It was welcome news that a Superior Court judge did not buy the argument by Classic Communities that the requirement to devote 15 to 25 percent of its project to below-market housing or pay an in-lieu fee equal to 5.4 percent of the price for each market-rate unit sold amounted to an illegal "special tax" against developers. Another claim, that Palo Alto is "unlawfully" forcing developers to bear the costs for the city's shortage of affordable housing, was also dismissed. Classic is the developer of Sterling Park along Bayshore Road.
A successful case against the ordinance would have threatened the very foundation of Palo Alto's affordable housing policy, as well as similar programs in many nearby communities. On average, the city generates 7.5 new homes a year with funding from the program.
The city's ordinance survived a similar court test in a case filed by SummerHill Homes last year. The company agreed to pay $4.4 million in "in-lieu" fees rather than build the required number of below market rate units. Another challenge to the ordinance is still pending, filed by Forrest Mozart, the son of Classic Communities president John Mozart, over West Meadow Oaks, a six-unit condominium project on West Meadow Drive.
Despite the lawsuits, the city remains firmly behind affordable housing projects like the 50-unit Eden Housing development at 801 Alma St. After adding a $3 million grant and a $2.8 million loan last month, the City Council raised its total commitment to the project to $9.3 million. Eden started off as a large mixed-use project but was scaled back considerably after strong opposition surfaced from neighboring condominium owners at 800 High St. In its first version, Eden featured ground-floor-retail, including the Palo Alto Ace Hardware store across the street, as well as 96 units of housing for seniors and families.
Approval of Eden, a partnership between the Community Housing Alliance and Eden Housing, shows how difficult it can be to win approval of large affordable housing projects, even on a street that backs up to a dense but upscale condominium project at 800 High St. that also faced strong opposition when it was approved several years ago. Some 800 High St. residents claim that the Eden project is trying to squeeze too many units into too small a space, and that the area is not suitable for families. We disagree and believe that Eden's location next to Caltrain and within walking distance of grocery and other shopping downtown or at the Stanford Shopping Center makes it appropriate for the site.
In fact, early drafts of the city's new Housing Element call for locating more new housing near Caltrain, within a quarter mile of El Camino Real and in mixed-use buildings — a strategy very similar to that of 800 Alma St. and the Eden family housing. As the city faces the challenge of finding ways to accommodate some 2,800 units of new housing, as stipulated by the Association of Bay Area Governments, locations must be found that can be zoned for much denser housing near the transit corridor.
This is a change in strategy from the current housing element, which saw 1,372 units built between 1996 and 2006, 316 more than required in those years by the regional guidelines. Of the total, 80 percent were built for "above moderate income" buyers, leaving less than 300 units in the "affordable" category. And in some cases, projects have been criticized for increasing neighborhood traffic, providing inadequate parking and forcing local schools to accommodate more children. Others lament the loss of community institutions like Hyatt Rickeys and Palo Alto Bowl, which were or will be turned into housing.
One planning official said the city faces many hurdles to reach its quota of affordable housing due to the limited land available and high property values. The reality today is that applicants can spend five to seven years on the waiting list to get into one of the city's affordable-housing facilities.
With the recent court decision, it appears that Palo Alto's system for financing the construction of new "affordable" housing units is on sound legal footing. Now the challenge is to find appropriate locations for housing that minimize adverse impacts to the community.