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Stanford offers new plan to tackle affordable housing

University proposes converting existing units to 'below-market-rate,' creating 'evergreen fund' for new housing

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."

Related articles:

More housing, but worse traffic?

Editorial: Stanford's housing obligations

School district criticizes county's Stanford housing study

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Comments

19 people like this
Posted by Naybor
a resident of Greenmeadow
on Jul 28, 2018 at 4:25 pm

Naybor is a registered user.

Let me get this straight.

Stanford is proposing to add no additional housing units - it will just lower the rent on 200 properties it already owns (and probably get to stop paying property taxes) but wants credit for 320 "new" units. Stanford has so many tax breaks already - some are literally written into the California constitution.

$35 million is nice - but at current construction costs this is less than 100 units.

The proposed fee would be over $100 million. I realize the goal is to see if there is a way to get to the goal at a lower price tag, but this proposal is insulting.


28 people like this
Posted by Bill O
a resident of Barron Park
on Jul 28, 2018 at 4:37 pm

Woefully inadequate. If Stanford doesn’t come up with something more significant for the thousands of jobs they’ll create, the county should deny the GUP.


21 people like this
Posted by Anonymous
a resident of Duveneck/St. Francis
on Jul 29, 2018 at 3:19 pm

My reaction is Stanford serves itself, without taking into account how it affects the neighboring region.
The City of Palo Alto must advocate on behalf on Palo Alto residents, and strongly insist to Santa Clara County that Stanford meaningfully make contributions to PAUSD (our local public school district) and reduce impact on our local and regional streets/routes and contribute to housing in a way that is positive, not selfush.


8 people like this
Posted by Bunyip
a resident of Adobe-Meadow
on Jul 29, 2018 at 6:23 pm

Stanford should start rescinding its land use claims to Palo Alto. Return all existing land to the Leland trust and remove most of Palo Alto.


25 people like this
Posted by A poor knave
a resident of College Terrace
on Jul 29, 2018 at 7:06 pm

@Bunyip,

How dare the serfs ask for fair payment! Burn their villages!


4 people like this
Posted by Bill
a resident of Barron Park
on Jul 30, 2018 at 10:37 am

> Stanford should start rescinding its land use claims to Palo Alto. Return all existing land to the Leland trust and remove most of Palo Alto.

Sure, then both the City of Palo Alto and the PAUSD can move forward with eminent domain against Standford, acquire the land, and can settle that issue for good.


2 people like this
Posted by Guy V
a resident of Professorville
on Jul 31, 2018 at 5:37 am

and who gets the upside appreciation of the units? Let me guess...this is a giant investment "idea"....where they avoid taxes(that the hard pressed middle class instead pays) to appreciate real estate....while paying numerous advisers, developers and committee members. It is extra special when you have a multi-billionaire on board. Question who many government/university employees will be needed to do this.
How we tax Wealth Appreciation instead of just income(or realized Gains)...so when a billionaire or university WEALTH increases by billions(Chan Z) they pay their fair share...instead of just the lowly income employee...paying each and every week!


7 people like this
Posted by HMM
a resident of Old Palo Alto
on Jul 31, 2018 at 7:24 am

Stanford employees who work 20+ hours a week on the part of the campus that is in PA, and meet the income requirements, are eligible for low income housing through Palo Alto Housing. They get preference over long time Palo Alto residents that have been displaced. It is time for our local governments demand Stanford do more.


2 people like this
Posted by Larry
a resident of Downtown North
on Jul 31, 2018 at 10:51 am

We should encourage Stanford to build very tall, mixed use, with underground parking. If Stanford built 10 buildings of 25 stories each or higher, it would not only solve ALL of their housing needs for students and staff but take a major debt in the area’s housing crisis.

Do we want to solve problems?


4 people like this
Posted by stanford staff
a resident of Stanford
on Jul 31, 2018 at 11:50 am

>To HMM: Many Stanford staffers still can't afford the "affordable housing" offered on PA Housing. Many staff are paid less than $50k and Stanford does not provide ANY housing help for it's regular staff. I was once told to try Stanford West or Colonnade, which both have 1-2yr wait list and rent starts $2400/mo. $2400/mo+ rent at Colonnade is already after-subsidies.

>Larry, I agree, it would change the landscape and feel of the university and it's surrounding area for sure (becoming more like Berkeley) but it's necessary. Many local residents will hate and resist high-rises though. It's part of the reason why Bay Area made so little progress dealing with this crisis. Once someone is or become a homeowner in the area they start resisting having anyone else move in while complaining about traffic from people having to commute since those people can't live here.

Stanford put out so many statements saying that they value it's staff/student and local community but their actions show that they only about faculty and top management + board members. Lots of staff leaving each year to get out of the bay area for good. Unfortunately many young people are still willing to come work here even with low pay and high rent. Sigh.


8 people like this
Posted by Online Name
a resident of Embarcadero Oaks/Leland
on Jul 31, 2018 at 4:05 pm

Online Name is a registered user.

Stanford plans to add 9,600 students, faculty and employees, not counting their families. And it wants to "build or convert" 200 units of low-income housing both on and OFF campus and only 100 of those are slated for their low-income employees.

Someone explain to me how those numbers are going to effect Palo Alto in terms of competition for housing, traffic, etc.


8 people like this
Posted by jh
a resident of Evergreen Park
on Aug 2, 2018 at 12:43 pm

jh is a registered user.

Just over half of the non-residential square footage in the City is owned by Stanford, including the Stanford Research Park. However the University qualifies for a $13.6 billion exemption from property taxes in Santa Clara. This includes the Stanford Research Park.

Yet the primary source of Palo Alto's revenue for the impact on infrastructure needed to deal with the increasing density and congestion Stanford is proposing comes from our property taxes. More than 70% of which is paid by residents, with an ever declining share by non-residents. Rental housing on campus produces no property taxes for the city yet, depending on how many rental units Stanford builds this will impact our city budget in so many surprising ways you would not even begin to think of. Not just the obvious costs of resurfacing city streets more often or the schools. But also even down to the littlest things that would never occur to you such as the turf in the nearby parks needing to be replaced every two years because of increased demand! That last little nugget comes from Stanford's own analysis on the impacts.

Unless Stanford is prepared to pay their share of the external costs generated by their desired expansion, Palo Alto's revenue for infrastructure is likely to have a big bite taken out of it.


Like this comment
Posted by Stephen
a resident of Duveneck/St. Francis
on Aug 2, 2018 at 10:01 pm

It is growing a bit tiresome to see "alternative facts" continued to be cited in these forums. Sorry "jh", the Research Park is not tax exempt - just look up any Research Park property on the Santa Clara Valley Tax Assessors web site. For example, in 2015 SRP generated nearly $30M in property taxes - see Web Link. See also Web Link.


Like this comment
Posted by R. Davis
a resident of Crescent Park
on Aug 2, 2018 at 10:21 pm

QUOTE: ...the City of Palo Alto and the PAUSD can move forward with eminent domain against Stanford, acquire the land, and can settle that issue for good.

I like your way of thinking. Stanford's still got plenty of land.

QUOTE: Many local residents will hate and resist high-rises though. It's part of the reason why Bay Area made so little progress dealing with this crisis.

"'scuse me while I kiss the sky"...not.


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

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