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BRM Program Study Session

From: domainremoved <Steve>
Date: Mon, 18 Jul 2016 19:31:36 -0700

July 18, 2016

Menlo Park City Council
701 Laurel St.
Menlo Park, CA 94025

Re: Below Market Rate Housing Impact Fees

Dear Council Members,

At the July 19 City Council meeting there will be a study session to consider a significant
increase in below market rate housing (BMR) fees. We do not believe that an increase of fees
will have the results imagined or is good for the City. There are better ways to reduce the
pressure on the cost of housing (rental and ownership) and provide BMR units. Further, if such
fees are invoked they should not apply to pipeline projects as described below.

Impact on Pipeline Projects

The staff report (16-134-CC) suggests a $25 to $50 per square foot (psf) fee for new residential
development along with an increase from the current $16.15 psf to $25 to $50 psf on new
office development. For Station 1300 this would result in an increase in fees of $6.7M to
$16.5M. This significant and unanticipated fee would cause us to seek cost reductions,
particularly with optional items such as as green features and public amenities. We recommend that
new BMR fees NOT be applied to developments, like Station 1300, that have pending
applications.

The Housing Problem

The cost of housing has moved from a problem to a crisis. Simply put demand is high and there
is a chronic lack of supply, which puts price pressure on rental and ownership housing at all
price levels. Additions to the market rate and BMR housing stock will mitigate the pressure on
prices and rents.

The BMR Fee Solution

Are additional fee really the solution?

The Residential BMR nexus study concludes that new housing causes new households that in
turn create economic activity in Menlo Park that then translates into the demand for new
workers who are often at lower income levels and need housing. This spurious nexus ignores
the fact that new housing production increases the supply of housing that keeps prices and
rents lower than they would be otherwise. Does building more housing really make housing less
affordable even to lower income households? Making new housing more economically difficult
to build reduces supply and increases prices.

In addition, creating a larger fund of affordable housing fees for the City is no guarantee that
new affordable housing will be built as the City has a sizable affordable housing fund now that
is not being utilized to create any significant amount of new affordable housing. The paucity of
housing sites is part of the problem.

Rental housing fills the price gap between for sale and BMR housing. Aside from the units in
Belle Haven that were made possible by a lawsuit, hardly any units have been built in Menlo
Park over the past several decades. Land prices make it impossible for rental developers to
compete with condominium developers. Added fees will make the situation worse for creating
more rentals.

Better Solutions

There are much more effective ways to reduce pressure on the cost of housing and to provide
BMR units. It will take bold measures and new programs such as the following:

Zoning: The amount of land zoned for multifamily should be expanded and the density
increased. The older multifamily structures will not be replaced until there is a density
incentive. There will not be any BMR developments until there is a place to build them.

Preservation: The rents at more affordable apartment buildings will continue to increase and to
become less affordable over time. There are methods being explored by Mid-Peninsula Housing
to acquire, refurbish, and stabilize rents for low and very low-income families at existing
buildings.

Broad Based Funding: Fees on the small number of private developments places the burden on
a few and will have unintended consequences. More broad base funding by the entire
community will be more effective and equitable. For example, the County of San Mateo is
considering an extension of the sales tax increase to fund affordable housing. Santa Clara
County is considering a billion-dollar housing bond to fund affordable housing.

We encourage creativity from strong leaders to devise effective solutions to a problem that
cannot be solved by merely collecting more fees for a housing program that does not exist.

With highest regard,

Steve Pierce & Bob Burke
Greenheart Land Company



Steve Pierce
Principal
Greenheart Land Company
650.533.7006
spierce_at_(domainremoved)
Received on Mon Jul 18 2016 - 19:38:24 PDT

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