While Affordable Housing Week came to a close May 20, the City of Morgan Hill is preparing to implement and formalize its Below Market Rate (BMR) home development program.
The city has had an affordable housing program since 1977, when voters approved the Residential Development Control System. That ordinance requires developers to compete for a limited number of annual building allotments by adding features to their projects that gain points. One way residential developers can gain points is by committing a portion of their proposed units for low- to moderate-income buyers.
On June 1, the city council will consider adopting a formalized BMR program that wraps up existing policies into a single effort, administered by nonprofit contractor Nyanda & Associates, also known as HouseKeys.
“What they’re being asked to approve is not new; it’s just tying it all up with a nice neat bow,” said Morgan Hill Housing Manager Rebecca Garcia.
On May 18, the council approved a two-year contract with HouseKeys for $500,000 per year. The contractor runs a website, housekeys.org, that serves as a resource of information and services for potential affordable home buyers.
A previous contract with the same nonprofit was approved for $272,000 for one year, which ends in July.
The need for an increased contract cost is due to realizations over the last nine months that the city’s portfolio of 500 units will take more effort and resources to manage, according to city staff.
Also on May 18, the council held an affordable housing workshop and declared the week of May 13-20 Affordable Housing Week.
At the workshop, Mayor Pro Temp Rich Constantine noted he was pleased to see that Morgan Hill has more affordable housing units (500 out of a total of 13,241 households) than every city in Santa Clara County except San Jose (1,385 affordable units). But he said there is more work to do in a region where housing prices have reached levels that are increasingly prohibitive for many Silicon Valley residents.
“Housing isn’t a privilege, it’s a right,” Constantine said. He noted that in Morgan Hill, it takes a combined family income of well over $100,000 to afford a new home. “It’s very important that we get affordable housing in Morgan Hill, because we want people who live here to work here. I want my firefighters, teachers and police to live in Morgan Hill.”
For many years, the city’s affordable housing program was administered by the Redevelopment Agency. But the state shut down that agency in 2012. Since then, the city has searched for the best way to keep its BMR efforts organized, and staff thinks they have found the right match with HouseKeys.
‘Huge’ program
The city’s contract with HouseKeys, a private nonprofit, pays for three full-time staff, plus half the salary of a city employee to administer the program, according to Assistant City Manager Leslie Little.
“They process applications, qualify applicants…assist with refinancing and desale of properties, conduct homebuyer education classes,” Little said by e-mail. “They sell new (affordable) homes and resale homes, conduct lotteries of qualified applicants when a home is ready to be sold, they review public records for notices of default and anything else that may affect any BMR property every day…”
The contractor also audits the city’s stock of BMR units annually, interacts with Homeowners Associations and help prepare grant applications and “much more,” Little continued.
“It’s a huge program,” she said.
The funding for the HouseKeys contract comes from a variety of city housing funds and former RDA loans. No general fund dollars are spent on the program.
More affordable homes are on the way in Morgan Hill. In December, construction is expected to begin on a “non-contiguous,” 41-unit affordable rental housing project to be developed by EAH. Those units will be scattered on four sites throughout the city.
Urban Housing Communities holds 39 building allocations, awarded in 2015, for another affordable project on the corner of Monterey Road and Bisceglia Avenue. The developer is in the process of seeking funding for the project, according to a May 18 city staff report.
Affordable homes are restricted for sale to households with annual incomes up to 120 percent of the Area Median Income (AMI). The AMI in Morgan Hill is $74,400 for a one-person household, and $106,300 for a family of four. Affordable homes are further split into four categories characterized by the income level of permitted buyers: very low (0 to 50 percent of the AMI), low (51 to 80 percent AMI) and moderate (81 to 120 percent AMI).
From 2007 to 2014, most affordable homes built in Morgan Hill were for moderate-income buyers (260 units), while very low-income homes accounted for 82 units.
Regional crisis needs regional solutions
City officials are so proud of their affordable housing program that they hope their partnership with HouseKeys can serve as a “model of best practices” for other cities, at a time when many experts acknowledge the Silicon Valley crisis needs regional collaboration.
During Affordable Housing Week, affordable housing advocates—including event host and nonprofit SV@Home—focused on the need for a regional approach as a key solution to the problems many residents face in a region where rents increased by 60 percent from 2010 to 2014, and the median monthly rent for a two-bedroom apartment is $2,800.
SV@Home spokeswoman Alina Harway applauded Morgan Hill and other cities in Santa Clara County for approving proclamations supporting Affordable Housing Week. SV@Home and other advocates spent the week conducting 24 activities, workshops, seminars and discussions about how to achieve solutions.
“We’re really inspired and motivated by the fact that it seems like there is a renewed focus” on affordable housing, Harway said. “Housing has been a problem in Silicon Valley for decades, but the situation has changed to the point that it’s not just a problem—it’s a crisis.”
