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Palo Alto looks to accessory dwelling units to address affordability crisis

Planning commission considers package of incentives for construction

Palo Alto is exploring zone changes that would give incentives and fee waivers to homeowners who rent out their units at affordable rates. Embarcadero Media file photo by Veronica Weber.

Ever since Palo Alto began to gradually relax zoning rules about accessory dwelling units five years ago, it has seen dozens of little homes spring up in backyards across the city.

Last fall, planning staff reported that it has received about 200 applications for the small dwellings and has issued close to 150 permits for construction between 2015 and 2020, a sharp increase from the city's historic trend of averaging about four per year. In October, as the City Council approved the latest batch of zoning changes pertaining to accessory dwelling units (ADUs), members acknowledged that these little homes are now playing a major role in the city's ability to comply with regional mandates for residential development.

"We're counting on ADUs to meet our housing targets," council member Eric Filseth said during the Oct. 5 discussion.

But when it comes to meeting the city's most difficult housing challenge — the dearth of affordable homes — Palo Alto leaders fear that accessory dwelling units may be falling short. Even though their small size makes them inherently more affordable than most local homes and apartments, the city's real estate market still allows owners to charge rent that is well out of reach for residents with modest incomes, including employees in the service and hospitality industries. To that end, the council agreed last year that the city should explore ways to encourage homeowners to build "affordable accessory dwelling units" — ones that would be deed-restricted to charge rent at below-market-rate levels.

The idea of a deed-restricted accessory dwelling unit isn't exactly new. San Diego, for example, recently implemented a policy that empowers anyone who builds a deed-restricted accessory dwelling unit in the city's transit-priority area to build an additional dwelling unit on their property.

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Palo Alto is unlikely to go that far. At its June 30 meeting, members of the Planning and Transportation Commission summarily smacked down the San Diego approach, which was among the most ambitious items in a menu of incentives that planning staff had presented for deed-restricted ADUs. Commissioners generally agreed that because many residential properties are comparatively small and because new state laws already allow up to three dwellings on any residential property (the main home, an ADU and a junior accessory dwelling unit, an independent living space carved out of an existing dwelling), allowing additional units is a bridge too far.

Commissioner Doria Summa said she was concerned that allowing additional dwellings could exacerbate parking problems and result in tree removal. Her colleagues generally concurred, with Commissioner Ed Lauing noting that the city and the state have only just begun to allow the new dwellings and that it may take some time for any problems to materialize.

"We don't have a lot of experience yet," Lauing said. "Instantly, without much experience, going to yet another ADU … I just don't think that's prudent."

Other staff proposals similarly fizzled. The planning commission rejected a recommendation to reduce the setback requirements (which currently calls for 4 feet of separation between the accessory dwelling and rear and side property lines) for affordable units. And it struggled to reach a consensus on staff's suggestion to increase the maximum size allowed for accessory dwelling units from 900 square feet (or 1,000 square feet when there are two bedrooms), under the current rules, to 1,200 square feet. Ultimately, the commission voted 3-2, with Vice Chair Giselle Roohparvar and Commissioner Michael Alcheck absent, to reject the recommendation. Commissioners Ed Lauing, Doria Summa and Cari Templeton all opposed increasing the maximum size, with Templeton and Summa both suggesting that allowing homeowners to build large accessory dwellings is akin to allowing a second main residence on a single-family property.

Large accessory dwellings can also create tensions between neighbors, particularly in areas where lots and homes are comparatively small and where accessory dwelling units would be larger than many of the homes, Templeton said.

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"I'm concerned about how this will affect some of our lower-income neighborhoods," Templeton said. "It may be implemented unequally around the city and might really impact those neighborhoods negatively."

Chair Bart Hechtman and Commission Bryna Chang both spoke in favor of allowing the larger dwellings. Chang said doing so could help the city create affordable housing that could accommodate families and not just individuals. Hechtman was particularly enthusiastic about the change and noted that expanding maximum dwelling size could serve as a strong incentive for homeowners to offer accessory dwellings at affordable rates for a predetermined period of time. Once the affordability requirement expires, the homeowner would be able to charge higher rents for their comparatively large accessory dwelling unit.

"I like this idea because I'm willing to give homeowners that ability to do that math and if it works for them, great — we get an affordable unit for 10 years, or whatever time period the council decides," Hechtman said.

Among the most divisive issues that the commission grappled with was the question of how long the affordability requirement should remain in place. On this, the commissioners failed to reach any consensus. Some, including Chang and Summa, argued that making the duration too short would create problems for residents who depend on the lower rents (Summa suggested a deed-restriction period of 30 years) and others, most notably Hechtman, suggesting that making it too long would deter homeowners from participating.

Even if some accessory dwellings lose their affordability status in a given year, others will get built to take their place, Hechtman said.

"I don't believe anything more than 10 years will get anyone to bite," said Hechtman, who was in the latter camp. "I have no fear or concern about transition because if we can get 20 affordable ADUs for just one year, that's better than not having 20 affordable ADUs for that year. Every ADU we get for every year that's affordable is a win."

Ultimately, even the compromise duration of 15 years failed to get the needed three votes, with only Chang and Templeton voting to support it.

Commissioners also had different ideas about what level of affordability the new dwellings should target. The majority agreed that they should be affordable for those in the "moderate" income category, which is roughly between 80% and 120% of the area median income (in Santa Clara County, the area median income for a household of four is about $151,300). Lauing and Summa suggested considering incentives to make them eligible for those in lower income categories, including those with incomes that are 50% of the area's median.

The commission was more united on other aspects of the proposed program, including the removal of all impact fees and plan check fees for homeowners who commit to building an affordable accessory dwelling. Commissioners were also open to granting homeowners more flexibility when it comes to development standards if they are converting a nonconforming structure to include an accessory dwelling unit.

A one-bedroom accessory dwelling unit in Palo Alto seen here in 2018 was originally a garage. Photo by Veronica Weber.

Another idea that proved to be broadly popular was streamlining the permit process for homeowners who want to convert their garages into affordable ADUs. Currently, they have to go through a two-step process of getting their new house (or new garage) approved and then getting a permit for converting the garage to a dwelling unit, an action that is permitted under recent state and local laws. The commission agreed that the city should consolidate this into a single approval.

The issue of how to make accessory dwellings more affordable will now go to the council, which will review the commission's recommendations and tackle the unresolved issues of affordability levels and duration of the deed restrictions.

The latter point is likely to prove particularly contentious. Planning staff has been conferring with a group of architects in recent months on possible changes to the city's zoning code and group members reported that their clients have not supported a 15-year minimum for affordability limits, preferring a shorter duration of five to 10 years. Planning staff, for its part, has been reluctant to accept anything shorter than 15 years, particularly if the city approves significant new benefits such as permission to build an additional dwelling.

"Staff does not believe that a 5 to 10-year period is sufficient, as some of the proposed incentives (e.g., an additional unit) provide significant ongoing value to the property owner," a report from the Department of Planning and Community Environment states. "At a minimum, staff would seek to establish a graduated metric for the length and time for such units to remain affordable, with more deeply affordable units (50%-80% AMI) having a shorter sunset period."

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Palo Alto looks to accessory dwelling units to address affordability crisis

Planning commission considers package of incentives for construction

by / Palo Alto Weekly

Uploaded: Thu, Jul 8, 2021, 9:07 am

Ever since Palo Alto began to gradually relax zoning rules about accessory dwelling units five years ago, it has seen dozens of little homes spring up in backyards across the city.

Last fall, planning staff reported that it has received about 200 applications for the small dwellings and has issued close to 150 permits for construction between 2015 and 2020, a sharp increase from the city's historic trend of averaging about four per year. In October, as the City Council approved the latest batch of zoning changes pertaining to accessory dwelling units (ADUs), members acknowledged that these little homes are now playing a major role in the city's ability to comply with regional mandates for residential development.

"We're counting on ADUs to meet our housing targets," council member Eric Filseth said during the Oct. 5 discussion.

But when it comes to meeting the city's most difficult housing challenge — the dearth of affordable homes — Palo Alto leaders fear that accessory dwelling units may be falling short. Even though their small size makes them inherently more affordable than most local homes and apartments, the city's real estate market still allows owners to charge rent that is well out of reach for residents with modest incomes, including employees in the service and hospitality industries. To that end, the council agreed last year that the city should explore ways to encourage homeowners to build "affordable accessory dwelling units" — ones that would be deed-restricted to charge rent at below-market-rate levels.

The idea of a deed-restricted accessory dwelling unit isn't exactly new. San Diego, for example, recently implemented a policy that empowers anyone who builds a deed-restricted accessory dwelling unit in the city's transit-priority area to build an additional dwelling unit on their property.

Palo Alto is unlikely to go that far. At its June 30 meeting, members of the Planning and Transportation Commission summarily smacked down the San Diego approach, which was among the most ambitious items in a menu of incentives that planning staff had presented for deed-restricted ADUs. Commissioners generally agreed that because many residential properties are comparatively small and because new state laws already allow up to three dwellings on any residential property (the main home, an ADU and a junior accessory dwelling unit, an independent living space carved out of an existing dwelling), allowing additional units is a bridge too far.

Commissioner Doria Summa said she was concerned that allowing additional dwellings could exacerbate parking problems and result in tree removal. Her colleagues generally concurred, with Commissioner Ed Lauing noting that the city and the state have only just begun to allow the new dwellings and that it may take some time for any problems to materialize.

"We don't have a lot of experience yet," Lauing said. "Instantly, without much experience, going to yet another ADU … I just don't think that's prudent."

Other staff proposals similarly fizzled. The planning commission rejected a recommendation to reduce the setback requirements (which currently calls for 4 feet of separation between the accessory dwelling and rear and side property lines) for affordable units. And it struggled to reach a consensus on staff's suggestion to increase the maximum size allowed for accessory dwelling units from 900 square feet (or 1,000 square feet when there are two bedrooms), under the current rules, to 1,200 square feet. Ultimately, the commission voted 3-2, with Vice Chair Giselle Roohparvar and Commissioner Michael Alcheck absent, to reject the recommendation. Commissioners Ed Lauing, Doria Summa and Cari Templeton all opposed increasing the maximum size, with Templeton and Summa both suggesting that allowing homeowners to build large accessory dwellings is akin to allowing a second main residence on a single-family property.

Large accessory dwellings can also create tensions between neighbors, particularly in areas where lots and homes are comparatively small and where accessory dwelling units would be larger than many of the homes, Templeton said.

"I'm concerned about how this will affect some of our lower-income neighborhoods," Templeton said. "It may be implemented unequally around the city and might really impact those neighborhoods negatively."

Chair Bart Hechtman and Commission Bryna Chang both spoke in favor of allowing the larger dwellings. Chang said doing so could help the city create affordable housing that could accommodate families and not just individuals. Hechtman was particularly enthusiastic about the change and noted that expanding maximum dwelling size could serve as a strong incentive for homeowners to offer accessory dwellings at affordable rates for a predetermined period of time. Once the affordability requirement expires, the homeowner would be able to charge higher rents for their comparatively large accessory dwelling unit.

"I like this idea because I'm willing to give homeowners that ability to do that math and if it works for them, great — we get an affordable unit for 10 years, or whatever time period the council decides," Hechtman said.

Among the most divisive issues that the commission grappled with was the question of how long the affordability requirement should remain in place. On this, the commissioners failed to reach any consensus. Some, including Chang and Summa, argued that making the duration too short would create problems for residents who depend on the lower rents (Summa suggested a deed-restriction period of 30 years) and others, most notably Hechtman, suggesting that making it too long would deter homeowners from participating.

Even if some accessory dwellings lose their affordability status in a given year, others will get built to take their place, Hechtman said.

"I don't believe anything more than 10 years will get anyone to bite," said Hechtman, who was in the latter camp. "I have no fear or concern about transition because if we can get 20 affordable ADUs for just one year, that's better than not having 20 affordable ADUs for that year. Every ADU we get for every year that's affordable is a win."

Ultimately, even the compromise duration of 15 years failed to get the needed three votes, with only Chang and Templeton voting to support it.

Commissioners also had different ideas about what level of affordability the new dwellings should target. The majority agreed that they should be affordable for those in the "moderate" income category, which is roughly between 80% and 120% of the area median income (in Santa Clara County, the area median income for a household of four is about $151,300). Lauing and Summa suggested considering incentives to make them eligible for those in lower income categories, including those with incomes that are 50% of the area's median.

The commission was more united on other aspects of the proposed program, including the removal of all impact fees and plan check fees for homeowners who commit to building an affordable accessory dwelling. Commissioners were also open to granting homeowners more flexibility when it comes to development standards if they are converting a nonconforming structure to include an accessory dwelling unit.

Another idea that proved to be broadly popular was streamlining the permit process for homeowners who want to convert their garages into affordable ADUs. Currently, they have to go through a two-step process of getting their new house (or new garage) approved and then getting a permit for converting the garage to a dwelling unit, an action that is permitted under recent state and local laws. The commission agreed that the city should consolidate this into a single approval.

The issue of how to make accessory dwellings more affordable will now go to the council, which will review the commission's recommendations and tackle the unresolved issues of affordability levels and duration of the deed restrictions.

The latter point is likely to prove particularly contentious. Planning staff has been conferring with a group of architects in recent months on possible changes to the city's zoning code and group members reported that their clients have not supported a 15-year minimum for affordability limits, preferring a shorter duration of five to 10 years. Planning staff, for its part, has been reluctant to accept anything shorter than 15 years, particularly if the city approves significant new benefits such as permission to build an additional dwelling.

"Staff does not believe that a 5 to 10-year period is sufficient, as some of the proposed incentives (e.g., an additional unit) provide significant ongoing value to the property owner," a report from the Department of Planning and Community Environment states. "At a minimum, staff would seek to establish a graduated metric for the length and time for such units to remain affordable, with more deeply affordable units (50%-80% AMI) having a shorter sunset period."

Comments

Online Name
Registered user
Embarcadero Oaks/Leland
on Jul 8, 2021 at 11:38 am
Online Name, Embarcadero Oaks/Leland
Registered user
on Jul 8, 2021 at 11:38 am

Put them on Stanford property. Put them on DoorDash property since they won't pay workers reasonably. Put them on the properties of big tech companies like Google and FaceBook that keep employing more contractors without benefits. Put them on the office grounds of lobbying groups like the Chamber of Commerce and Silicon Valley Leadership Group etc.. that keep lobbying to keep foreign contractor wages at $85K to displace full-time workers AND who keep lobbying against businesses paying their fair share.

Put them on the properties of politicians like Berman and Becker who are conveniently "uninformed" about the housing bills before them. Becker says he "needs to wrap his mind around them" while Berman says he's busy, busy with all these complicated bills.

PATHETIC.


Andy
Registered user
Stanford
on Jul 8, 2021 at 11:43 am
Andy, Stanford
Registered user
on Jul 8, 2021 at 11:43 am

This illustrates why local gov is either the cause or solution to the housing crisis.

ADU's are the easiest way to build new housing supply on existing property.

They should be encouraged with maximum speed, size and as many units as possible.

High rents are a reflection of low housing supply so restricting rent on ADU's doesn't make sense if we are expanding the housing supply in many ways at the same time. Let the market decide if an ADU is worth more or less than an apartment.

Concerns about losing a tree to build an ADU is as foolish as people afraid of taller structures due to shadows.

Local gov should figure out how to aggressively encourage property owners to make their land available for ADU's.

For every bedroom with a private bath, there is an opportunity for housing so even 2BR/2BA ADU's can possibly help provide housing for 2 different people.


Andy
Registered user
Stanford
on Jul 8, 2021 at 11:50 am
Andy, Stanford
Registered user
on Jul 8, 2021 at 11:50 am

To the person who said "Put them on the office grounds of lobbying groups like the Chamber of Commerce..."

I actually agree with you...in addition to ADU's on residential properties, we should be putting ADU's or housing on EVERY type of property where it's possible, including parking lots, office complexes.

Some of the ADU's are multiple unit designs that can add a dozen units to a parking lot.

Zoning has traditionally been residential or commercial or office, but to solve the crisis, it should be mixed.

The key is to build housing supply in every scenario, from ADU's to new housing to new mixed use developments.


Online Name
Registered user
Embarcadero Oaks/Leland
on Jul 8, 2021 at 3:55 pm
Online Name, Embarcadero Oaks/Leland
Registered user
on Jul 8, 2021 at 3:55 pm

Andy, what percentage of the zillions of sq feet of new housing that Google et al are putting in is real below market rate? One you answer that, how what percentage of NEW MARKET rate housing is going in? And how many brand new workers will be competing for the MARKET rate housing and what how much more will the increase the prices?


Bystander
Registered user
Another Palo Alto neighborhood
on Jul 8, 2021 at 5:57 pm
Bystander, Another Palo Alto neighborhood
Registered user
on Jul 8, 2021 at 5:57 pm

Where will the water come from for all the additional housing units?

Will the schools be able to cope with more students?

What about our fragile and inefficient power supply? The number of outages has been increasing in recent years.

What about parking on our streets, particularly when all the extra garbage cans are out for the new ADUs.

We are losing public transportation options so these new residences will have at least one if not two cars.

Privacy issues, light planes, noise levels when windows are open, broadband, will all be impacts of increasing the number of residents on our residential streets.

City Council have to start putting the needs of those of us who live in town above those who want to live here. Vacant office space seems to be everywhere from seeing all the For Lease signs in front of office buildings. Remote work mean that employees can live anywhere now with only the occasional in person meeting at their office. Personal work space is being eliminated in many companies with work stations for those in the office that day becoming a trend. Hybrid work and remote work will become the norm.

Bad time to encourage more ADUs from my perspective.


Seer
Registered user
Midtown
on Jul 11, 2021 at 1:24 pm
Seer, Midtown
Registered user
on Jul 11, 2021 at 1:24 pm

I built an JADU before it was popular, of course, it's really 2 houses in one and the "J" part is a fiction created by a "door". I figured it would be useful for boomeranging children, possibly house swaps where we didn't have to move out of our primary house ... and perhaps a startup incubator if the people needed somewhere to get going for 6 months.

Renting it out is a "eh, maybe". Mostly renting makes me worried about what protections the renters have so that we'd possibly get caught in a months or more year long effort to evict tenants who didn't pay and/or were damaging the property. It happens. Ironically, I'd never ever want a below-market rent on my property. It's been my observation that if you want a super good renter who pays on time and doesn't damage anything, then charge market rate or above.

For people who work in or for the city, why not just build very dense, smaller affordable housing (that could have good public amenities such as workout, kitchen, machine shop etc). And then (as Stanford does for its housing) only people who work for the city or school can rent them. In fact, some of these can be put on school or park lots and they'd serve to deter vandalism with vested owners living right there.


Annette
Registered user
College Terrace
on Jul 11, 2021 at 6:35 pm
Annette, College Terrace
Registered user
on Jul 11, 2021 at 6:35 pm

Is there really a sizable group of people in this town of smarties that think ADU production = affordable housing in Palo Alto? I don't doubt that ADUs create income opportunities for those who build them, but given the cost of land, the cost of construction, and market forces, it is likely that the only ADUs that will fall into the "affordable category" are those rented to friends and relatives or maybe those owned by the rare individual who simply wants to contribute to the solution.


C
Registered user
Palo Verde
on Jul 16, 2021 at 5:03 pm
C, Palo Verde
Registered user
on Jul 16, 2021 at 5:03 pm

> Privacy issues, light planes, noise levels when windows are open, broadband, will all be impacts of increasing the number of residents on our residential streets.

Exactly that. I read a PA Online article that we've reached beyond maximum capacity of residential streets, and now we're going to increase them even more. Brilliant.

Have these Palo Alto officials heard of "Mountain View"? It's a nice place to buy groceries, and, more relevantly, they're building apartments and office buildings like crazy. Believe it or not, people can live there as well, and, if anyone remembers Economics 00001, the increased supply of housing, if it outpaces demand, will lower rents -- especially now that telecommuting has become more popular.

Anyone remember when the McMansions came in? No, they weren't proposed as affordable housing solutions, but they did result in bigger homes that looked like someone stuck a big box on the property. Thankfully, a bigger backyard home won't be as noticeable -- unless you're the neighbor across it, of course.

Who, exactly, will live in these ADU's? If they're not explicitly for lower-income housing, then they'll just be rented to single high-tech workers or become in-law units for the owners. This sort of higher-density housing will benefit the resident, but not necessarily lower income residents, much less yourself as a neighbor. And, if it's for lower-income housing, then landlords have less of an incentive to build them, anyway.

Palo Alto's already building more apartments in the former business areas near Fry's Electronics. Palo Alto seems to be doing a fine job driving out larger businesses with its taxes, so I guess we should do *something* with that land.


C
Registered user
Palo Verde
on Jul 16, 2021 at 11:52 pm
C, Palo Verde
Registered user
on Jul 16, 2021 at 11:52 pm

With the widespread moratorium on evictions because of the virus, the result have been landlords not being paid rent. Newsome is passing aid relief to landlords, but, overall, it's still a disincentive to rent to lower-income renters, who are more likely to lose their jobs. "Backyard housing" obviously refers to small-time landlords, yet these are the same people who have the most risk when renting their units, particularly to low-income renters.


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