News

Palo Alto boosts affordable-housing project with $10.5 million loan

City Council's approval of loan raises city's funding of 59-unit project to $20.5 million

With affordable housing in short supply, Palo Alto offered a $10.5-million lifeline on Jan. 13 to a 59-unit residential development known as Wilton Court.

The development at 3705 El Camino Real, which will consist entirely of below-market-rate units, won the City Council's unanimous approval a year ago, becoming the first affordable-housing project that the city approved since 2013 (the zone change that would have enabled the 2013 project was subsequently overturned in a citizen referendum). The council also voted last June to loan $10 million to Palo Alto Housing, the nonprofit developer behind Wilton Court.

Since then, however, the project has encountered numerous financial hurdles. According to a report from the Department of Planning and Development Services, the project received $2.8 million from Santa Clara County's Intellectual and Development Disabilities Housing Funds, $1.2 million shy of the $4 million that Palo Alto Housing had applied for. It also failed to receive a $10 million state grant that it had requested.

Given the funding shortfall for the project, which has an estimated price tag of $46.3 million, the council was asked to fill the gap. On Monday it did just that, voting unanimously to approve a $10.5-million loan for Wilton Court.

The development will target residents with incomes between 30% and 60% of area median income (for a family of two, this means income less than $70,260, according to the city). Monthly rents in the new development will range from $659 for a one-person studio to $1,442 for a one-bedroom apartment for two people.

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The project also includes 21 units for adults with developmental disabilities.

The council's vote makes Palo Alto by far the largest financial contributor to the development, with a total investment of $20.5 million. Palo Alto Housing also expects to get $16.6 million in low-income housing tax credits, along with $2.8 million from the county, and $1.5 million from the state's "enhanced tax credits" program (which the nonprofit expects to secure this spring), which is geared toward "shovel-ready" projects.

In an update to the council, Palo Alto Housing noted that it has been investigating various state programs to close the funding gap.

"Due to the housing shortage and the strong demand for more affordable housing, these funding sources are oversubscribed by two and three times," the nonprofit's update states. "So, in order to even be considered, each proposed affordable housing development project must meet a hundred percent of the criteria within the applicable notices of funding."

The nonprofit was banking on $10 million from a state Housing and Community Development Department program. But with the number of projects significantly outstripping available funding, Palo Alto Housing no longer considers the program a viable source, the letter states.

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The council approved the contribution on its consent calendar, as part of a list of items that get approved without discussion. It was one of several actions that the council took pertaining to the housing shortage in its first business meeting of the year, along with relaxing rules for construction of accessory-dwelling units and creating a "safe parking" program for vehicle dwellers at local churches.

Sheryl Klein, chairwoman of the Palo Alto Housing board of directors, lauded the council's action.

"It's extraordinary what they've done," Klein told the Weekly. "It's really incredible."

If the project receives the rest of its expected state funding, Palo Alto Housing plans to break ground on Wilton Court in September, Klein said.

Under the terms of the loan, the funding will be repaid after the development is built through payments made from any residual receipts beyond the project's operating expenses, according to the city.

Palo Alto's $20.5-million contribution will come primarily from "impact fees" that the city charges developers. This includes $11.7 million from commercial fees, $0.6 million in residential impact fees and $7.7 million from "residential in-lieu" fees, which are provided by housing developers who wish to avoid the city's inclusionary-zoning requirements.

The council will also consider Tuesday other programs for increasing the city's housing supply when it discusses staff's Housing Work Plan for the coming year.

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Palo Alto boosts affordable-housing project with $10.5 million loan

City Council's approval of loan raises city's funding of 59-unit project to $20.5 million

by / Palo Alto Weekly

Uploaded: Fri, Jan 17, 2020, 4:04 pm
Updated: Sun, Jan 19, 2020, 6:14 pm

With affordable housing in short supply, Palo Alto offered a $10.5-million lifeline on Jan. 13 to a 59-unit residential development known as Wilton Court.

The development at 3705 El Camino Real, which will consist entirely of below-market-rate units, won the City Council's unanimous approval a year ago, becoming the first affordable-housing project that the city approved since 2013 (the zone change that would have enabled the 2013 project was subsequently overturned in a citizen referendum). The council also voted last June to loan $10 million to Palo Alto Housing, the nonprofit developer behind Wilton Court.

Since then, however, the project has encountered numerous financial hurdles. According to a report from the Department of Planning and Development Services, the project received $2.8 million from Santa Clara County's Intellectual and Development Disabilities Housing Funds, $1.2 million shy of the $4 million that Palo Alto Housing had applied for. It also failed to receive a $10 million state grant that it had requested.

Given the funding shortfall for the project, which has an estimated price tag of $46.3 million, the council was asked to fill the gap. On Monday it did just that, voting unanimously to approve a $10.5-million loan for Wilton Court.

The development will target residents with incomes between 30% and 60% of area median income (for a family of two, this means income less than $70,260, according to the city). Monthly rents in the new development will range from $659 for a one-person studio to $1,442 for a one-bedroom apartment for two people.

The project also includes 21 units for adults with developmental disabilities.

The council's vote makes Palo Alto by far the largest financial contributor to the development, with a total investment of $20.5 million. Palo Alto Housing also expects to get $16.6 million in low-income housing tax credits, along with $2.8 million from the county, and $1.5 million from the state's "enhanced tax credits" program (which the nonprofit expects to secure this spring), which is geared toward "shovel-ready" projects.

In an update to the council, Palo Alto Housing noted that it has been investigating various state programs to close the funding gap.

"Due to the housing shortage and the strong demand for more affordable housing, these funding sources are oversubscribed by two and three times," the nonprofit's update states. "So, in order to even be considered, each proposed affordable housing development project must meet a hundred percent of the criteria within the applicable notices of funding."

The nonprofit was banking on $10 million from a state Housing and Community Development Department program. But with the number of projects significantly outstripping available funding, Palo Alto Housing no longer considers the program a viable source, the letter states.

The council approved the contribution on its consent calendar, as part of a list of items that get approved without discussion. It was one of several actions that the council took pertaining to the housing shortage in its first business meeting of the year, along with relaxing rules for construction of accessory-dwelling units and creating a "safe parking" program for vehicle dwellers at local churches.

Sheryl Klein, chairwoman of the Palo Alto Housing board of directors, lauded the council's action.

"It's extraordinary what they've done," Klein told the Weekly. "It's really incredible."

If the project receives the rest of its expected state funding, Palo Alto Housing plans to break ground on Wilton Court in September, Klein said.

Under the terms of the loan, the funding will be repaid after the development is built through payments made from any residual receipts beyond the project's operating expenses, according to the city.

Palo Alto's $20.5-million contribution will come primarily from "impact fees" that the city charges developers. This includes $11.7 million from commercial fees, $0.6 million in residential impact fees and $7.7 million from "residential in-lieu" fees, which are provided by housing developers who wish to avoid the city's inclusionary-zoning requirements.

The council will also consider Tuesday other programs for increasing the city's housing supply when it discusses staff's Housing Work Plan for the coming year.

Comments

Greenacres
Green Acres
on Jan 17, 2020 at 5:14 pm
Greenacres, Green Acres
on Jan 17, 2020 at 5:14 pm
20 people like this

This is exactly what we need -- housing for low-income residents (rather than mostly luxury housing with a few low-income units cynically sprinkled in) and residents with disabilities who face difficulties getting housing at all in this town, and developed with buy in from the nearby neighbors


Money for Low Income Housing
Another Palo Alto neighborhood
on Jan 18, 2020 at 2:01 am
Money for Low Income Housing, Another Palo Alto neighborhood
on Jan 18, 2020 at 2:01 am
33 people like this

There would be more money in the fund for affordable housing if Adrian Fine, Greg Tanaka, Liz Kniss, Cory Wolbach and Greg Scharff had not lowered the proposed increase in the affordable housing impact fee from office development from $60/square foot to $35/square foot. Web Link

Good thing Wolbach and Scharff are no longer on the Council. Kniss is termed out this year. Remember the efforts of Fine and Tanaka to upzone for mostly luxury housing and not focus on lower income housing if they decide to run for re-election in 2020.


State Funding
Another Palo Alto neighborhood
on Jan 18, 2020 at 7:12 am
State Funding, Another Palo Alto neighborhood
on Jan 18, 2020 at 7:12 am
26 people like this

For all the posturing about the need for more affordable housing by Fine, what he primarily supports is market rate housing, knowing full well what this article perfectly illustrates - why more affordable isn’t built - lack of funding not lack of will.

Non - profit housing developers don’t stand a chance when competing for land against richer for profit developers, Land for Wilton Court was bought long ago by non-profit PA Housing when it was cheaper. And now it struggles to fund construction.

Money is the problem when land is so valuable and funding so sparse. The State must pass funding bills for non-profit housing developers that not restrict it to vets or homeless, but build for BMR low and very low income people.

Building market rate housing in Palo Alto with 15% BMR set aside is better than nothing but barely. And the notion of trickle down benefits to low income people coming from building lux or market rate housing is nothing but a cruel joke.

We need real affordable BMR housing with a lot of funding by the state, and sensible support by city and county. And yes - up our city commercial impact fees along the lines of the Stanford GUP. Studies show such fees do not impede development. For that Fine and Tanaka will have to change their positions and shouldn’t be re-elected if they don’t. And their majority mates, Cormack and Kniss should do likewise.


Resident 1-Adobe Meadows
Adobe-Meadow
on Jan 18, 2020 at 9:22 am
Resident 1-Adobe Meadows, Adobe-Meadow
on Jan 18, 2020 at 9:22 am
6 people like this

Articles in paper about Weiner's SB 50 bill moving along in the state legislature. We can assume that our local legislatures are buddies with Weiner, as are some of our PACC members. So the promise of state funding is looming. Now is the time to capitalize on the political machinations for the Fry's site. At some point in the debate political machinations will overrule the plan go for the gold. At some point the arguments from local builder's will be overcome with a movement that directs their short and long term planning. Can we please get ahead of the curve here and do something smart. And Sobrato is in the mix of CA politicos so they can do something right. And if they don't it will not escape notice and notice to Newsome and Weiner that local industrialist ae not on-board with state requirements.


Barbara
Downtown North
on Jan 20, 2020 at 11:52 am
Barbara, Downtown North
on Jan 20, 2020 at 11:52 am
Like this comment

WHY? The City of Palo Alto is giving 10.5 million for this low cost housing project and creating more traffic? What happened to doing something with the Cubberley site? How much worse can it get before something is done to improve or raze and rebuild?


bea richmond
Menlo Park
on Mar 19, 2020 at 9:15 am
bea richmond, Menlo Park
on Mar 19, 2020 at 9:15 am
Like this comment

menlo park, palo alto, mountain view. looking for low income housing anywhere


Harry Merkin
Ventura
on Mar 19, 2020 at 8:45 pm
Harry Merkin, Ventura
on Mar 19, 2020 at 8:45 pm
1 person likes this

That is a huge building. OK, maybe, but why does the rendering attempt to distract from its bulk by showing it from across a wide street, with an uncharacteristically empty street expanse occupying half the image area, and with a pedestrian wearing a distracting hot pink top drawn in the near foreground? Can't our local developers ever be straight with us?


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