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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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The Regional Context for the Palo Alto Comp Plan Update

Uploaded: May 26, 2015
Recent Trends

The region has seen a surge in job and population growth with the highest growth rates up and down the peninsula from San Francisco to San Jose. The region added 499,000 jobs and 323,000 residents from 2010 through 2014 and the growth is continuing into 2015.

This job growth has reduced unemployment and made room for new residents to join the workforce. Between April 2010 and April 2015 the regional unemployment rate declined from 10.2% to 4.1% reducing regional unemployment by nearly 2/3 from 383,400 to 163,900.

This growth has brought an increase in traffic and housing prices and rents. The substantial rise in housing prices and rents has been caused in part by a substantial shortage of new housing construction. Only on the past two years have new residential permits exceeded 20,000 per year and even that rate has been unable to keep pace with population growth.

In 2007 there was an average of 2.7 residents per household. That ratio would mean that the 546,578 added residents from 2007 through 2014 would require 202,436 new housing units. But only 113,810 units were added, which left a shortage of 88,626 housing units for these years.

The Comp Plan Years to 2030

While the future is uncertain, some trends are very likely to occur. The reason is the aging and eventual retirement of most baby boomers by 2030. In 2030 the oldest boomers, born in 1946, will be 84 and the youngest boomers, born in 1963, will be 67. The peak baby boomer retirement period will be between 2020 and 2030.

There is broad consensus among leading national forecasting firms, the UCLA Anderson School Forecast and CCSCE on three broad job growth trends:

1) 2015 and 2016 will see a continuation of strong job growth in the nation, state and region

2) Job growth rates will decline sharply in the following four years to 2020.

3) Job growth rates between 2014 and 2030 would be below 1% per year between 2014 and 2030 to reach the 2030 regional projection in Plan Bay Area. In contrast, the growth rate for our metro area was 6.0% for the past 12 months.

The recent surge in job growth will taper off.

But population growth will continue at, perhaps, a slightly slower pace and with predictable changes in the age structure of the population. Regional population growth would average 0.8% per year between 2014 and 2030 to reach the 2030 Plan Bay Area regional population projection. Note both the regional job and population/housing projections are being revised this year.

Demographic Trends

The California Department of Finance projects three major demographic trends for our region and county:

1) Birth rates have declined and are expected to remain lower to 2030. At the state and county level no growth is expected in school age population to 2030.

School enrollment projections released in December 2014 by the California Department of Finance show an anticipated small decline in K-12 enrollment in Santa Clara County from 275,614 students in the 2013-14 school year to 266,802 in the 2023-24 school year and for San Mateo County a small decline from 94,613 to 93,692.

2) Roughly half of the increase in state and county population will be in residents aged 70 and above and the next largest portion will be in residents between 55 and 70.

3) Most population growth at the state and county level will be in Hispanic and Asian populations, partly driven by immigration but an increasing share will be from children of existing residents.

As a result of these trends, the demand for smaller housing units may increase and the average number of people per housing unit will fall. This is likely as a large share of the growth in households will be for those headed by someone 65 and over and a large share of these households are one or two residents. There will also be slightly fewer children per household.

This is already a trend in Palo Alto with its above average share of residents over 65 compared to the county. As of January 1, 2015 the average household size in Palo Alto was 2.47 residents compared to the county average of 2.97.

Conclusion

These are the regional trends in which Palo Alto and other Bay Area communities will be planning their job and housing choices for the future.


Comments

 +  Like this comment
Posted by Counterclockwise, a resident of University South,
on May 26, 2015 at 10:21 pm

"As of January 1, 2015 the average household size in Palo Alto was 2.47 residents compared to the county average of 2.97."

Such averages are meaningless. There is no such thing as an average household, nor is there 0.01 of a person (excepting Lizzie Borden's household). I challenge you to make your point in realtistic, illustrative terms.

I am very literate numerically and statistically, so do your best.


 +  Like this comment
Posted by confused, a resident of Menlo Park: Allied Arts/Stanford Park,
on May 27, 2015 at 1:59 pm

How will the population grow if there isn't enough housing? I don't understand how the mismatch of jobs and housing growth fits with population projections. These seem disconnected and possibly wishful thinking.


 +   1 person likes this
Posted by stephen levy, a resident of University South,
on May 27, 2015 at 4:31 pm

stephen levy is a registered user.

@ confused

A few points.

There is now a shortage of housing for the recent population growth associated with the strong job growth. So at least so far "don't build and they won't come" is a theory in conflict with the evidence.

How does this work. There are two explanations.

One is that people double up--as a choice they make or have to make faced with rapidly rising rents and prices. This has happened in our region.

Second, some people move to adjacent counties and commute back in.

This process, very real in fact, has the effect of hurting most those who cannot afford the rising prices and rents and have to move or double up. It means that we become a region of older homeowners who bought a long time ago and increasingly wealthier newcomers.

The projections going forward assume that the housing shortage will be dealt with.

The collective communities in the region hold collective inconsistent positions. As a group they favor and approve new job growth while many are ambivalent about housing. There is now growing pressure for and recognition of the bad social and economic implications of a persistent housing shortage.

Most cities are struggling with these conflicting views and we will see how it works out over the next 5 to 15 years.


 +   1 person likes this
Posted by stephen levy, a resident of University South,
on May 27, 2015 at 4:42 pm

stephen levy is a registered user.

@ counterclockwise

I guess you are not a sports fan.

There is no average San Francisco Giant but the team does have a batting "average".

It is calculated by dividing the number of hits made by the team by the number of at bats that count (not walks or sacrifices)--I suspect you know this already.

Similarly, average household size is calculated by dividing the number of people by the number of households. So if a city has 10,000 households and 25,000 residents, the average household size is 2.5.

The point in baseball is that a team with a batting average of .290 likely has more players hitting .290 or more than a team with a batting average of .250.

So Palo Alto with an average household size of 2.47 most certainly has a higher percentage of 1 and 2 person households than a city with an average household size of 3.0 and that has implications for housing policy--particularly when we know that all cities will have the greatest growth in residents aged 65 and above who have an even smaller average household size.

So, yes there is maybe no average household but there certainly is an average household size.




 +  Like this comment
Posted by Palo Alto, a resident of College Terrace,
on May 27, 2015 at 4:57 pm

I'd be interested to learn more about the demographic trends in Palo Alto, specifically, rather than Santa Clara County in general.


 +   2 people like this
Posted by Gale Johnson, a resident of Adobe-Meadow,
on May 28, 2015 at 8:07 pm

I'm one of those older homeowners you speak of. I live in SPA far from the madding downtown crowd. I assume the reason so many startups locate downtown is due to the proximity to Stanford, the same reason Hewlett and Packard started here. Yes, housing is very expensive here, to rent or buy. How many new units would have to be built to significantly lower prices enough to be affordable for most of the downtown tech workers who now commute long distances? I don't think anyone knows the answer or has the magic formula or algorithm to give us that answer. Lots of opinions though! I've supported the idea of increased height limits for housing, not more offices. Would that work? Property owners and developers favor building more offices because they produce more profit. So, what will it take to effect changes to correct the jobs/housing imbalance? A question I don't have an answer for. Please come forward you folks much smarter than me!


 +   1 person likes this
Posted by Techie, a resident of Menlo Park,
on May 29, 2015 at 10:09 am

Gale, most startups locate downtown instead of the Research Park because twenty something\'s want to work someplace with street life - restaurants, shops, and nightlife - and be able to live near work or take the train instead of driving. And, of course, most people who want to work long hours and take a big risk with their careers are in their 20s. (Though bravo to the older programmers who set out on startups rather than spend their days at the big companies!)

A different height limit for residential sounds like a good idea. I believe Neilson Buchanan has proposed the same thing. Also, aside from the height limit, Palo Alto zoning doesn\'t let you build the full three stories of residential over retail - compared to office, where you can go up all three. At a time when we\'re restricting office space and need more housing downtown, that doesn\'t make much sense.

There\'s also a number of places like the Frye\'s site and 27 University that would be perfect for more housing over ground-floor retail, rather than just more offices.


 +  Like this comment
Posted by Mark Weiss, a resident of Another Palo Alto neighborhood,
on May 29, 2015 at 3:48 pm

As of 2012, San Francisco had a 1.5 percent payroll tax, that brought in $400 M to city coffers.

What would you estimate, Dr. Levy, the hypothetical effect of such a thing here?

I would not mind so much being overrun by this new species if there were something in it for me.

And what about my comment a few posts back about taxing realtors rather than having a parcel tax, or in addition? How much of a "residential real estate transfer tax" hypothetically would we need to impose to match the $10 M per year of the recent and renewed parcel tax?


 +  Like this comment
Posted by Mark Weiss, a resident of Another Palo Alto neighborhood,
on May 29, 2015 at 4:17 pm

Since you digressed a bit into baseball, I am posting again to add the detail that on my own blog I grasped for but did not quite reach a clever reference to Mario Mendoza, a mediocrity from the 1980s baseball who is immortalized for "The Mendoza Line" which to many people is a minimum standard of success, like a .200 batting average. I actually think it is something less tangible, having to do with the expression "hitting your own weight" i.e. a batter whose average was below his body weight. There was a period there wherein Mendoza started putting on weight, but his batting average did not increase proportionally. To me the Mendoza LIne is not .200 but is more like an irrational that cannot be described simply: There was also a yarn about the guy with the lowest average being "the strongest man" in that he held up the other 500 players in the charts they used to print in the Sunday paper. Mendoza arguably was better off as a 170 pounder hitting .200 than being a 235 pounder hitting .205.

I actually did hit .667 on a single at bat, my first hit in Senior Little League, as a 13 year old playing with 14 and 15s; it took me almost to mid-season to get a safety; I knocked Paul Hopper's hanging curve the opposite way off the right field fence, took two bases but cluelessly tried to stretch it to a triple and was thrown out by a mile. It's actually, of course, still a hit, but in the context of economics it is more like a hit and an out, or two bases and an out, 2 of 3, .667.

Web Link
e most irrational thing you do.

i am also saying something about "feed a pig slaughter a hog" in that the developers are getting fat and we should or could benefit, maybe by taxing them. Or indirectly by taxing their tenants.

Famously, a Palo Altan named Ron Conway moved to SF and helped Ed Lee get elected partly by getting some high tech companies exemptions from the payroll tax. I've never met or even seen Ron Conway but I presume he is more likely a porker (compared to a CEO like T.J. Rodgers who is an exercise nut).

And yeah, I admit I am carrying more on my frame than I did for the 1981 League Champion Titans: 30 percent more!


 +  Like this comment
Posted by Mark Weiss, a resident of Another Palo Alto neighborhood,
on May 29, 2015 at 4:18 pm

I argued that the 14-acre Fry's site should have a 7-acre park: we are way-behind in our per capita people to park acres ratio.


 +   2 people like this
Posted by water!, a resident of Another Palo Alto neighborhood,
on May 29, 2015 at 8:29 pm

And there there is the problem of water.

My fruit trees died over the winter, and I wonder how much water the occupants of those new hotels around the corner are going to use.

The trouble with thinking this way is that there are always busts. More reasonable growth means more sustainability in the long run. If things get too expensive, it makes places like Detroit attractive, and our nation benefits.

It's interesting that we don't have any of the social pressure of some other wealthy nations to allow young families to buy homes and not take them up as ghost homes or live there forever. I suspect we'd end up with a lot of vacated housing stock if the tax laws changed. I wouldn't move into an apartment in PA, I'd move somewhere I could lead a better quality of life. As much as I enjoy it here, and have our friends, let's face it, the nature of this area is transient. There is a whole other depth to life when you live somewhere people are truly connected. (Count me as one who would probably move now if I could move the equity with me instead of losing so much of it. Subtract me from the list of people who will need a spot in an expensive senior facility here, I wouldn't want to grow old here anymore.)


 +  Like this comment
Posted by Demographics, a resident of another community,
on Jun 1, 2015 at 3:46 am

Something interesting would be the age of the workers in the added jobs, as well as visa status. If Employers brought or bring 150,000 workers on H1B visas, do we project them to remain int he area? If the workers in the added jobs are aged 25 and under when hired fresh out of college, do we project them to remain in the area? The tech industry has college graduates flocking to Silicon Valley to take jobs, but they don't necessarily plan to stay here. It's a reverse of past practices, but some of these companies (Google) are mainly hiring college graduates in their Silicon Valley HQ these days. That doesn't mean they will all remain here. It's kind of like postgraduate education for them. Once they have the Diploma of Google Employment, then they can find a job elsewhere.


 +  Like this comment
Posted by Demographics, a resident of another community,
on Jun 1, 2015 at 3:49 am

That is, when Google hires a college graduate fresh out of school, the hire is likely to work at HQ initially. If they hire at another location, or transfer an employee there, that employee is less likely than those at HQ to be a recent graduate. The recent graduates look for a different kind of housing situation than those with 10 years of experience and added age.


 +  Like this comment
Posted by curmudgeon, a resident of Downtown North,
on Jun 1, 2015 at 3:54 pm

If the idea is to plan in a regional context, why do we tally jobs-housing "imbalances" town by town?


 +  Like this comment
Posted by Robert, a resident of another community,
on Jun 1, 2015 at 8:20 pm

@curmudgeon

As a result of Prop 13, property taxes on housing don't actually cover the cost of services required, so its really the fairest way to have the cities which are driving growth pay for its cost. Its not a perfect system, but given the context it makes sense.


 +  Like this comment
Posted by Curmudgeon, a resident of Downtown North,
on Jun 2, 2015 at 10:42 am

@Robert

I'm still trying to parse your Prop 13 comment. Do bear in mind that the bedroom community you live in owes its economic underpinnings to jobs elsewhere.

To elaborate on my original point: we must get beyond the legacy of 19th century context of individual towns and adapt to the 21st century reality of a regional jobs-habitation unit. Politics notwithstanding, inter-town boundaries are abstractions here--signs beside the road, if even that.

It makes much more sense to compile jobs-housing "balances" over representative commute zones, not within contextually meaningless city limits, and to periodically "redistrict" them. To illustrate: does it make more sense for an employee of VMware, whose campus is barely inside Palo Alto, to live in north Los Altos or in north Palo Alto? City-context accounting demands north Palo Alto, which is a much longer commute; rational regional reckoning allows the much more sensible Los Altos.

Bottom line: planning economists need to join Silicon Valley and innovate their thinking.


Sorry, but further commenting on this topic has been closed.

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