The city's proposal is to require developers of both rental and for-sale multi-family housing units to designate 15 percent of those units as below market rate (BMR). Currently the requirement is 10 percent. Among other things, the proposal calls for lowering income qualifications for families, extending the time period the units can be designated as BMR, and adjusting the sale prices of the units.

Nancy Tivol, executive director of Sunnyvale Community Services, said that though the city should definitely look at increasing BMR units, it is important for the city to look "at the entire study" and make "a fair decision."

On the other hand, many developers believe it's a struggle for their companies to make the current 10 percent BMR requirement. Increasing that percentage to 15, along with other added restrictions, would only make matters worse for them, they say.

"The restrictions would make it almost impossible for any developer to push their project through and absorb costs," said Crisand Giles, executive director of the Home Builders Association of Northern California.

Instead of attracting developers to Sunnyvale, this proposal might drive them away, many have said.

"The proposed changes in the BMR program may serve as a strong disincentive for developers," said Bob Hines, government relations director for the Tri-County Apartment Association. Members of Tri-County own, manage and develop multi-family housing units in Santa Clara, San Mateo and Santa Cruz Counties.

Sunnyvale adopted an affordable housing ordinance in 1980 that established the requirements of the BMR housing program. Since then the ordinance has undergone several amendments.

Last year, the Sunnyvale City Council directed city staff to explore affordable housing options for city employees and review the BMR housing program. The city held informational meetings to gain public input and study sessions and public hearings with the Sunnyvale Planning Commission and the Sunnyvale Housing and Human Services Commission. City staff then proposed a revised BMR program that would be implemented in all future development projects. With the revised proposal, the city hopes to provide more housing for low-income families and eventually improve their economic status by extending the time limit requirements.

There are now 180 BMR purchase units and 632 BMR rental units in the city. However, demand for these units has increased over the years. Currently there are 279 people waiting to purchase a BMR unit.

According to Annabel Yurutucu, housing officer for Sunnyvale, demand for BMR rental units is significantly higher, adding that it is not possible to measure the demand, however, since the units are managed and maintained independently by rental property owners.

The city needs to look at how BMR rents are affected by the rental market, Tivol said.

"From our experience, although market rents have come down somewhat, the BMR rents have been raised," she said.

Paul Negus—a graphic designer—has lived in Sunnyvale for 14 years and has been a BMR resident for a year.

"The BMR is great—it has a lot of protections," Negus said. "But it needs more work."

Negus said he has witnessed several fixed-income families being evicted "unfairly" by landlords with just a month's notice.

In the new proposal, the term limit for rental units, which is currently set at 20 years, would be eliminated. The change ensures that BMR rental units remain in the program forever, thereby increasing the number of affordable rental units over time, according to Trudi Ryan, planning officer for Sunnyvale.

The new proposal would increase the term limit for purchase units from 20 to 55 years.

This will enable future generations of low-income families, who remain in these units for that term, to have the opportunity to sell their homes at market rate after the term, Ryan said.

However, some think Sunnyvale should not have deed restrictions on BMR units and should provide homeownership opportunities sooner—after the 20-year term expires.

Giles and Natalie Cardenas, government affairs director for the Silicon Valley Association of Realtors, both said Sunnyvale should rethink the deed restrictions and homeownership portions of the proposal.

"Deed restrictions are a limitation," Giles said. "They do not give the cities power to reinvest."

At the council-requested study session on Oct. 22, Yurutucu and Ryan displayed sample calculations comparing market rate and BMR prices, which showed the considerable differences between the two based on a range of interest rates and down payments. Calculations also showed BMR programs in other jurisdictions, a comparison of existing and proposed dedication requirements, qualifying household incomes, family median income changes, rental unit affordability and proposed sales prices. They also compared Sunnyvale to other cities, such as Irvine and Davis, which are implementing a similar BMR program.

However, many developers did not agree with the city's calculations.

"A lot of the information is outdated and archaic," said Mark Burns at the study session. Burns is a residential broker with Coldwell Banker, and was previously with the Silicon Valley Association of Realtors.

Daniel Carroll from Pulte Homes in Pleasanton also urged the city to look at tightening some of the numbers, especially lowering the qualifying median range for both rental and purchase units.

Hines added that Sunnyvale shouldn't be compared with sprawling cities like Irvine and Davis, which have abundant land for development.

Besides disagreeing with the city on various features of the proposal, developers said they are concerned about the bottom line—the cost absorption. They said it's most likely that they will have to pay for all the costs incurred through the new proposal. In a 100-unit housing project, 15 would be classified as BMR units, according to the new proposal, which means they will be sold at a considerably lower price. However, the cost differential has to either be spread over the remaining units or be absorbed by the developer, they said.

If requirements are made more stringent, then it becomes more difficult for them, they said. Whereas revenues were high and costs were low in the past, things are different now.

"The city has to make the economics work," said Suzi Blackman, president and CEO of the Sunnyvale Chamber of Commerce. "The Chamber absolutely agrees that there should be a balance between jobs and housing. But there are different ways to accomplish it."

Jeffrey Dennison, government relations manager for the Tri-County Apartment Association, said at the study session that there are creative ways to make the BMR program work in Sunnyvale. The city could partner with nonprofit developers to take advantage of tax-free bond financing and other fiscal incentives not available to market rate developers, he said.

Representatives from the nonprofit community said they are sensitive to the needs of the homeless and the needy in the housing situation.

"People are being priced out of the housing and rental markets," said IrisAnn Nelson, chairwoman of the city's housing and human services commission. "We need more affordable housing."

Several council members directed staff to have more discussions with developers and nonprofit organizations and analyze their numbers in greater detail. The city council was scheduled to vote on the BMR issue on Nov. 12. However, at the Oct. 22 council meeting, Councilwoman Pat Vorreiter moved that the issue be postponed to a later date.