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What would it take to get affordable housing built in Palo Alto?
It’s a question that members of the City Council have been wrestling with for at least five years, as they repeatedly name housing a priority and then inevitably fail to meet their annual goals for new units. On Monday night, they finally began to get some answers.
A new report by the consulting firm Strategic Economics examined the city’s existing zoning regulations, evaluated the costs of construction, estimated the rate of return on new developments in various zones and concluded that a reasonable place to start is loosening the city’s parking rules and retail requirements.
The city commissioned its report as part of an effort to revise its “inclusionary housing” ordinance, which requires homebuilders to dedicate a percentage of their units to below-market-rate housing. Council members have suggested in the past that the city raise the requirement from 15% to 20%. They have also considered extending the requirement to rental housing (today, it only applies to ownership units).
The new report urges caution on both fronts. It indicates that while the city could see some housing production in the downtown area, particularly for ownership units like townhouses and condominiums, it would likely have to make numerous zoning revisions to make below-market-rate housing projects pencil out. The prospects are even less promising for rental units, which are unlikely to achieve a high enough rate of return for developers to justify construction under the current regulations, the report suggests.
The analysis also states that what works in the downtown core may not work in other commercial areas, such as the “service commercial” zoned sites along El Camino Real. Even with no inclusionary housing, rental developments in these low-density zones would generate an estimated rate of return of about 4.38%, according to the analysis, below the 4.75% benchmark for feasibility.
For Palo Alto, the new report’s findings come at a time when the city is bracing for aggressive new regional housing mandates and coming off a yearslong drought in housing construction. The city is about 1,000 housing units short of where it should be if it were on pace to meet its Comprehensive Plan goal, according to Planning Director Jonathan Lait.
Since 2015, Palo Alto has permitted 572 units, Lait told the council. To remain on pace, it would have needed to generate about 1,593 units by this time.
Given the housing shortage, the council majority agreed Monday night that the report’s recommendations offer a good starting point for zone changes. Armed with the new analysis, the council voted not to increase the inclusionary housing requirement for ownership units at this time but to consider adjustments to parking and retail standards that would make a future increase viable. The council also directed staff to consider other zoning amendments — including changes to density limits — that could support a future inclusionary requirement of 20%.
The council voted 6-1, with Councilwoman Lydia Kou dissenting, to pursue the various zone changes. In doing so, council members acknowledged that they are unlikely to see new housing without making compromises on development standards.
“Something has to give,” said Councilwoman Liz Kniss, “Something. Maybe your height gives, maybe your parking gives, something has got to give if you really believe that you want more housing and that you want inclusionary housing.”
Currently, an applicant looking to redevelop a building with a retail component is required to replace all of the retail square footage. The proposed change would require the developer to only provide 1,500 square feet of retail. Parking standards, which currently vary by zone, would be reduced to one space per unit.
The three members on the council’s more slow-growth wing were more reluctant to move ahead with zone changes. Councilman Eric Filseth suggested a more holistic approach that considers a wider range of factors that the city can adjust to make the economics work, including density regulations. Using the model supplied by Strategic Economics, Filseth created his own spreadsheet that allows users to modify different factors, including rent, height and density of the development, and projects the rate of return.
Filseth said he’d like to consider other factors besides economics — most notably, parking demand — when revising the downtown’s parking standards.
“I think we ought to be looking at demand as opposed to how we can improve development economics,” Filseth said. “We can improve developer economics by not requiring plumbing and electricity too.”
Vice Mayor Tom DuBois suggested that to create new affordable units, the city should require builders of rental properties to construct inclusionary units, rather than buy their way out through in-lieu fees.
“We need to get away from in-lieu fees, impact fees,” DuBois said. “We’re seeing mostly rental projects for affordable housing. If we have no inclusionary requirements, I don’t think we’ll get inclusionary units in those rentals.”
His proposal to develop an inclusionary-housing requirement for rental housing — what’s known as the “Palmer fix” — fell by a 3-4 vote, with only Kou and Filseth joining him. Mayor Adrian Fine, who made the motion to move ahead with the loosening of zoning regulations, pointed to the study as evidence that the type of reform DuBois is recommending simply would not pan out economically.
“It’s unfortunate, I regret that, I do not like that. But requiring 15% of units and making them economically infeasible means we’ll get 15% of zero,” Fine said.
‘Maybe your height gives, maybe your parking gives, something has got to give if you really believe that you want more housing and that you want inclusionary housing.’
Liz Kniss, city councilwoman
In addition to directing staff to tweak the zoning regulations, the council also authorized the use of a blunter and less predictable tool: the newly created “planned home” zone. Modeled after the discarded “planned community” zone, the new designation allows developers to directly negotiate with the city over the zoning concessions they’d like to receive in exchange for public benefits. Unlike with the planned-community zone, which the city suspended in late 2013 and which often involved amenities such as grocery stores, fountains and public art as benefits, the planned-home zone would specify that the chief benefit is housing.
By a 4-3 vote, with DuBois, Filseth and Kou dissenting, the council supported an approach in which applicants using the “planned home” zone are required to provide the equivalent 20% of the units at below market rate. The exact number of units would depend on the affordability level so that a developer who opts to build for those in the “moderate” income would have to supply more such units than one building in the “low” or “very-low” income categories.
Fine called the new tool the city’s “challenge zoning,” with developers invited to come forward with their own proposals for zoning concessions. Kniss, who strongly supported the new zoning tool, cited the city’s recent failure to generate housing as a reason to explore new approaches.
“We have selected housing as an absolute top priority as a council and it doesn’t happen, year after year,” Kniss said. “That is the definition of insanity — you keep doing it over and over again. And we keep doing it.
But while she, Fine and council members Alison Cormack and Greg Tanaka all supported this approach, the three dissenting council members suggested that the new zone is too open-ended and, as such, likely to engender the same type of distrust that doomed the planned-community zone.
Kou suggested that if the city uses this zone and designates housing as a “public benefit,” the projects should be 100% affordable, rather than the 20% favored by the council majority. Filseth pointed to prior criticism from residents that when it comes to planned-community developments, the city is routinely out-negotiated by applicants.
“We’re going to end up inherently dipping a toe into those waters again,” Filseth said.
I get it that developers need to make money on a project. But nowhere have I ever seen any breakdown of just how much money they make. I’ve had the sense for a long time, as Palo Alto development exploded, that what the city gives them in benefits is greatly overshadowed by the amount they make from the finished product and that the consequences of the concessions are not in Palo Alto residents favor. In fact, it’s not clear to me why they need any concessions from the city at all.
If they build projects, whether offices or housing, without, for instance, ample parking, or reasonable affordability, it is the city and Palo Alto residents who bear the brunt. Where will all the cars go? And skews the projects into the prohibitive for all but the highest paid buyers/renters.
Soooo . . . I’d like to see some actual numbers. And one last comment . . . seems to me that them what has, takes as much as they can get and devil take the hindmost.
PAG,
Why not look at Mountain View, Menlo Park, East Palo Alto, and Redwood City?
They are all building much more housing than Palo Alto. They provide most of the answer to your question. Looking just within the borders of a city with a seriously failed policy makes no sense.
Not seen in this discussion are the additional costs for schools, utilities, city services, etc. that these proposed housing units will incur. Where will the money come from?
I watched (suffered through) most of the discussion online last night. I didn’t see much progress being made, however. Developers/builders will still rule and call the shots. CC members asked a lot of good questions and they got, for the most part, good answers. Liz was puzzled by what has happened, or hasn’t happened, in the past to alleviate the shortage of low cost housing in PA. She’s served several terms on council, and as mayor, so if she’s still puzzled by it then it’s time for her to step aside, which she’ll have to do, and let a more qualified replacement step in.
There should be some embarrassment from current CC members who approved the Comprehensive Plan that set the goal of adding 300 housing units a year. And as the deficit is accumulative, they will/should feel more embarrassment as the years go by. That was just a check mark in the long list of agenda items and goals while Gregg Scharff was mayor. It would be good to get a yearly evaluation and report on how well we’re doing in meeting those goals.
The offsite building of low income/low rental priced units showed some promise. But that gets back to the question of location and if there are any developers/builders that will be willing to do it.
My thanks to all CC members who are struggling for the best solution to the problem, and especially to those with critical minds and can do math. There were a lot of terms thrown out last night that only developers/builders know about and use in running their businesses and evaluating projects.
We already have problems with parking, so that seems an option (reduced parking requirements) that at a practical level won’t work. There is one that seems unduly sacred and one that over time is going to have to be accepted – building height. Unlike many places in the Bay area, we sit on granite so there’s no physical reason not to go higher. It’s mostly an appeal to an outdated notion of what’s a “nice town”. With ever more humans, we have to go up with buildings. Without screwing-up a lot of other things, taller buildings are the route to go. An otherwise great proposal was offered to build tall buildings near the Palo Alto train station – it’s an example of what we must do to get the housing we need.
We can fiddle with other possibilities, but they’ll have a second order effect; tall building are first order. With second order effects we’ll forever be trying to patch them to squeeze just a little bit more housing.
“Liz was puzzled by what has happened, or hasn’t happened, in the past to alleviate the shortage of low cost housing in PA. She’s served several terms on council, and as mayor, so if she’s still puzzled by it then it’s time for her to step aside, which she’ll have to do, and let a more qualified replacement step in.”
She was also puzzled that we have a traffic problem even though it’s been the #1 concern for years. When the outrage reached such a crescendo that it couldn’t be ignored, the CC held a meeting that took only limited questions but we were treated to a PowerPoint presentation that would have shamed a 4th grader.
Of course no action items, no solutions. Residents PAID for a traffic survey because the city’s couldn’t be trusted. When I asked her at the CC meeting where that survey was, she snapped, “That’s not OUR survey.” To this day, I regret not having snapped back “Why not? It should have been.”
But she’s still here, voting against residents’ interests and grooming her successors to do the same while the probe into her campaign irregularities drags on and on and on…..
I’m glad to see such concern over providing affordable housing and a willingness to consider flexibility in parking, density and height requirements. In 2013, a plan for 60 affordable housing units for low and very low income seniors was turned down by referendum after unanimous approval by the city council. Parking, density and height concerns contributed to its defeat.
That site is now Orchard Park, a very nice development of sixteen, five-million dollar homes. Work on the Maybell Avenue side is complete and the first Sale Pending sign just appeared. You might want to take a look if you were interested in the Maybell Project when it was up for debate.
As you look you might ask yourself, as I do, how many Palo Alto senior citizens will have lost out on being able to continue living in their community, due to the cost of housing, over the project’s 55-year lifetime. And how should we assess our ability to bring forth affordable housing within existing zoning regulations, as demanded by those who overturned the project while proclaiming their support for affordable housing?
I wish the council success in coming up with measures that bring Palo Alto closer to meeting its housing objectives.
It feels as though the CC is pushing on through with their usual double speak: unattainable solutions.
We are in a three way hair ball. Housing, health and climate crisis. Whether its 20% inclusionary or 100% affordable project, renters (45% of PA residents) are in a lose, lose situation.
TAX breaks for the top 2% wage earners leave the 98% pushed to the bottom. Trading in residential parking for a higher number of allocated units, retail square footage in exchange for tiny live / work spaces is ludicrous . Store are shuttering, families are leaving for Bend and Boise.
Our community is crumbling at all corners. Light bulb! City of PA might create a housing department, like a recreation and park department and recruit / assign a housing commission for oversight who can take REAL action.
Our social and historical fabric keeps tearing and patches used, are outdated and flimsy trying to cover all CC flaws . Kou and Tanaka flip flop on housing, homeless and development more than an Olympic gymnast seeking gold. Vote them out.
Real progressives are necessary for real solutions, to real problems. It’s is long overdue for the majority residents who have invested heavily in our town’s make up. And I am not speaking of monetarily.
BLM? Inclusiveness? Equity? Hmmm. Not so. Not here. Yes infrastructure (waste water plant) is decrepitly outdated, school blds old . Yet $$$ are spent on: Rinconada fire station, kids museum, library. And once booming biz districts get parking structures.
Follow the tax dollars and the commercial development buy in’s and you’ll pass “go” with $200 million extra dollars to hire consultants to tell us the same thing. Planning for the future whether its in virtual Silicon Valley or where we actually live, Santa Clara County has failed dramatically . Yes. Follow the money !!! All this empty talk and data spreadsheets will pencil out for me come election day . VOTE for real change, not re-election talking points.
Meanwhile buildings with huge lots all over PA sit half or all empty. Outright community neglect, poor decision making and inaction is Palo Alto’s ghost of Christmas past, present and future!
Dick D.,
If you watched last night, you heard DuBois say he is adamantly opposed to any exceptions to the height limit.
Which city council candidates have the courage to take on this bete noire this year? Palo Alto probably has 10-12 old buildings that exceed the current height limit and they do not seriously degrade the city. We don’t want canyons lined with 30-story buildings, but 10 10-story buildings strategically placed would go a long way toward meeting the housing requirements.
I don’t find this funny or ironic, Council Member, Filseth. “We can improve developer economics by not requiring plumbing and electricity too.” Public art, having decent place to go to the bathroom, wash dishes, do laundry, park a small utility vehicle and enough space for kids to run outside is a critical component of a well planned neighborhood, not Scrooge economics. Human lives, rich, middle income or poor are intrinsically coupled with community development. It is the stake that moves the social investment marker
The real issue here is that this entire bay area is massively over populated. Greedy developers and their complicit city council members have allowed the massive proliferation of office development that has attracted millions of people to the area. Housing development doesn’t return the same profit as office space, so it is ignored. And public lands, parks, open space, streets and schools return no profit at all, so they are sold off if the city staff and developers can figure out how to convert city lands to their own uses.
The reality is that we live in an era when there is no longer cheap open space and if cities do not limit development and plan for a decent quality of life for their residents than we will get more of what we have now, which is the rich greedy developers building what makes them money and ignoring everything else that makes a city worth living in.
By only only discussing building housing our city council is failing residents. We have no room for more housing since we don’t even have enough open space for people to freely visit during this current pandemic. (Closed parks, no place to walk or bike). We certainly didn’t have enough street capacity before people started to stay at home and it will be worse if we had thousands of homes, more people and cars. And the environment in this area is awful – dirty air, water, pollution and loss of habitat all around.
It is beyond time to not allow any more development. If the city wants to repurpose some office buildings into housing – that is worth discussing. But they absolutely should not do any deals with developers to build housing or office space. The city always get suckered and outsmarted by the developers who must be laughing all the way to the bank.
Lastly remember who is on the city council voting for these developers – Tanaka and Cormack are not friends of Palo Alto residents. They are selling off our city. We need to reelect Lydia Kou who truly represents residents of the city and cares for us. She has a great moral compass and always supports residents and our quality of life. Lauing is so-so, as is Burt but there are clear supporters of growth in the running like Templeton ( a stanch YIMBY and pro-growth advocate). Please vote for city council candidates who will slow all this crazy growth down. It is destroying the city.
> “The real issue here is that this entire bay area is massively over populated.”
> “It is beyond time to not allow any more development.”
^ Concurring…given the mass proliferation of mundane-looking office buildings & residential high-rise dwellings (along with the resultant increases in traffic gridlock), a citywide & long-term moratorium on any new development should be initiated by the planning commission & PACC.
Quality of life in Palo Alto has noticeably gone down over the past three decades and it will not be remedied nor improved with further development projects.
It’s time for prospective Palo Alto residents & businesses to seek out alternative sites for their wishful thinking & commercial endeavors.
And perhaps time for weary folks like me to ‘get the hell out of Dodge’ before things get any worse.
Palo Alto (like many other once quiet municipalities) has become some sort of a pseudo Mecca for various carpetbaggers & ubiquitous upwardly mobile mentalities.
Santa Clara County has successfully joined the ranks of Los Angeles, Orange, and San Diego Counties when it comes to the over-saturation of people, traffic, strip malls, crappy-looking apartment complexes, and lego-land office building designs.
We’re driving people out of business and out of work, and driving people crazy with covid lockdowns and rules not backed by data; yet we want to encourage more people to pile into Palo Alto?
Crowding encourages the spread of disease as we’ve seen throughout history. c19 outbreaks are worst in cities, as with other diseases. *This* is what we need to stop, not kids playing. But, the city seems to exist to support developers so we conveniently set history aside to allow more development.
How is Atherton handling the push for increased housing?
The above one sentence:
But, the city seems to exist to support developers so we conveniently set history aside to allow more development.
very well summarizes all there is to observe.
Except to add, reelect Lydia Kou, who as a professional Realtor is the only one daring to speak Truth to the Real Estate Powers. She reminds me of Nixon going to China, and Adenauer (1955) going to Moscow, and Kohl promising to reduce the Army by a factor of 3 for getting re-unification, all actions only conservatives could dare to do without being squashed in the next election, even so the more liberal forces wanted to do that as well.
We better start building seawater desalination plants!
> “How is Atherton handling the push for increased housing?
^ Most likely with resistance. Being an exclusive & pricey neighborhood, an increase of ‘affordable’ housing would diminish it’s image…and the same would apply to places like Hillsborough, Malibu,
Pacific Palisades and the like. You really can’t blame them.
> “…Nixon going to China,”
^ Not a valid comparison. Nixon established diplomatic relations with the PRC to serve as a buffer between the United States & the USSR.
Given what has transpired to date (i.e. trade & manufacturing imbalances, political & economic conflicts, open immigration, and various pandemics) ….perhaps a BIG mistake.
How is Atherton handling the push for affordable housing?
They don’t care because since they have few or no jobs within their borders and thus don’t have to add housing since the housing targets are based on the number of jobs within their borders.
“Real progressives are necessary for real solutions, to real problems.” Really!, While I see many of the ideas from the left as having merit it is more than clear that Progressives are their own, and others, worst enemy. Progressives could not vote for Al Gore because he was not sufficiently pure on climate change in 2000-so they went for Ralph Nader, insuring GW Bush became president. Not much good for climate change, plus his administration killed many of the progressive actions gained by then, not to mention 911 and the ensuing wars and hundreds of thousands lost lives.
Again in 2016 many of these Progressives just could not in clear conscience vote for Hillary Clinton and so by a few votes we got Donald Trump. So how have progressive gains done with that. Now in a couple of months we will have a super majority conservative Supreme Court for the next few decades, health care and women’s rights will suffer and the progressive solutions will be in the desert for decades to come.
So much for Real progressives are necessary for real solutions, to real problems. I’ll settle for some middle of the road practical solutions, they wear better.
Good point Mr. Dabrowski….
> “Real progressives are necessary for real solutions, to real problems.”
^ The current brand of so-called ‘real progressives’ just sit around & gripe offering unrealistic alternatives to ‘real problems and issues’ and as a result, Bernie Sanders, AOC (and other similar political mindsets) will NEVER rise above or beyond their current positions in federal government.
They are too alienating, too socialist, and too do nothing…except for bellowing their rants targeting idealistic mindsets that share the same unrealistic ideals (aka dilusions).
My head is aching. Too many solutions offered by too many self proclaimed (but pseudo) experts, and I’m sure we’ll hear from our local expert economist on the subject. ‘Boy, oh boy’…or better yet the new term “C’mon man”…those ABAG folks and their subservient groups seem to be having fun in their think tanks, dreaming up housing numbers that might be good for someone, but certainly not what’s good for our communities and residents in our communities. What puzzles me most is that they must know what a paltry track record PA has shown of adding housing, certainly low cost housing, but that doesn’t seem stop them from adding on more. Over 10,000 units? ‘C’mon Man’! I’m not a user but I might be willing to try the stuff they’re smoking.
The 300 new units per year was an unachievable goal, and those who voted to approve the Comprehensive Plan knew that. Approval of the Plan was just a check mark in the list of agenda items on Gregg Scharff’s list. Wonderful, we got that done, now we can push that aside, forget about it, and carry on with other business…like supporting big businesses, in lieu of family owned small businesses. I’m waiting to hear how they weigh in on ABAG’s new housing goals set for PA. I hope that question comes up during the debates.
@Gale Johnson, PLEASE submit that as a question for the debates. How our city attorney can reject a challenge to ABAG on the grounds they might sue us is so ludicrous. How about OUR suing ABAG for wasting our time and resources trying to meet their ridiculous goals.
I don’t know the answer, but does a “home” equate to some number of people living together or alone . . . are there other factors of what is assumed to be a “home”.
I don’t know the answer, but does a “home” equate to some number of people living together or alone . . . are there other factors of what is assumed to be a “home”?
Why aren’t the 800 block of Emerson and the one at Homer and Almo 10 stories and would people really find that “unacceptable”?
While I believe a home is a residence able to be occupied by one or more people. It needs to have utilities, a kitchen, a bathroom, and possibly a closet. Probably a door and another means of egress.
I’d like to know this answer.
I have a great-aunt who ran a boarding house in a university town (essentially a dorm). Based on how that worked, could someone with a 5 bedroom house rent to 4 borders and say they are providing 5 residences (themselves & 4 others)?
If yes, a census of how many people are renting out rooms, in law units, cottages, etc might help our ABAG tally quite a bit.
If the definition is fuzzy, I’d once again suggest my “Mailboxes as Apartments” and open a few more UPS Stores with 200 mailboxes. 200 new legal addresses (“Unit 1,” “Unit 2,” etc.)…easy to do that! And it could provide mail service for RV dwellers around the area.
And…are we counting RVs in our ABAG numbers? For some it’s a great housing option, for others it’s a deteriorating albatross tied around the neck…a half step to homelessness. It’s a clever housing solution for some, a terribly sad situation for others. Sorting it out requires great care.