Seeking to ramp up production of affordable housing and avoid an escalation in development fees, Stanford University on Friday submitted a new proposal to Santa Clara County that would convert up to 200 apartments on the university's campus into below-market-rate units and create a new fund to support future projects.
If approved by the county Board of Supervisors, the proposal would mark a sharp departure from how the county and Stanford have traditionally addressed the topic of affordable housing. The existing approach relies on "impact fees," which Stanford is required to pay whenever it constructs new academic facilities -- funds that are earmarked for affordable-housing projects.
Now, with the university seeking a General Use Permit for 2.275 million square feet of academic space and 3,150 new units (a combination of apartments and student beds) by 2035, the county is taking a fresh look at both the impact of Stanford's expansion on the region's already dire housing shortage and at the best methods to best ease these problems.
In May, the Board of Supervisors supported raising the impact fee for non-residential development from the current level of $35 per square foot to $68.50 per square foot. The ordinance setting the higher fee is set to return to the board in August, following reviews from the Housing, Land Use, Environment and Transportation Committee.
At the May 8 meeting, several supervisors noted that while they support the $68.50 fee, their aim isn't money but housing. As such, they left the door open for Stanford to propose other strategies for creating affordable housing before the ordinance is formally adopted in August.
"I think almost all of us have said, in some form or fashion, we are really interested in the housing, not in collecting a fee," Board President Joe Simitian said at the May 8 meeting. "I think that a conversation about how we can move forward to effectuate that result is an important conversation."
With its proposal, Stanford hopes to advance the conversation and, in the process, create a new model for funding affordable-housing projects in San Mateo and Santa Clara counties. The proposal includes three primary components: provision of more affordable-housing units on campus, a payment to the county for 38 units of housing for “extremely low income” residents; and a new fund that the university hopes can generate housing for years to come.
The proposal, which is outlined in the Friday letter, would create 200 units of affordable housing (for those making below 80 percent of area median income) on Stanford's campus, which could entail designation of existing apartments as "below market rate," construction of new units, or some combination of both.
The first 100 of these units would be designated for Stanford staff and would have to be provided before the university occupies any of the new academic facilities authorized in the new General Use Permit. The remaining 100 would have to be made available before the Stanford can occupy new academic space beyond 1 million square feet.
Some of these units could become available as early as next year, said Jean McCown, Stanford's associate vice president in the office of government and community relations. Though Stanford has not determined where exactly the 200 units of affordable housing will be located, one idea is to gradually designate existing units on Stanford property as below-market-rate once they are vacated.
"You can take some of the market-rate units at Stanford West (Apartments), for example, and convert them to affordable units," McCown told the Weekly. "You'd get these units right away."
She noted that Stanford is not planning to evict any tenants in its existing market-rate units as part of the conversion. And if it takes too long to provide the 200 units of affordable housing through vacancies and conversions, the university would be open to other options, including new construction.
The second component of Stanford's proposal is an immediate $14.3 million payment to the county to subsidize 38 "extremely low-income" units for which the university's General Use Permit would create the demand, according to the county's analysis. According to Stanford's proposal, the county would agree to commit these funds to housing projects within five years of the General Use Permit approval.
"We would front-load it immediately and they can work with other programs to provide that extremely low-income housing," said Catherine Palter, Stanford's associate vice president for land use and environmental planning.
The third component -- and one that Stanford believes has the most potential to address the affordable-housing crisis -- is the creation of what it's calling the "Evergreen Loan Fund." The university would immediately contribute $21.7 million to the fund. It would also accept contributions from area employers and institutions interested in making a dent in the housing shortage.
Palter noted that the fund is "evergreen" because as the loans are repaid, the money would be directed to other housing projects. And while other investors would be able to contribute loans for these projects and ultimately get repaid, Stanford's contribution would remain in the fund in perpetuity, she said.
"We've spent a lot of time with housing developers asking, 'What is your challenge to getting these types of projects in the community? What's your missing slice of financial support?'" Palter told the Weekly. "It was really out of those conversations that we came up with that fund."
The fund, she noted, would be run by a community-development financial institution (CDFI), an organization with expertise in putting together financial packages involving disparate funding sources to support housing projects.
"They would have the ability to be nimble and creative and have more flexibility on how the money is used," Palter said.
Stanford's initial contribution to the fund would support the creation of 44 units of "very low income" housing (for those people making less than 50 percent of area median income) and 173 "low-income" units (for those making less than 80 percent of area median income). These 217 units -- along with the 200 affordable units that Stanford would make available on its campus and the 38 "extremely low income" units for which the university will contribute $14.3 million -- would effectively meet the demand for affordable-housing units that a county analysis estimated would be generated by the university's proposed expansion.
Technically, the county analysis determined that 575 affordable-housing units would be needed, but Stanford is recommending that it get credit for 320 units when it builds or provides the 200 apartments. The reason, according to the university, is because actually building units on Stanford's land is "more valuable than paying a fee, and Stanford should be incentivized to provide housing over paying a fee."
This incentive, which effectively gives Stanford credit for 1.6 units for each unit built, also is necessary because Stanford cannot avail itself of tax credits that typically account for 30 percent to 50 percent of the cost of affordable-housing construction, according to the Stanford letter.
McCown said the university was encouraged to create the fund through its recent discussions with nonprofit developers and institutions like the Silicon Valley Housing Trust and the Chan Zuckerberg Initiative. In addition to the fund's creation of new housing, the idea is to create a long-term model that other institutions can emulate. The Friday letter from Robert C. Reidy, Stanford's vice president for land, buildings and real estate, emphasized that the fund would "have a high likelihood of attracting investments from other institutions or nonprofit foundations, further expanding upon its benefits."
Palter described the university's offer as a "housing now" plan, in contrast to the existing development-fee system that relies on a gradual accumulation of money as buildings are developed.
"The ordinance does not deliver the units and does not have the ability to front load," Palter said.
In releasing the letter Friday, Stanford is hoping to persuade the county to set aside the proposed ordinance and to instead negotiate a development agreement with the university that officials say would lead to more below-market-rate units becoming available in the near term.
Because Stanford expects to build out its academic facilities over 18 years, the fees and units "would be metered out over almost two decades," the letter states, and provision of housing would be "completely dependent on the pace of Stanford's academic growth."
"By contrast, through a Development Agreement, Stanford would commit to affordable housing benefits up front without regard to the timing of its future growth, and Stanford would commit to provide a substantial portion of these benefits on its land."