Palo Alto's efforts to encourage more housing should primarily focus on maintaining diversity and addressing the needs of low-income residents, two members of the City Council are arguing in a new memo.
The memo, penned by Councilman Tom DuBois and Councilwoman Lydia Kou, seeks to recalibrate the council's work plan for producing new housing — an effort that has been the subject of much debate and only modest success. The city has adopted a goal of adding 300 housing units per year, though it is likely to fall well short of the goal for the second year in a row. The only significant housing project that the council has approved this year is a 59-unit apartment complex known as Wilton Court on El Camino Real.
In the memo, DuBois and Kou propose an "affordable housing plan to advance housing goals that address socio-economic diversity and affordability." They cite the city's history of "affordable and diverse housing programs," including its long-standing inclusionary-housing program that requires housing developers to designate 15% of their units as below-market rate.
"We recommend prioritizing actions consistent with previously adopted housing goals to address diversity in housing options," the memo states.
To date, the city's inclusionary-housing (also known as inclusionary zoning) program only applied to ownership units. This is largely because of a 2009 court decision, Palmer v. the City of Los Angeles, in which a state appeals court deemed it illegal for cities to apply inclusionary-housing laws to rental units.
In 2017, the state Assembly adopted what's known as the "Palmer fix," a law that allows cities to extend inclusionary-housing laws to rental units. Doing so should be Palo Alto's highest housing priority, DuBois and Kou argue in the new memo. They propose that the percentage of units that should be designated as below-market rate in rental properties be set between 15% and 25%.
Under the proposal, the units would be set aside for residents with incomes in the "extremely low" (between 0 and 30% of area median income), "very low" (31% to 50%) and "low" (51 to 80%) categories.
The memo also proposes updating the city's zoning ordinance to ensure that when density bonuses are applied to a mixed-use project, these bonuses get devoted to the project's housing component to the extent legally possible. When such a bonus is applied, about 20% to 25% of the bonus units should be dedicated to affordable housing.
While affordable housing is the main focus of the memo, some of its other suggestions are broader in scope. The memo proposes, for example, that the city increase its development impact fees for commercial projects — a policy change that the council approved in December 2016 and then significantly scaled back three months later when new council members were sworn in.
The city's current development impact fee, which the council approved in March 2017, is $35 per square foot, up from the pre-2017 level of $20.37. A nexus study in 2016 concluded that the city could feasibly charge $60 per square foot.
Since the council reversed its direction and adopted a $35 fee, the Santa Clara County Board of Supervisors hiked its own development-impact fees for Stanford University from $36.22 to $68.50 per square foot.
The memo recommends increasing Palo Alto's fee to a comparable level: $64 per square foot.
Other proposals in the memo pertain to preserving existing units. One calls for exploring a law that would require property owners who remove housing units to either replace them on another site or pay an in-lieu fee.
Another proposal calls for new "protections and regulations" for cottage-cluster developments and duplexes in low-density residential neighborhoods and in commercial districts to preserve "missing middle housing," which targets residents whose incomes are too high to qualify them for below-market-rate programs but too low to allow them to afford Palo Alto's famously high rents.
The broadest and potentially most complex and contentious proposal calls for exploring "citywide protections and regulations to prevent existing housing to be converted to commercial/hotel use." The memo acknowledges that such a law would need much more exploration before it could be implicated and, as such, sets it as the lowest priority on the list of proposals.
"Establishing regulations to prevent housing units from converting to commercial or hotel uses requires some study, including legal analysis, and would likely require some form of waiver process where required to comply with state or federal law," the memo states. "Advancing either of these items now may delay other policy initiatives currently underway or planned."
DuBois and Kou state in the memo that many of the recommendations have already been discussed by the council and that staff is already working on. This includes the "Palmer fix," which the memo marks as the highest priority. Under their proposal, this policy change would return to the council in the near future for adoption, while the rest of the proposals would be referred to the Planning and Transportation Commission for review.
The council is scheduled to discuss the memo on Monday, Sept. 23.