Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Raymond Hodges, Director, Department of Housing
Subject: Selection of MidPen Housing for 626-640-648 Walnut Street, San Carlos; Approval of Exclusive Negotiating Agreement and Initial Predevelopment Loan
RECOMMENDATION:
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Measure K: Adopt a resolution:
A) Authorizing and directing the Director of the San Mateo County Department of Housing (“DOH”), or designee, to negotiate and execute, in consultation with the County Attorney, an Exclusive Negotiating Agreement with MidPen Housing, or an affiliate entity, to afford the parties sufficient time not to exceed one year unless an extension is necessary and advisable in the Director’s discretion, to negotiate the terms of both a Development Agreement and an Agreement to provide site control of property located at 626, 640, and 648 Walnut Street in the City of San Carlos (the “Property”) with MidPen Housing, or an affiliate entity, for the purpose of developing and operating an affordable housing development on the Property for low-, very low- and extremely-low income households, including persons experiencing or at risk of homelessness and local public employees, to the extent and in a manner allowable by law; and
B) Authorizing and directing the Director of DOH, or designee, in conjunction with MidPen Housing, to submit, or cause to be submitted, to the City of San Carlos, all necessary entitlement application documents required to ensure development at the Property proceeds in accordance with state law; and
C) Authorizing and directing the Director of DOH, or designee, in consultation with the County Attorney, to negotiate and enter into a Development Agreement with MidPen Housing, or an affiliate entity, regarding design, development, construction, ownership, and management of the Property and the provision of on-site resident services at the Property; and
D) Authorizing and directing the Director of DOH, or designee, to enter into necessary agreements to provide site control of the Property, through a ground lease with at least a 55 year term, or another instrument agreeable to both DOH and MidPen Housing, subject to County Attorney review and approval, with MidPen Housing or an affiliate entity to facilitate MidPen Housing, or its affiliate entity developing, owning and operating an affordable housing development on the Property for low-, very low- and extremely low-income households, including persons experiencing or at risk of homelessness and local public employees, to the extent and in a manner allowable by law; and
E) Authorizing and directing the Director of DOH to enter into an Initial Predevelopment Loan Agreement in an amount not to exceed $250,000 to MidPen Housing, or an affiliate entity, for early predevelopment activities, on terms and subject to an agreement in a form approved by the DOH Director and the County Attorney, from Measure K (AHF) funds, or other available funding sources, with no increase to Net County Cost; and
F) Authorizing the Director of DOH, or designee, acting in consultation with the County Attorney, to negotiate and execute any and all agreements, documents, certificates, extensions and amendments as may be necessary to effectuate the purposes of this resolution.
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BACKGROUND:
The County owns three adjacent, vacant parcels totaling approximately 0.61 acres at 626-640-648 Walnut Street in downtown San Carlos (APNs 050-131-060, 050-131-070, 050-131-080). The County acquired the Property in March 2024 with the intent of facilitating the development of affordable housing for low-income households on the Property.
Toward this end, on July 21, 2025, the County’s Department of Housing (DOH) issued a Request for Proposals (“RFP”) to solicit proposals from affordable housing development teams, with extensive experience developing, owning, operating, managing, and maintaining affordable housing, to serve as the developer, owner, and operator of the improvements. The RFP listed five primary objectives for the development of the site, which align with County goals and policies:
1. Creating at least seventy-five (75) affordable rental apartment units for families with incomes of up to 80 percent of Area Median Income, while maximizing to the degree feasible the number of larger-family units having two (2) or more bedrooms and units serving Very Low-Income and Extremely Low-Income families;
2. Providing at least 15 percent of the total units for households with incomes up to Extremely Low-Income, and providing a minimum of an additional 5 percent of the restricted units that are subject to a preference for people experiencing homelessness, who are referred with a Tenant-Based Rental Subsidy;
3. Providing a preference for at least 25 percent of the units for City and County employees, to the extent and in a manner consistent with state and federal housing laws;
4. Creating a project that incorporates high-quality design and amenities appropriate for the planned resident population(s) and that uses green building strategies and planning for sustainable operations; and
5. Maximizing leverage of the County’s below-market rate land contribution to limit the need for additional County funding, and/or strategically return funds to the County over time through lease payments, residual receipts loan repayments, or other creative mechanisms.
Ten qualified affordable housing developers and operators submitted development proposals in response to the RFP, and after an initial completeness review, a scoring committee comprised of staff from DOH and the City of San Carlos reviewed and scored all ten proposals based in part on the proposers’ vision for the site, overall project concept, financing approach, design and cost-effectiveness, community outreach, strategy for successfully marketing to County employees, and the development team’s experience and capacity.
From these initial ten proposals, the four highest scoring development teams moved on to an interview round with the Selection Committee. The Selection Committee interviewed all four teams and evaluated teams on their experience and ability to partner with the County as long-term partners with clear, transparent decision-making; their strategies for engagement with the City of San Carlos and plan to balance community input with entitlement streamlining; their demonstrated experience with employer/workforce housing, including fair-housing compliance and actionable marketing/outreach; the realism and competitiveness of their financing strategy, in particular, the state’s Affordable Housing and Sustainable Communities program; and balanced the benefits of working with development teams with direct San Mateo County experience with those of teams who would bring fresh perspectives and build new positive relationships in San Mateo County.
On October 24, 2025, following interviews, the Selection Committee unanimously recommended MidPen Housing to the DOH Director for selection and advancement to the Board of Supervisors for approval. The Committee selected MidPen Housing because they possess the experience and skills necessary to identify and secure long-term funding for the Property; they have proven to be a committed and thoughtful partner with the County on key, high profile affordable housing development opportunities; they presented a bold design strategy that has the potential to maximize housing on the site while also utilizing a thoughtful approach in working with the local community and neighborhood groups and taking advantage of streamlining opportunities to ensure the project has the best opportunity to compete for critical state funding. MidPen Housing’s team also demonstrated deep understanding of the need for affordable housing for public employees and practical steps for achieving this goal based off their two previously completed comparable developments.
DISCUSSION:
In view of the competitive process DOH has undertaken to identify a qualified affordable housing developer, staff recommends that the Board authorize the Director of DOH to enter into the necessary agreements with MidPen Housing to allow it to develop, own, and operate the affordable housing development on the Property, while allowing the County to retain long-term ownership of the land.
First, subject to this Board’s approval, the County and MidPen Housing will enter into an Exclusive Negotiating Agreement (“ENA”) to afford the parties sufficient time to negotiate two other agreements necessary for the project to proceed (the “ENA Period”). During the ENA Period, which will be for an initial term of six months, and will not exceed a total term of one year unless an extension is necessary and advisable in the Director’s discretion, the parties will negotiate and enter into:
(a) a Development Agreement, which will set forth the details of MidPen Housing’s development and operation of the affordable housing project on the Property; and
(b) an agreement that will transfer long-term site control of the Property from the County to MidPen Housing likely through a long-term ground lease, whereby MidPen Housing becomes the lessee of the Property and owns the resulting improvements during the term of the lease with the County retaining the fee interest and control of the Property. Pursuant to these agreements, MidPen Housing will be required to record an affordability covenant restricting tenancy at the Property to households earning at, or less, than 80 percent of area median income for a term of at least 55 years, including units for local public employees to the extent and in a manner allowable by law.
Under the ENA, MidPen Housing will be required to place on deposit an initial amount of $40,000 to be used by the County to cover costs associated with negotiating and entering into the ENA, legal analysis and additional staff time related to the development of the Property.
Second, consistent with the RFP, to expedite design and entitlement work to ensure the development has the opportunity to apply for upcoming affordable housing funding rounds, staff recommends that the Board authorize a $250,000 predevelopment loan to MidPen Housing from Measure K funds or other available funding sources. The loan would be repaid from residual receipts and will be structured on standard County terms subject to approval by the DOH Director, and subject to review and approval as to form by the County Attorney. This predevelopment loan will enable MidPen Housing to immediately engage design professionals and to conduct site analysis and community outreach.
The resolution has been reviewed and approved as to form by the County Attorney.
Each agreement authorized by the Resolution will be subject to review and approval as to form by the County Attorney.
PERFORMANCE MEASURE:
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Measure |
Target |
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Selection of an affordable housing development team for the development of 626-640-648 Walnut Street, San Carlos |
Complete |
COMMUNITY IMPACT:
The County is dedicated to ensuring safe affordable housing options for all San Mateo County residents, especially the most vulnerable extremely low-income, very low-income and special-needs households. The homes created by the Project are targeted to low-, very low- and extremely low-income households, including persons experiencing or at risk of homelessness who experience significant barriers to housing stability.
FISCAL IMPACT:
There is no Net County Cost. The action authorizes an Initial Predevelopment Loan not to exceed $250,000 to MidPen Housing, funded with Measure K funds or other funds previously allocated by the Board to the Affordable Housing Fund. Staff expect that MidPen Housing will apply in the future for County financial assistance administered by DOH, to further support the project development process, and such other financing as may be available.