MILPITAS — Developers will either have to build more affordable housing or pay higher fees under new rules the Milpitas City Council tentatively approved this week.
The rules would require developers of residential projects with at least 10 homes or apartments to set aside 15 percent of them as affordable. However, apartment developers would have the option to pay into the city’s affordable housing fund instead.
Developers building houses, condominiums or townhouses for ownership, not rental, could also request to pay an in-lieu fee to the city, but that would require approval from the council.
The vote at Tuesday night’s meeting was unanimous, though the council will need to approve the ordinance covering the new regulations at a second reading later this month. It would take effect 30 days after that.
City Manager Julie Edmonds-Mares said the primary goal of the ordinance is not to collect fees.
“The intent of our ordinance, first and foremost, is to get the units developed inside the development,” she said. “Having the developers do that and deliver it for the city for our inventory.”
While Milpitas has 1,278 affordable housing units, no new affordable housing has been built in the city since 2012, according to a city staff report.
Almost all of the current affordable housing was made possible with money from the now-defunct redevelopment agency, which the state dissolved in 2012, the report said.
In 2015, the council required new residential developments with at least five units to set aside 5 percent of them as affordable to low- or very low-income households, or pay a fee equal to 5 percent of the construction costs of the project.
Since the resolution passed, not a single developer has included affordable units in their projects, instead opting to pay the fees.
Tim Wong, the city’s housing director, said that in order to allow a developer building residential properties for ownership to pay in-lieu fees under the new ordinance, the council would have to first ensure that the fees would exceed the cost of including units in the project, and find that the project or community would be better served by granting the exception.
The extra layer of requirements to pay fees would encourage developers to include affordable housing in their developments, he said.
While city staff initially recommended the new ordinance only require 10 percent of residential units be set aside at affordable prices, the council decided to increase it to 15 percent.
“I’m not really happy with a 10 percent,” Vice Mayor Marsha Grilli said at the meeting, noting that some surrounding communities have higher requirements. “I feel like we could do a lot better here. … Certainly, I think it should be more than the 10 percent.”
Mayor Rich Tran said that 10 percent “is not a set-aside that shows leadership for working families, and I believe this community deserves better.”
At a future meeting, the council will also vote on setting the fee levels that residential developers would have to pay per square foot into the city’s affordable housing fund if they choose not to build affordable units in their projects.
The council also is considering adopting a new separate fee that would be levied against commercial developers, to help offset the impact they have on the need for more housing because of the creation of jobs. Several other surrounding cities have adopted similar fees, at varying levels.
Councilman Bob Nuñez and Grilli both expressed concern at the meeting that representatives of the commercial development industry were not clearly notified about the city’s proposed ordinance, and asked that staff members get feedback from them regarding the fees.
Staff had recommended charging $30 per square foot to developers of houses, townhomes or condominiums for ownership and $31 per square foot for developers of apartments who opted to pay in-lieu fees.
The staff also recommended commercial developers pay $4 per square foot in impact fees.
At the same meeting, the council also approved a roughly 100-apartment affordable complex at 355 Sango Court, and a loan restructuring for the Montevista Apartments on 1001 S. Main St. to allow conversion of 50 market-rate units into affordable ones. The complex currently has 306 apartments, of which 163 are affordable and 143 are market rate.
Milpitas to require more affordable housing in developments