Overhaul due for lower-cost housing program

Owners expected to earn greater returns in exchange for signing uniform deed restrictions

Like a 1970s home with an avocado green, gold and wood-paneled interior, Palo Alto's below-market-rate (BMR) housing program needs a thorough remodeling, according to its managers.

Pressing problems include deteriorating facilities, excessively low appreciation rates and a mishmash of legal policies that complicates management, Advance Planning Manager Cathy Siegel told the Policy and Services Committee Tuesday evening.

The discussion was the first of a series of three meetings -- before the committee, the Planning and Transportation Commission and the City Council -- to review proposed changes to the program.

Siegel presented the committee with 14 recommendations and an accompanying report that was distilled from four years of analysis with input from three consultants and the Palo Alto Housing Corporation, which operates the BMR program for the city.

Since its inception in 1974, the program -- created to provide housing for Palo Alto's average-income residents and workers -- has grown to include 179 owner-occupied and 155 rental units.

The three-member committee, minus Councilwoman Judy Kleinberg who lives beside BMR units, voted to send the proposals, largely intact, to the Planning Commission for further review.

But Councilwoman LaDoris Cordell said she would like to see current owners compensated for years of less-than-adequate appreciation.

The proposal currently recommends increasing the rate of appreciation for the owners from one-third of the Consumer Price Index to the full CPI, a federal figure that has averaged about 3.3 percent, according to a city staff report.

Cordell, echoing the concerns of several BMR owners, said she thought they should receive retroactive appreciation.

"I don't think people should be penalized because the city used an inadequate appreciation rate," BMR owner Greg Kerber told the committee.

That would not be fair to former BMR owners who recently sold their units, however, city staff said.

A large majority of the owners are satisfied with their units and the program, Siegel said, citing a 2004 survey of the residents.

But several residents told the committee the cost of homeowners' association dues, coupled with the low appreciation, made their housing situation tough.

Jean Nolan said she purchased her residence in 1993 for $114,000 and would only receive $132,000 if she sold it now.

"Where am I going to go? I'm kind of stuck," she said.

Under the new program, Nolan would be able to switch to a full-CPI appreciation if she signed a new deed restriction, according to city staff.

Palo Alto's BMR units have more than 20 types of deeds, according to the report. The complexity has caused problems, including allowing owners to refinance at rates higher than the unit's BMR price, the report states.

City staff recommend creating a low-cost loan program to help owners maintain their units. The staff also urged several procedural changes, including governing the program through an ordinance rather than a section of the city's Comprehensive Plan.

If approved, BMR units or contributions would be required for all development projects that involve three or more units, down from the current limit of five units.

Recommendations also include developing additional smaller units, using the BMR program to encourage dense developments and promoting donations of land.

About 500 families are on the waiting list for BMR housing. To qualify, a family of four must earn less than $126,000.

Developers are required to provide money or units for most projects.

The proposed changes are expected to go before the Planning and Transportation Commission in October for a final City Council approval in December.


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