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.