The Menlo Park City Council on Tuesday, March 26, voted unanimously to make a $6.7 million loan to MidPen Housing, a nonprofit housing developer, to build 140 below-market-rate apartments on the 1300 block of Willow Road and replace the 82 units that are there now.

The loan will come from the city's Below Market Rate housing fund, leaving the fund with a remaining balance of about $9.1 million.

The apartments are intended to be affordable to households whose incomes fall under 30 and 60 percent of the area median income, according to a staff report. That translates to a maximum income of $44,000 at the 30 percent level and $87,960 at the 60 percent level for a family of four. Most of the apartments would be intended for renters whose incomes are 50 to 60 percent of the area median income.

As proposed, the development would include 66 one-bedroom apartments, 50 two-bedroom units and 24 three-bedroom apartments. There would be a community room, a landscaped courtyard, an exercise room, a teen room, an after school program area, two laundry rooms and some smaller outdoor spaces.

During the construction, MidPen Housing plans to relocate current tenants based on each household's needs. These tenants will be the first invited to move back into a new apartment with the same number of bedrooms as the one they previously occupied. After that, preference at the new below-market-rate apartments will given to people who live in, work in or have been displaced from the Belle Haven neighborhood, followed by a preference for people who have been displaced from other parts of Menlo Park.

Preference would also go to people who are homeless and living in the Ravenswood City School District. If the project receives funding from San Mateo County, MidPen would also likely be required to dedicate some units to people who are formerly homeless, according to Jan Lindenthal, chief real estate development officer at MidPen Housing.

 According to Nevada Merriman, who is director of housing development at MidPen Housing and a Menlo Park housing commissioner, the contribution represents the last discretionary approval needed for the developer to seek further funding from the state and apply for federal tax credits. Final plans for the development will be submitted as part of the building permit review process.

Construction is expected to start as soon as the spring of 2020, with plans for leasing to begin in the fall of 2021, Merriman said in an email. MidPen would pay for the current tenants to be relocated to similar housing at an expected cost of $5.7 million, as well as moving costs, estimated to be $315,000, according to the staff report.

The new development proposal requires the removal of the frontage road, which would allow the new apartments to be pushed closer to Willow Road, giving neighbors at the rear of the property on Carlton Avenue more space. The council also approved this step Tuesday.

Currently, the sidewalk cuts inward onto a private frontage road behind a wall on Willow Road, so pedestrian passersby are forced to walk through the private residential property, which has caused safety problems in the past, Lindenthal explained.

The city sold the bulk of that frontage road to MidPen Housing for $1, and a small piece, about 1,500 square feet, to the owner of the adjacent Soleska Market for $100 per square foot, according to staff. The new development would include a public sidewalk, which would be installed along Willow Road.

Affordable housing goals

All of the 58 new apartments that MidPen Housing plans to build – not counting the 82 old ones that would be replaced – would go toward helping Menlo Park meet goals set in what’s called the “Regional Housing Needs Allocation.”

The Association of Bay Area Governments oversees the state allocation process that sets a certain number of housing units, based on income categories, as a goal that cities should strive to meet to keep up with demand.

Since 2015, when the most recent allocation cycle started, the city of Menlo Park has had a mixed success rate, depending on affordability category. According to a staff report, the city permitted 775 housing units intended to be affordable to households earning more than 120 percent of the median income between 2015 and 2018, five times more than what the plan called for. On the other hand, the city granted permits for only four housing units intended for moderate-income earners in the same period, compared with the 143 such housing units the state called for.

Menlo Park has granted permits for 29 percent of the 129 housing units that should be dedicated for low-income renters under the state's plan, and for 46 percent of the 223 housing units intended for very low-income people.

Menlo Park is one of only 24 jurisdictions in California that is meeting its goals for lower-income and above moderate-income housing production, according to a state report.

The city gave out building permits for 44 new housing units in 2018. These included 24 townhomes at 133 Encinal Ave., 15 secondary dwelling units, and assorted single-family and multifamily residences. The city is also reviewing building permits for about 407 proposed new housing units.

Relying on the city’s housing permitting rates from 2017, Next 10, an independent, nonpartisan group that works with California data, calculated that it could take the city until 2444 to meet the state's moderate-income housing goals.