The East Palo Alto City Council unanimously endorsed Tuesday night a new stipulation for developers in the area, requiring them to pay a fee for low-income housing.
The new ordinance would repeal the city's Below Market Rate Housing Program and replace it with an Affordable Housing Program ordinance. The law 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 new fees would go into effect 60 days after council's final approval. Under state law the ordinance must undergo two hearings before enactment, Director of Community Development John Doughty said.
Council members wanted some refinement to the ordinance, including a closer look at the $44-per-square-foot fee for owner housing with structured parking, which might be too prohibitive for developers to build that kind of housing, Doughty said.
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. Under the new ordinance, developers will proportionately contribute to providing affordable housing within the city.
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 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.