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.