East Palo Alto developers could be required to pay a fee for low-income housing if the City Council approves a staff recommendation Tuesday, July 1.
The proposed Affordable Housing Program ordinance would repeal the city's Below Market Rate Housing Program and reenact new provisions. The new ordinance would subject each new market-rate unit in a residential project to an affordable-housing impact fee that would be adjusted each year to account for market fluctuations.
The recommended initial fees would be $22 per square foot for rental housing and for owner housing without structured parking, and $44 per square foot for owner housing with structured parking, according to a 2013 Affordable Housing Nexus Study the city commissioned from consultants David Rosen & Associates. The Nexus Study is a detailed report of the impacts of market-rate housing on the demand for affordable housing in East Palo Alto.
The new ordinance is important to the city because of the high cost of land in the region, according to a staff report. Residents have said they want to maintain the city's diversity and have a diverse housing stock that supports households with incomes ranging from "extremely low" to "moderate."
Subsidies and funds the city once had for affordable housing largely dried up when the California legislature dissolved redevelopment agencies in February 2012. Those funds represented the largest source of funding to produce affordable housing, according to a staff report.
The city adopted an "inclusionary" ordinance in 1994 -- the Below Market Rate Housing Program -- which was amended in 2000, 2004 and 2011. But recent court cases, a regional housing-affordability crisis and the loss of redevelopment agency funding makes the scalable fee on market-rate rental and ownership projects a more sustainable alternative. Developers would proportionately contribute to providing affordable housing within the city, the staff report noted.
East Palo Alto is also required by the regional Association of Bay Area Governments (ABAG) to build 467 affordable-housing units from 2014 to 2022. Of those, 118 must be for households earning less than 80 percent of the San Mateo County area median income.
The housing element of the city's general plan found that a number of forces impact the supply of affordable and quality housing in the city. Regional housing markets have created high land values, which directly affect housing affordability; tighter loan standards have reduced the pool of eligible home buyers, especially those with low incomes; and the majority of households in the city are low income.
The ordinance adoption would also align city law with the state's Mitigation Fee Act (AB1600). In October 2013, the California Supreme Court held that impact fees in Sterling Park, L.P. v. City of Palo Alto are subject to the Mitigation Fee Act, at least for statute of limitation purposes, staff noted.
The new ordinance would also better withstand legal challenges currently in the courts, including the current California Supreme Court case CBIA v. City of San Jose, which imposes an impact fee similar to East Palo Alto's and challenges whether such fees are a permissible use of governmental police power.