Bay Area housing advocates were thrilled last year when Mountain View leaders pledged to go hard on residential growth, transforming the corporate office park of North Bayshore into a dense urban neighborhood with 9,850 homes.
But despite that grand vision, almost nothing has changed for North Bayshore. After one year, not a single new apartment project has been pitched to the city for review, let alone constructed. In fact, city planners say at least one housing proposal already in the pipeline is now being pulled back by its applicants.
Why has the city's hottest new neighborhood suddenly gone ice cold? City officials say the culprit is that housing is too expensive -- even for developers to build.
A line of developers at the Tuesday, Sept. 4, Mountain View City Council meeting took aim at the city's fees and requirements, which reportedly would add about $120,000 in costs per apartment unit. These costs were intended to help make North Bayshore into a vibrant neighborhood with parks, transportation and even a new school for residents.
But for the companies poised to build those homes, those costs are becoming a deal breaker, said Tim Steele, vice president with the Sobrato Organization. In June, Sobrato pulled plans first submitted in 2015 to build 635 apartments and a six-story office building on Pear Avenue. That project is reportedly being modified and will be discussed by city officials next week.
Steele explained that his company needed to amend the plan because the city's park fees had dramatically increased, from $32,000 to $60,000 per apartment. Basically, the project no longer penciled out, he said.
"Never in our mind did we anticipate the fees would double over that time," he said. "Even with the financial influence of offices, these projects can't overcome this burden."
The elephant in the room during the discussion was Google, which owns large swaths of North Bayshore land and has enthusiastically supported the housing plans. No one from the company spoke at the meeting or submitted comments in advance.
Reached by the Voice for comment, a source at Google speaking on background said that the company is still committed to building North Bayshore housing, but it needs to be built in an economically feasible and affordable manner. The company was reportedly encouraged that Mountain View would be revisiting the fee structure for North Bayshore.
Previously, Google officials had signaled that the city was overreaching with its fees. Last September, a Google director issued an ultimatum, saying that that the company would need 800,000 additional square feet of office space development to compensate for the various city requirements, particularly one for 15 to 20 percent to be set aside as affordable housing. That demand ended up backfiring and becoming a public-relations misstep for Google. Within a week, company officials were pledging their ongoing commitment to North Bayshore housing plans in an attempt to undo the damage.
While many developers need to balance out their costs, council members indicated they weren't sure Google should get the same consideration. It is one of the world's richest companies, and it already owns significant swaths of land in North Bayshore. Plus, Google has a self-interest in finding ways to build housing near its headquarters, said Councilman John McAlister.
"What if they don't want a monetary return but rather an equity return on employment?" he said. "What if their return is a reliable workforce?"
The reasons for the sudden spike in development costs are complicated. On one hand, land values have nearly doubled since 2016, going from $5.2 million to $10 million an acre in 2018. The city's ambitious and well-publicized housing plans were surely helping to drive these dramatic valuations. But as land values went through the roof, that also meant city fees for parks and schools were also rising to new heights.
Taken together, each apartment in North Bayshore would cost about $645,000 to build, according to city officials, a $120,000 increase from roughly one year earlier.
Anticipating bad news, officials from the Mountain View Whisman School District came out in force to remind the council that a future school was not optional.
"You've looked me in the eye before and assured me there would be a school. After reading your staff report, I have to say I'm concerned," said Laura Blakely, Mountain View Whisman's school board president. "I support development ... but it can't come at the sacrifice of schools."
Yet many council members signaled they had little choice but to surrender some fees if they wanted housing in North Bayshore. Mayor Lenny Siegel started off the discussion by suggesting the city should study cutting the school fees by up to 50 percent. He suggested that reduction could be supplemented by some future state funding, a bond measure or money from the city's Shoreline Regional Park Community fund. Without giving specifics, he said the school fees were stopping at least one developer from submitting a housing proposal to the city.
"We have to come up with a compromise," Siegel said. "The only way to get any money to build a school in North Bayshore is to build the housing."
It was a controversial comment, and other council members said they were not comfortable with backpedaling on the fees, especially given the uncertainty of finding other funding sources for schools. The Mountain View Whisman School District has estimated it would cost $109 million to build a compact school on a 5-acre plot in North Bayshore. Superintendent Ayinde Rudolph said about one-third of that money was expected to come from development fees.
Joined by McAlister, Councilwoman Margaret Abe-Koga warned that the city was being pushed into a corner where they could end up subsidizing the developers' costs.
"We know what the school fees are based on what we've heard, but (the developers) just don't want to pay it," Abe-Koga said. "Someone has to subsidize for this, and I don't know if it should be us."
Siegel and others proposed incentives for housing developers, including giving credit toward their park fees for providing recreational space, even for private gyms and swimming pools not open to the public. Councilman Chris Clark suggested these amenities could be given partial credit, like 75 percent of their value.
In another idea that was proposed, the city could loan the school district money on the uncertain possibility that it could be paid back through additional state funding or a bond measure.
Mountain View city staff members said they will investigate these options and bring them to the City Council at a future date.