News

Palo Alto settles suit over affordable housing

After three court rulings, City Council reaches deal with Sterling Park over requirement for below-market-rate units

After five years of litigation, Palo Alto officials on Monday reached an agreement with a developer who challenged a city policy that requires new developments to include affordable-housing units.

The City Council unanimously agreed in a closed session to approve a settlement with Sterling Park, a deal that concludes a protracted legal fight centered on Palo Alto's below-market-rate program. Sterling Park had vehemently opposed the city's requirement that its 96-condominium development at West Bayshore Road include 10 units of affordable housing. Though the program typically requires projects more than five acres in size to sell 20 percent of their units at below-market-rate prices, city officials agreed in 2006 to allow Sterling Park to designate fewer units for affordable housing and to contribute "in-lieu" fees to make up the difference.

Since then, Sterling Park developer John Mozart has repeatedly challenged these conditions of approval. In 2009, Mozart filed a lawsuit against the city, claiming that the below-market-rate program is illegal and calling the requirement "arbitrary and capricious." Its argument was ultimately rejected by the Santa Clara County Superior Court and by the state Court of Appeals.

Sterling Park scored a limited legal victory in October, however, when the Supreme Court ruled that the developer can proceed with completing the construction of the development even as its dispute over affordable housing drags on. The court did not make any rulings on the merits of Sterling Park's broader challenge of the city's below-market-rate program, which has been around since 1974 and which requires developments to devote a percentage of the market-rate housing developments to affordable housing.

Under the settlement reached this week, Sterling Park will be obligated to provide one below-market-rate unit and contribute $8 million in "in-lieu fees" to the city's affordable-housing fund. The contribution brings the fund up to $9.2 million, with the proceeds earmarked to assist affordable-housing projects. Palo Alto also has a separate program that collects funds for affordable housing from commercial developments. That fund currently has $8 million.

City Attorney Molly Stump said in a statement that the city is "pleased that the settlement of this lawsuit means that there will be $8 million available to be used for development of affordable housing."

"That is the objective of the BMR housing program, and it remained the City's goal throughout this legal process," Stump said.

Comments

8 people like this
Posted by Greenacres
a resident of Green Acres
on Oct 27, 2014 at 11:28 pm

$17.2 million on the affordable housing fund, plus $14.5 million the residents found, surely there must be a way to save the Buena Vista Park now?


3 people like this
Posted by Amy
a resident of Duveneck/St. Francis
on Oct 28, 2014 at 12:44 am

A diversed population is the way forward for our city's vibrancy. Our city council is doing a fine job to safeguard the affordable funding.


10 people like this
Posted by Barron Park dad
a resident of Barron Park
on Oct 28, 2014 at 10:45 am

Isn't it bad faith for the developer to accept a deal based on pre-conditions that you voluntarily accept, and then sue in the courts to overturn those pre-conditions? Who acts like that? Who would support such behavior?


2 people like this
Posted by Mohammed
a resident of Charleston Gardens
on Oct 28, 2014 at 10:49 am

Great Job!
Developers tend to be greedy and care less about the middle class


6 people like this
Posted by Carol Gilbert
a resident of University South
on Oct 28, 2014 at 1:07 pm

Wake up CPA, you should have purchased Casa Olga and Buena Vista Park where you had lower income housing that really served two good-sized communities. Instead, you let these places go and you are not going to end up providing for the people who have to move. How will we serve these communities?!


1 person likes this
Posted by Wondering?
a resident of Another Palo Alto neighborhood
on Oct 28, 2014 at 1:53 pm

> City Attorney Molly Stump said in a statement that the city is
> "pleased that the settlement of this lawsuit means that there will
> be $8 million available to be used for development of affordable housing."

So why didn't the City agree to this sooner, and put this matter to bed?


5 people like this
Posted by Craig Laughton
a resident of College Terrace
on Oct 28, 2014 at 3:24 pm

Subsidized housing, especially BMR, is wrong for two reasons:

1. It is a shakedown of the developers.

2. It provides a rationale to increase development density.

There should be a city-wide referendum asking whether PA wants even more subsidized housing. If the answer is "yes", then the apportionment of this housing should be assigned according to the vote: The neighborhoods with the most affirmative votes will get the lion's share of the housing. [Portion removed.]


3 people like this
Posted by Jeff
a resident of Duveneck/St. Francis
on Oct 29, 2014 at 2:55 pm

I agree that the city should quit looking for ways to shake down a minority group of any sort to fund an agenda. The city council should focus on achieving goals through well planned zoning and infrastructure. They should quit trying to be a vendor through proxies.


Like this comment
Posted by The Shadow Knows.....
a resident of Crescent Park
on Oct 29, 2014 at 3:07 pm

@ Barron Park Dad -


My guess is that John Mozart is more interested in the precedent against the inclusion of BMR units than in the particulars of this individual project. He is an extremely wealthy man, and one thing that can be said about him is that he knows how to make money.


1 person likes this
Posted by Contrarian
a resident of University South
on Oct 29, 2014 at 7:04 pm

Mozart won big time. Instead of ten units of THOSE people, he has only one.


1 person likes this
Posted by Greenacres
a resident of Green Acres
on Oct 30, 2014 at 10:02 am

With the money now in the affordable housing fund, and the money the Buena Vista neighbors came up with, they now have more to offer the owner of BV than Prometheus had. The residents formed a non-profit, and it allows the City to enter into a regulatory agreement to retain the property as BMR. The residents could remain, the property could remain affordable over time, and there would even be some money for improvements -- the non-profit would probably also be eligible to apply for grants for further improvements.

The City would be making a very-low or no-interest loan to the non-profit, or whatever other terms make sense -- but the point is, in the end, the City would get a lot of the money back. And it would help far, far more residents, existing residents, than any other effort we could make right now.

I think this is actually better because it comes at a time to help the residents of BV. Some of the BMR stock is not that affordable and wouldn't be able to help the BV residents necessarily anyway. We have unfilled BMR stock in our system that sometimes goes unfilled for years. I really get angry at City Councilmembers who prioritize whether we get credit from ABAG as the primary consideration in how the affordable housing money is spent, even if the alternative does far less good. If we don't get credit from ABAG for saving the existing low-income housing of hundreds of residents that would otherwise be lost, then we need to do the right thing anyway, and lobby for the rules to reflect the importance of doing the right thing. This situation is the poster child for what's wrong with ABAG's rules.


Like this comment
Posted by long view
a resident of South of Midtown
on Oct 31, 2014 at 12:52 pm

long view is a registered user.

If a developer thinks they can't provide 10% BMR housing and still make money, let them prove that. But developers never want to share their financials, because it would expose the huge amount of money that they are making. Palo Alto needs to be concerned about the moderate income folks who work in Palo Alto and on the peninsula. The developers are doing just fine.


Like this comment
Posted by Craig Laughton
a resident of College Terrace
on Oct 31, 2014 at 3:23 pm

?Palo Alto needs to be concerned about the moderate income folks who work in Palo Alto and on the peninsula

"Long view", there is no way to determine where people, currently in BMR units, work, because PAHC will not provide that information. I know many middle class workers in PA, but none of them live in BMR units. Do you know some (if so, where do they work)? Subsidized housing in PA is a first-come, first-served housing plan with no requirement to be gainfully employed in PA or elsewhere.


Like this comment
Posted by Neighbor
a resident of Woodland Ave. area (East Palo Alto)
on Nov 7, 2014 at 6:39 am

Regarding these housing developments, in Palo Alto , they should make John Mozart pay prevailing wage to the workers that build the units. Definitely not The $12 to $15 an hour that ultimately gets paid to the labourers. How about certified payroll? This is what happens when you have a labor force that can not vote.


Sorry, but further commenting on this topic has been closed.

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