Commission recommends council accept developer's offer to dedicate land for deeply affordable rentals at 777 Sunnyvale Saratoga Road

The Sunnyvale Housing and Human Services Commission voted 6-1 on May 28 to recommend that the City Council approve an alternative compliance plan for a residential development at 777 Sunnyvale Saratoga Road that would dedicate land to the city instead of providing all required below-market-rate (BMR) units on-site.

Ernie DiFrenci, the city's affordable housing manager, told commissioners the project has been approved by the Planning Commission for 242 residential units (80 ownership townhomes and 162 rental units). Under Sunnyvale Municipal Code 19.67 and 19.77 the developer would normally provide 15% of ownership and rental units as BMR homes'a total of 36 units (12 ownership and 24 rental). The applicant is asking to meet the obligation by dedicating roughly 1.45 acres to the city, which DiFrenci said "can accommodate approximately 162 rental units." He said the dedicated parcel would yield about 24 more affordable units than required and allow "deeper affordability" for extremely low-, very low- and low-income households.

The commission asked detailed questions about timing, delivery and operations. Staff said the developer will dedicate the parcel to the city before issuance of any building permits for the ownership townhomes, and the city would then issue a competitive request for proposals to select a nonprofit affordable housing developer to build and manage the rental project. Commissioners were told the typical financing and development timeline for a nonprofit affordable rental project is roughly five to seven years, while townhome construction could take about 18 to 24 months after building permits are issued.

Commissioners pressed staff on how the alternative compliance compares to paying in-lieu fees. Staff said ownership in-lieu payments are collected at sale (7% of the sales price) and could be delayed until closings; rental in-lieu fees must be paid before issuance of building permits and staff estimated a total rental fee of approximately $13,400,000 if the developer ' instead of dedicating land ' chose to fee out. The staff report notes that dedication produces a materially larger number of deeply affordable rental units than the base on-site requirement.

Several commissioners raised concerns about the city's housing element policy (policy H-2.3), which encourages BMR units be integrated within market-rate housing. Staff acknowledged that integration is the usual practice but said the city evaluates alternative compliance requests case by case and recommended approval because the proposed dedication would generate substantially more deeply affordable units and give the city control as landowner over project quality and long-term affordability. Staff also noted that the city's BMR and housing mitigation funds are currently healthy and that other integrated BMR projects remain in the pipeline.

Public comment was closed with no speakers. Commissioner Davis moved approval of the staff recommendation (Alternative 1) and Commissioner Stewart seconded. In a roll-call vote, the commission recorded six votes in favor and one no: Heiermatt, Stewart, Friedlander, Davis, Rivera and Chair Duncan voted yes; Vice Chair Weiss voted no. The motion carries and will be forwarded as the commission's recommendation to the City Council.

The commission record and staff presentation included these specific details from the staff report and discussion: the project was approved as 242 units (80 ownership/162 rental); the municipal code requires 15% BMR for ownership and rental developments (12 ownership, 24 rental); the applicant proposes to dedicate ~1.45 acres for an entitled 162-unit rental development (producing roughly 24 more units than required); the city would issue an RFP to select a nonprofit developer; the anticipated nonprofit financing and construction timeline is roughly 5'7 years; the dedication would be required before the first building permit for the ownership units is issued; and the dedicated land would be restricted to affordable housing in perpetuity per the proposed agreement.