Milpitas council approves staff plan on unsold affordable unit and directs priority for low-income buyers

Milpitas — The Milpitas City Council on Jan. 13 voted unanimously to approve staff’s recommendation on an unsold below‑market‑rate townhouse unit at 2001 Terab Court while adding direction to prioritize qualifying low‑income buyers in any resale decision.

Staff presented two options under the city’s executed affordable housing agreement with KB Homes: purchase the remaining below‑market‑rate unit (staff estimated allocating up to $800,000 from the city’s affordable housing fund to cover purchase and real‑estate expenses) and continue marketing it as an affordable unit, or release the unit so KB Homes may sell it at market rate and the city would accept the net proceeds. Staff said the market estimate for the unit was approximately $1,200,000 and that the net proceeds—depending on final sale price—could be applied to the city’s affordable housing programs.

The vote came after a detailed presentation from staff and HouseKeys and extended council questioning about why Lot 20 remained unsold. Staff told the council Lot 20 is a stacked/tandem floor‑plan with the main living area on the second floor above garages; that layout, council members were told, deterred several prospective buyers who otherwise qualified. Julius Nyanda of HouseKeys said many applicants who completed eligibility paperwork went to inspect the unit and declined to move forward, citing the floor plan and other factors. “We did about 400 applicants across two campaigns and many who visited reported the floor plan is problematic,” Nyanda said.

Council members also questioned the apparent price gap between the affordable sales price and nearby market‑rate sales. Staff explained the affordable sales price listed in the report is $716,361; under the agreement the developer gave the city a notice and allowed a time window for the city to decide whether to buy the unit at an affordable price plus reasonable real‑estate expenses or allow the developer to release it. Staff noted there is currently just over $2,000,000 in unencumbered funds in the affordable housing fund, and that most or all of any purchase money could be returned to the fund when the unit is re‑sold as an affordable unit, though there would be carrying and transaction costs.

Council debate focused on policy tradeoffs: preserving a single moderate‑income ownership unit versus converting the unit to market rate and capturing proceeds to finance more or different affordable housing programs. Several members urged measures to expand access to lower‑income households; council ultimately approved staff’s recommendation with an explicit addition directing staff to prioritize qualifying low‑income buyers in the resale process and to return with any procedural details and inventory breakdowns requested by council.

The motion was made by Council member Chua and seconded by Vice Mayor Barbara Dio; the council voted unanimously in favor. Staff said it will follow up with KB Homes to ask whether the developer will extend its marketing period and will provide the council a disaggregated inventory of the city’s 283 below‑market‑rate units by income category (very low, low, moderate). The council also asked staff to analyze options such as subsidizing the sale price or changing the income category if needed to reach eligible buyers, noting that such policies would reduce funds available in the affordable housing fund and require a policy decision.

Next steps for the council include receipt of the requested inventory breakdown and any additional staff analysis of program options, and further action depending on KB Homes’ response about an extension to market the unit.