Housing commission backs plan allowing developer to pay BMR in‑lieu fees for 1124 W. El Camino Real condos

The Sunnyvale Housing and Human Services Commission voted unanimously June 25 to recommend that the City Council approve an alternative compliance plan allowing the residential portion of the project at 1124 West El Camino Real to pay BMR in‑lieu fees instead of building on‑site affordable ownership units.

The commission's action followed a staff presentation that described the project as a mixed‑use development: 111 multifamily residential units above retail plus structured parking, and five two‑story single‑family homes as originally approved. The developer later filed a revised tentative map to convert the main building to condominiums, with the intent to sell about 86 units and retain roughly 25 as rentals. Staff said the rental portion is grandfathered from the city's rental BMR requirement and will instead pay a housing impact fee set under Sunnyvale Municipal Code Section 19.75; the ownership units would be subject to Sunnyvale Municipal Code Section 19.67, which requires 15% of new ownership units be affordable when a project creates seven or more ownership homes.

Staff said the 15% requirement would amount to 13.65 BMR units for the ownership portion. Rather than require on‑site units, the applicant requested City Council approval to pay an ownership in‑lieu fee set at 7% of the final sales price of each market‑rate home, collected at escrow. "The in lieu fee is set at 7% of the final sales price for each market rate home and is collected through escrow at the time each unit is sold," staff told commissioners.

Staff estimated the housing impact fee for the grandfathered rental portion at approximately $949,000 and estimated the ownership in‑lieu fee could be close to $16,000,000 depending on market prices; combined, staff said the total collection for both rental and ownership portions would be slightly over $17,000,000. Staff also said those in‑lieu funds are commonly used to pair with nonprofit and state or federal funding to build deeper affordability and serve very low or extremely low income households.

Commissioners asked staff to clarify timing and mechanics for collection. Staff said in the case of condominium sales the city would submit a payoff demand into each escrow and receive the 7% fee at the close of each sale; because condos must be habitable to occupy, staff estimated the funds would likely arrive over a roughly 2½ to 3‑year period after building permits are issued. Staff explained that if the commission had required on‑site BMR units, the city would either round up to the next whole unit or compute a fractional in‑lieu payment and perform a true‑up at the last escrow closing.

Several commissioners voiced reservations about a broader trend toward alternative compliance. Commissioners noted the city generally prefers on‑site, mixed‑income housing and expressed concern that repeated in‑lieu approvals could reduce the supply of integrated BMR units. Commissioners also flagged potential affordability risks for future BMR homebuyers in high‑rise condo developments, citing high homeowners association (HOA) fees driven by elevators or amenities; staff said a 2025 state law now caps certain increases to HOA fees for affordable units but does not set initial HOA levels.

Commissioners discussed the project's potential to fund additional affordable units through the city's housing mitigation fund. Staff and commissioners estimated that, paired with state and federal dollars, roughly $17,000,000 could underwrite a significant number of deeply affordable homes — staff noted a rule‑of‑thumb cost of about $1,000,000 per affordable unit for very low‑income development in the local market, meaning the in‑lieu sum could support multiple projects when leveraged with other sources.

Formal actions earlier in the meeting included unanimous approval of the consent calendar (minutes) and, later, the motion on the alternative compliance plan. Vice Chair Weiss moved the commission's recommendation that the City Council approve the applicant's BMR alternative compliance plan for 1124 West El Camino Real (attachment 2 to the staff report); Commissioner Stewart seconded the motion. The commission approved the recommendation with a roll call vote of seven yes, zero no.

The commission's recommendation will go to the Sunnyvale City Council, which must approve or amend the alternative compliance plan before the applicant may proceed under the in‑lieu terms. If City Council approves the plan, the city will collect the 7% sales‑price fee at each condo sale and the rental housing impact fee through escrow as described by staff.