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A Tech Company Land Swap and the Pursuit of Affordable Housing in Mountain View

Earlier this year, Google and LinkedIn signed off on a mega real estate deal. Next week, locals will vote on whether they want rent control.

Marcio Jose Sanchez/AP

In what some locals call the “grand bargain,” Google and LinkedIn agreed in July to trade large amounts of Silicon Valley real estate. Involving about 3.5 million square feet of existing and potential office space, mostly in the city of Mountain View, the deal will consolidate each firm’s Silicon Valley employees into separate campuses. Previously, the companies operated across a patchwork of properties scattered between Mountain View and neighboring Sunnyvale.

In the trade, LinkedIn acquires seven Google buildings, close to 10 buildings the professional networking company already owned along the Mountain View-Sunnyvale border, as well as one million square feet of developable land. In return, Google gains over 370,000 square feet of office space along with the right to develop 1.4 million square feet in Mountain View’s North Bayshore district. LinkedIn had planned to construct a 10-building mixed-use development, with offices, a hotel, a movie theater, shops, and restaurants, on the site.

Until Google and LinkedIn first considered the property swap over a year ago, North Bayshore was a source of competition between the two tech firms. Just months before, they had emerged as the primary contenders in a widely reported battle for the right to develop 2.5 million square feet of office space in the 500-acre office park, which is cut off from the rest of Mountain View by Highway 101, the main artery between San Francisco and Silicon Valley.

To compete, Google and LinkedIn offered the city of Mountain View extravagant benefits such as a new police station, road improvements, toxic groundwater cleanup, and college scholarships. The competition showed what an anomaly Mountain View and the surrounding region is in terms of economic development. Whereas cities usually cobble together a collection of tax breaks, waivers and subsidies to lure employers away from other potential locations, Google and LinkedIn were willing to contribute vast resources for the right to expand within Mountain View.

LinkedIn largely won out in North Bayshore. The Mountain View City Council granted it the right to develop 1.4 million square feet in the district, nearly three times the 515,000 square feet it awarded to Google. This outcome helped to quell concern that Google, which owns most of the property in North Bayshore, was turning Mountain View into a de facto company town.

Following this summer’s grand bargain, however, Google gained control of all the property LinkedIn had won in North Bayshore.

“If you’ve been following the events in North Bayshore for the last several years, you realize how significant the deal actually is,” said Mountain View Community Development Director Randy Tsuda.

Like other city officials, Tsuda welcomed the deal as an “innovative solution” to stalled development in North Bayshore, where Microsoft, Intuit, and Symantec also have campuses. Companies have not found a way to grow in North Bayshore without exceeding local restrictions on traffic congestion. Traffic has surged throughout the Bay Area as a flourishing tech sector has fueled rapid job growth.

Despite efforts at partnership, LinkedIn and Google could not coordinate infrastructure improvements to accommodate increased traffic in North Bayshore. To build the mixed-use development it had planned for the area, for example, LinkedIn would have needed Google to contribute land for a new frontage road, pedestrian bridge, and off-ramp. The land swap the two companies brokered in July overcomes this complication.

Mountain View officials consider the swap to be a victory for the city, too. Pleased that Google and LinkedIn will remain headquartered in Mountain View, city leaders view North Bayshore as a likely bastion for new housing. In February, the Mountain View City Council voted to begin a two-year process to permit the construction of up to 10,250 residential units there. While such large-scale development will likely add to infrastructure needs, changes will be simpler in LinkedIn’s absence because Google will benefit more directly from infrastructure investments in North Bayshore.

A Win-win-win?

North Bayshore represents tremendous hope for the community of Mountain View. While tech industry growth has sent housing costs soaring throughout the Bay Area, North Bayshore represents an opportunity to alleviate the affordability crisis by building more housing.

City leaders aim to make the area a “complete” neighborhood, where high-density apartment complexes, located within walking distance of public transit, entertainment, business, and open space, house families at all income levels. “It won’t be just about jobs,” Mountain View Economic Development Manager Alex Andrade said. “It will also be about this holistic approach to designing a community.”

According to Andrade, since finalizing the grand bargain with LinkedIn, Google officials have begun to discuss a framework for the development of North Bayshore with Mountain View city planners. Any project the company considers will require city approval.

Google shares Mountain View’s interest in creating a new neighborhood. “We are very interested in this becoming a community out here,” Google’s John Igoe said in an interview this spring. Igoe directs design and construction for the company in northern California.

To Google, residential development in North Bayshore would improve housing options for its employees. City leaders in Mountain View, however, want to ensure that people beyond the company can access new housing.

In May, the city council began to explore how Mountain View could incentivize developers to build affordable housing in North Bayshore. One option would allow developers that designate enough units as affordable housing, which qualifying tenants would rent at discounted rates, to build taller structures than the city would ordinarily permit.

This approach marks a dramatic shift for Mountain View. Two years ago, the city council voted to exclude housing from the list of allowable uses in North Bayshore, instead favoring the sprawling commercial development characteristic of Silicon Valley. Residents, however, had become increasingly alarmed by the housing shortage to which this pattern of development had given rise. In 2014, voters elected three pro-housing candidates to the city council. The council soon voted to revise land-use guidelines to permit residential development in North Bayshore.

Although Google and other private developers have an interest in building new housing, city officials understand that the private sector can only be expected to pursue development projects that make business sense. For affordable housing incentives to work, for example, the economic benefit of constructing taller buildings must offset lost profits on affordable units, on which rent would be lower than the market would otherwise bear. Despite reiterating his company’s desire to create a residential community within North Bayshore, Igoe said, “The vision we create has to start with Google. It has to work for Google.”

A Community’s Identity at Stake

Google and Mountain View officials are engaged in a delicate dance with the potential to hurt or benefit many people in the community. Given the city council’s apparent willingness to green light the construction of over 10,000 residential units in North Bayshore, Google could play a significant role in lifting Mountain View out of its housing hole.

New housing, however, could require another five or so years to materialize in North Bayshore. In the meantime, living conditions for residents of Mountain View could remain precarious. In recent years, a rising number have resorted to living in unsafe homes or on the street, or have reportedly left Mountain View entirely, because they can no longer afford the cost of housing in the city. According to real estate website Zillow, median home values in Mountain View have doubled in the last five years, climbing from approximately $716,000 to $1.43 million. Zillow reports that the monthly median rent jumped from about $2,700 to around $4,200 during the same period. Last summer, Mountain View ranked among the top three California cities with the highest median rents.

Members of the Mountain View Tenants Coalition, a grassroots organization, packed city council meetings throughout the fall last year to demand relief. The coalition pushed the council to consider rent control, a policy that limits the amount by which landlords may increase rent each year. Landlords and realtors vigorously opposed the idea. They called rent control a blunt instrument that benefits the affluent as much as the poor, without boosting local housing stock.

Ultimately, the city council rejected rent control but passed alternative measures, most notably a rental dispute mediation program. The program gives tenants the right to initiate a formal mediation process with their landlord if their rent increases by over 7 percent in a single year.

Decrying the council’s action as toothless, tenant advocates added a measure in support of rent control to this month’s election ballot. The measure proposes to enact rent control as an amendment to Mountain View’s city charter. Under the amendment, allowable rent increases would generally match the rate of inflation but never exceed five percent in a given year.

The city council countered with its own ballot initiative. Rather than set a hard price ceiling, the council’s measure would allow tenants to challenge annual rent increases above five percent through a binding arbitration system.

Supporters of rent control slammed council’s proposal—what some call “soft rent control”—as a political trick meant to split the vote for any new tenant relief in Mountain View. Mayor Pat Showalter, who led the council’s effort, disputed the accusations. “We're crafting what we think is a better methodology,” she said. “It's an honest difference of opinion.”

Aside from doubting the merits of rent control, council members voiced concern that the rent control initiative proposes to amend Mountain View’s charter, which functions as the city’s constitution. Any change to the amendment, if passed, would require another popular vote at the polls. Council members consider the relative flexibility of their measure, which a supermajority of council members could amend or repeal after a two-year trial period, to be an advantage.

Even if the council-backed arbitration measure wins the most votes this November, the backers of the rent control initiative could prevail nevertheless. As an amendment to the city charter, their measure would supersede the ordinance the council has proposed. Rent control simply must pass by a majority vote of the electorate to become the controlling law in Mountain View. Proponents of rent control have said they can reduce the risk of a split vote by persuading voters to approve the council’s initiative along with their own.

Since mobilizing last fall, rent control advocates have cited community diversity as their primary motivator. Historically, Mountain View has stood out from neighboring suburbs for its ethnic and socioeconomic diversity. In 1980, 51 percent of students at Mountain View’s downtown high school (which closed in 1981) were racial minorities, compared to about 10 percent at neighboring Los Altos High and Awalt High (later renamed Mountain View High School). At the time, Mountain View was considered a “dump,” the industrial and agricultural “stepchild” of the San Francisco Peninsula, according to longtime residents.

Low- and moderate-income members of the community, many of Latino descent, have struggled to keep their heads above water amid an ongoing tech wave. “Until Google, Mountain View was more or less known as a working-class town, and a diverse town,” Mountain View native and historian Nicholas Perry said in an interview this spring. “That’s the only identity we have, and it’s like people have taken that away from us while we’re still here.” Perry, a San Francisco city planner, did not state a position on rent control.

Opponents of rent control have also expressed deep concern about changing demographics in Mountain View. Parties on both sides of the debate share the hope that Mountain View will build housing to remedy a shortage decades in the making. By leveraging Google’s riches in North Bayshore, the city has the potential to turn this political will into results, and in the process break ranks with the surrounding region to reach a new equilibrium between economic growth and community integrity. But, this outcome will require sophisticated planning and negotiation among parties with diverse interests.

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