Under a proposal by local nonprofit affordable housing developer MidPen Housing, the Menlo Park community could become able to offer 12 new townhomes to low-income households to purchase in the community.

During a study session the Menlo Park City Council held Tuesday, Nov. 9, to explore the idea, council members asked questions and signaled support for the concept, asking for staff to bring back further proposals for official approval in the near future, including dedicating $200,000 to MidPen Housing to start exploring forming a community land trust and contributing $3.4 million to support the construction of the proposed affordable townhomes.

MidPen Housing owns the property at 335 Pierce Road, in Menlo Park's Belle Haven neighborhood, which has one vacant parcel and one four-unit apartment building, and hopes to redevelop a dozen townhomes on the property that can be affordable to low-income households in Belle Haven.

In the Belle Haven neighborhood, 57% of homes are renter-occupied, higher than the overall 40% percent of renter-occupied homes throughout San Mateo County, according to data from a recent University of California at Berkeley study exploring Menlo Park's housing inventory. The facts that the median household income in the neighborhood is $58,274 while the median sales price of homes in the neighborhood is over $1 million, indicate that homeownership for many households living in the neighborhood is out of reach, according to a staff report.

MidPen Housing proposes to generate a rare opportunity of homeownership for those low-income local households through the formation of a legal structure called a community land trust rooted in Belle Haven.

A community land trust is an entity that controls the ownership of a property and is responsible for its stewardship, according to staff. These usually make homeownership more affordable because the homeowner is buying just the house, not the land that the property sits on. The homeowners lease the land long term from the community land trust and agree to sell the home at a restricted price to keep it affordable in perpetuity, but may be able to realize the appreciation from improvements they make while living in the house, according to an explanation by Grounded Solutions Network, a Bay Area-based housing policy nonprofit.

New state legislation that offers a partial property tax exemption on community land trust properties, permitting homeowners within these trusts to pay property taxes on the improvements to the land but not the land itself, explained Jan Lindenthal, chief real estate development officer for MidPen Housing Corporation, to the council. An additional benefit of the community land trust approach is that the community retains the power to make decisions about the land itself, she said. Eventually, the goal is for the trust to operate as a self-sustaining nonprofit, which could even provide resources such as homeownership counseling or counseling for prospective homeowners, she said.

"Homeownership is the most important wealth-building vehicle for families and one of the few paths to build generational wealth and financial security," she wrote in a letter to city staff about the proposal. She added that they are particularly interested in developing affordable homeownership opportunities in Belle Haven because of the support Belle Haven residents had expressed for the idea in MidPen's previous outreach efforts.

The new townhomes, which would contain two bedrooms and be targeted toward families, would be intended for first-time, low-income homebuyers, or households earning between 51% and 80% of the area median income. For a household of four, that translates to an annual household income of between $93,177 and $146,350.

MidPen Housing would also take steps to offer the first right of refusal to the current tenants at the 335 Pierce Road apartments to purchase homes, or relocate to the new apartment development currently under construction by MidPen Housing along Willow Road, Lindenthal said.

The $3.6 million in funding that MidPen Housing seeks to support building the new homes and forming the community land trust comes from the city's below-market-rate fund, which is generated from in lieu and impact fees from home and business-related development projects and is intended to be used to develop housing affordable to very low, low- and moderate-income households. MidPen and staff recommended expanding that intent to also include the formation of a community land trust.

In addition, the site would need to be rezoned from the current R-3 designation, which permits 13 homes per acre, to the R-4-S designation, which permits 30 homes per acre.

Because of the work involved to form a community land trust, the entitlement and approval part of the project likely wouldn't move forward until 2023 and construction likely wouldn't begin until 2024, Lindenthal said.