law
• Providing specified minimum affordable housing
enables concessions and waivers
Photo Source: Google Street View Feb 4, 2025
4City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Village Centers
**State Housing laws have impacted
implementation of Village Center vision**
• 2017 Land Use and Transportation Element (LUTE)
Mixed Use areas supporting neighborhoods:
• Living
• Shopping
• Less reliance on automobiles
• Gathering places for larger neighborhood
Average 18 dwelling units per acre
Minimum Commercial Floor Area Ratio (FAR) of 10%
Village Center Master Plan in process
5City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 What Influences Developer Decisions?
Can Commercial Development Be Incentivized?
• Price of land
• Price of materials and labor for design and construction • Interest rates
• Time to develop (permits, availability of labor/materials) • Complexity of design
• Market sales and rents/Developer profit
• Local impact fees and development requirements
6City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Why BMRs?
Trade-Offs to Achieve Commercial Space
• Sewer/Water Connection Fees
System wide
• Park Dedication (or In-lieu Fee)
Helps maintain city-wide minimum inventory of open space • Transportation Impact Fee
Most Village Centers will show minimal increase in trips • School Impact Fees
Not a City of Sunnyvale fee
• 15% of units Below Market Rate
Reduction of 5-27 BMRs, depending on which programs are used 7City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 5 Criteria
What Would Qualify a Village Center Site for Incentive Program? • General Plan land use designation of Village Mixed Use ALL • Not a Housing Element site for lower income housing ALL • More than 1,700 feet walking distance to other Commercial 5 • North of El Camino Real* 5
• Entire Village Center is 6 or fewer acres 2
*HE Program to increase affordable units in Highest Resource Areas 8City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Village
Center # VMU Not HE Lower
Income Site
Approximate Distance
to Nearest
Commercially zoned
property (ft.)
Distance
>1,700 ft.
North of
ECR
Village
Center <6
acres
Closest Farthest
1 4,277 6,125
2 140 950
3 1,478 2,904
4 53 1,637
5 3,168 4,435
6 1,690 3,115
7 1,320 2,112
Which Village Centers Would Be Eligible?
9City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Recommended Program
FAR of Commercial / Retail Reduced BMR requirement
Over 5% to 10% FAR
Ownership:
7.5% - affordable to Moderate income
Rental:
5.0% - affordable to Low income
2.5% - affordable to Very Low income
Over 10% FAR No BMR requirement
10City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Can an Eligible Village Center Site Still Utilize Waivers? Feedback from Developers
Without the affordable units, State Density Bonus law would not enable waivers or concessions
• Enabling
Sunnyvale has a tradition considering deviations from code standards • Discretionary
Staff recommends allowing, similar to State Density Bonus law:
• Waivers from development requirements
• One concession
11City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Public Hearing
Planning Commission February 24, 2025
• 9 speakers
Affordable housing and retail are both important
General support for program to increase retail
Advocacy for
• Higher amounts of retail
• Priority for small local businesses.
• Not allowing nightclubs within Village Centers.
Recommendation to City Council
• Approve the Commercial Incentive Program Ordinance and Resolution 12City of Sunnyvale – Village Center Commercial Incentive Program – March 2025 Alternatives
Recommendation
• Staff drafted Ordinance and Resolution
• Staff drafted Ordinance and Resolution, with modifications • Do not implement a commercial incentive program
Staff Recommendation
• Introduce an Ordinance and Adopt a Resolution for a Commercial Incentive Program for Village Centers
13City of Sunnyvale – Village Center Commercial Incentive Program – March 2025