Palo Alto's efforts to build affordable housing are hobbled by disjointed plans, inadequate funding strategies and insufficient efforts by city leaders to obtain community support, according to a report that the Santa Clara County Civil Grand Jury released on Thursday.

Mountain View, meanwhile, has been far more successful in adding affordable housing, thanks in large part to the city's ability to work with property owners on "area plans" with mixed-use developments, the report notes.

Titled "Affordable Housing: A Tale of Two Cities," the new report targets the two north county cities of Palo Alto and Mountain View and, after reviewing their respective planning processes, funding sources, political climates and actual accomplishment, concludes that the latter city is doing far better than the former when it comes to meeting its regional mandates for below-market-rate housing. As of 2019, the report notes, Mountain View was on a path to meet 56% of its affordable housing targets for the period between 2015 and 2023, a number established through the Regional Housing Needs Allocation (RHNA) process. Palo Alto, meanwhile, was on pace to meet just over 10% of its targets for low-income housing.

Things have only slightly improved since then. By the end of 2020, Palo Alto had approved permits for 101 residences in the "very low" income category and 65 in the "low" category, which in both cases constitute about 15% of the city's RHNA targets between 2015 and 2023. Mountain View did better, approving 218 and 212 dwellings in the two respective categories for an accomplishment rate of 27% and 43%, respectively.

The grand jury report includes recommendations for both cities to improve their housing policies, though it saves the bulk of them for Palo Alto.

Failure to build affordable housing comes at a high cost, the report argued, with insufficient housing impacting the social fabric of the community.

"Homelessness was increasing in the County before the pandemic and the current economic uncertainty has made it worse," the report states. "Many low-income wage earners are one paycheck away from eviction."

Meanwhile, moving to lower-cost areas carries its own consequences, the report states, chief among them long commutes.

"About 120,000 Silicon Valley workers live long distances from their jobs," the report states. "Silicon Valley 'super commuters' drive three hours one way to work, resulting in traffic gridlock, air pollution, and degraded health and quality of life."

The report focuses chiefly on housing in the three below-market-rate categories: "low income," which is up to 80% of the county's area median income; "very low income," which is up to 50% of area median income; and "extremely low income" which is up to 30% of area median income. The area median income in Santa Clara County ranges from $82,450 for a one-person household to $127,200 for a five-person household.

In Palo Alto, the city council has regularly designated "affordable housing" as one of its top priorities, though it has consistently failed to meet its goals for housing production. To explain the challenge they face, council members routinely point to the high cost to developers of building affordable housing as a top impediment and the lack of state funding to support regional mandates.

The grand jury argues in the new report that the fault, to a great extent, lies with the council itself. It blames Palo Alto's elected leaders for relying too heavily on the city's planning staff to raise awareness in the community about the importance of affordable housing, an approach that is not as effective as actually facilitating these conversations themselves.

"City staff do not have the same stature as elected leaders," the grand jury states. "Therefore, Palo Alto city council members cannot expect staff alone to lead community conversations that enable Palo Alto residents to understand (AH) affordable-housing needs and cost requirements and to build community support," the report states.

To support its case, the report focuses on two specific planning projects that had gone askew because of inadequate community consensus. One is the 2013 referendum over a housing development on Maybell Avenue that included 60 apartments for low-income seniors as 12 single-family homes. While the council approved a zone change to make the project possible, residents argued against the single-family homes and voters subsequently overturned the zone change in a referendum, scuttling the development.

Another is the city's more recent effort to redevelop a portion of the Ventura neighborhood by creating an area plan that includes, among other features, affordable housing, park space and other community amenities. A working group of area residents and citizens spent more than a year developing a plan, only to end up with three alternatives that left most members disappointed. Residents of the neighborhood, the report notes, feel that "staff and consultants controlled the process and did not listen to community concerns," leading to an outcome that one member characterized as "a terrible, disappointing, and unfortunate failure."

While the grand jury viewed the Palo Alto's council's failure to engage the residents as a major factor in the failures of the two efforts, the city's planning strategies are also to blame, according to the report. While Mountain View clearly identifies areas of the city that can accommodate affordable housing and has 25 "precise plans" throughout the city, which it updates every several years, Palo Alto has no such scheme. As a result, affordable housing in Palo Alto is addressed "in a confusing combination of general and specific approaches," according to the grand jury.

By contrast, the grand jury lauds the Mountain View approach, pointing to the city's strong communication between city leadership and the community throughout the planning process. The report notes that there is an ongoing dialog between staff and the community about the need for affordable housing — including the high costs and necessary trade-offs for new construction — and which areas are currently zoned for affordable housing development. The result is that residents are not blindsided when a developer comes forward with a proposal and are more likely to accept it.

"With this proactive communication, specific projects may be modified by resident input but are rarely derailed," the report states.

The report also makes a case that Mountain View residents are simply more inclined to support housing growth. Renters comprise close to 60% of the city's population and have been politically active for years, aligning themselves with affordable housing advocates and passing rent control in 2016 as a direct response to the lack of affordable units. (Palo Alto's renting population is closer to 50% and is not politically organized.)

Residents generally accept that some level of growth is necessary, which translates into less resistance and more community buy-in when projects are up for approval, said Mountain View City Council member Margaret Abe-Koga. She said one of the attractions that lured her and many others to Mountain View is the city's diversity, and that residents are willing to build the housing needed to protect it.

"It is such a diverse community and there definitely is a feel here, a vibe that residents really cherish that diversity and do whatever we need to do to maintain it," Abe-Koga said.

While the grand jury report creates a contrasting picture of Palo Alto and Mountain View planning strategies — with the former depicted as a laggard and the latter as a leader — its evidence does not always align with this view. As an example of Mountain View's proactive approach, the grand jury points to the North Bayshore Precise Plan, where two property owners, Google and SyWest, could not agree on a development approach, prompting the city to create a new set of development standards for a 30-acre section. The plan includes a requirement for between 1,200 and 2,800 homes.

That plan, however, has not been universally welcomed. SyWest claimed that the city's approach is financially infeasible and, as such, is "fatally flawed." The company also accused the city in a letter of forcing its conclusion on property owners "without actual buy-in" and argued that its input has been largely dismissed.

Palo Alto's efforts in Ventura are also less doomed than the report makes them out to be. Despite a lack of consensus on the working group, the council generally agreed in September on an alternative that would gradually phase out office use and add about 500 housing units. For all its complications and disappointments, the planning exercise helped facilitate conversions between the city and the three major property owners in the planning area: The Sobrato Organization, Jay Paul and Smith Development, each of whom had contributed ideas for future housing development. And it raised awareness in the wider community about the lack of recreational amenities in Ventura, prompting a new effort to build a city gym in the area.

The grand jury report does, however, accurately capture a wide discrepancy in Palo Alto between its plethora of housing policies and its meager results. To spur housing production, the city had adopted new zoning designations (including an "affordable housing" zone with less restrictive design standards) and a new "housing incentive program" aimed to streamline approval for housing projects in certain portions of the city. It had also regularly updated its Housing Element and Comprehensive Plan to add policies pertaining to affordable housing.

Despite these efforts, the only major affordable housing development that the city has approved in recent years is the Wilton Court project at 3703 El Camino Real, which is now being developed by the nonprofit Alta Housing and which features 59 apartments for low-income residents and adults with developmental disabilities.

The grand jury blames the city's failure to craft clearly defined area plans, in the manner of Mountain View, as a chief reason for the city's inadequate results on housing.

"To match affordable-housing outcomes with their policy goals and campaign platforms, Palo Alto leaders need to employ best planning practices such as creating specific planned areas with identified densities, setbacks, height limits, etc., that support affordable-housing development," the report states. "The Palo Alto City Council should identify specific regions where zoning will allow affordable-housing to be feasible and clarify and simplify zoning requirements. This should be done with wide community input and education."

Abe-Koga said she has really come to believe in Mountain View's precise plan approach, which benefits both residents and developers by providing clarity on important aspects like allowed densities and design standards across large swaths of the city. It also lays out what mitigation measures are needed to accommodate growth, and what community benefits developers can offer up to allay those concerns. Once a precise plan is established, developers can often slide through the review process by following those zoning rules.

To some extent, the conversation is already happening in Palo Alto. The introduction of the "planned home" zone, which allows developers to negotiate with the city over development standards, has succeeded in bringing about new applications for housing proposals. Over the past year, the council has been weighing the merits of each proposal and gradually modifying the parameters of what these projects should include and where they should — and should not — be located. In April, council members rejected a proposal for a 24-apartment complex that was eyed for a single-family zone in the College Terrace neighborhood and prohibited future planned-home projects in single-family neighborhoods. The council also signaled its support over the past year for several housing projects in commercial and mixed-use zones, including a 70-apartment complex at 660 University Ave. and a 113-apartment development proposed for 2951 El Camino Real.

Both of these projects, however, still face a long road toward approval. Palo Alto's process requires developers behind "planned zone" projects to go through a preliminary review before filing formal applications, which then must go through formal reviews by the Architectural Review Board, the Planning and Transportation Commission and the council.

In its review, the grand jury concluded that Palo Alto's process is far longer than it needs to be. In Mountain View, the report notes, the city approved two developments — a 58-townhome project at 535-555 Walker Drive and a 144-unit project at 394 Ortega Ave. — in less than a year.

In Palo Alto, it took the city two years and one month from the date of the preliminary screening to approve a 57-unit project at 2755 El Camino Real, while the 102-unit project at 788 San Antonio Road took one year and eleven months (it should be noted that both of these projects relied on newly created zoning designation to win approval and neither is "affordable" by the grand jury's definition).

To speed things up, the grand jury offers two ideas. One is following the Mountain View approach by creating area plans with precisely defined design standards, thus obviating the need for preliminary reviews. Another is combining the Planning and Transportation Commission and the Architectural Review Board into a single body, thus reducing the number of meetings that are required for a project to advance.

The report also recommends that both cities conduct "housing impact studies" to evaluate the impact that new commercial development has on demand for affordable housing. Palo Alto has maintained for years that the link is essential. In recent years, it has moved to limit commercial development both through an annual cap and through a citywide limit in the Comprehensive Plan. Council members and city officials have consistently argued that reducing commercial development and limiting job growth reduces the demand for housing and helps both the city — and the region — attain a better jobs-housing balance.

Council member Eric Filseth made that argument in October, when he made his appeal to reduce the city's housing targets for the Regional Housing Needs Allocation next cycle, which spans from 2015 to 2023.

"We're now producing more housing supply faster than new housing demand, which is just unheard of in Bay Area cities," Filseth told an Association of Bay Area Governments committee, which subsequently rejected the city's appeal.

While ABAG rejected the city's arguments that limiting commercial development is in itself a pro-housing policy, the grand jury takes a more nuanced position on commercial development. Its report acknowledges that funding is a major challenge for affordable-housing projects and argues that mixed-use developments with commercial components can represent a partial solution to the housing crisis.

On this approach, more than any other, Palo Alto and Mountain View have taken different paths. Mountain View has welcomed mixed-use developments, recently rezoning the East Whisman area for 2 million additional square feet of offices alongside 5,000 new homes. Palo Alto has largely opposed all projects that include major commercial components and rejected them as alternatives in the Ventura plan. Allowing more offices, city officials have argued, would effectively nullify its progress on housing.

The grand jury report tries to take the middle road. It recommends that Palo Alto put together a plan for funding affordable housing through mixed-use projects, as well as other mechanisms such as a property tax and a business tax (the city is already exploring the latter). But recognizing the unintended consequences of commercial development — namely, additional housing demand — it recommends that both Mountain View and Palo Alto perform a housing impact study that "informs decision-makers about how the proposed project affects the job-to-housing ratio."

The report also calls on both Mountain View and Palo Alto to come up with new plans to pay for affordable-housing projects by July 30. Oddly, it claims that Palo Alto does not have an affordable housing fund. The city in fact has such a fund, which the council relied on in recent years to support the preservation of the Buena Vista Mobile Home Park and the construction of the Wilton Court project.

The city of Mountain View has yet to formally respond to the grand jury report and its recommendations, but reaffirmed its commitment to building more affordable housing units in the coming years. Mayor Ellen Kamei said in a statement Friday that the city has 1,000 additional affordable housing units in the planning pipeline, including 120 deed-restricted units on one of the city's downtown parking lots, and that more are planned on a former Santa Clara Valley Transportation Authority lot near the downtown transit center.

"These are only a few examples of how our City's affordable housing strategy is working to address a critical need in Mountain View and in our region," Kamei said.

In discussing the new report, Palo Alto Mayor Tom DuBois argued that the grand jury report fails to consider many of the city's current and past efforts to encourage affordable housing. He noted that 9% of the city's existing housing stock consists of units in the "extremely-low" to "moderate" categories, which is a higher rate than in most cities in the county (Mountain View's rate is 3.9%, according to the housing advocacy group [email protected]).

"We've done a lot of zoning changes and we're trying to incentivize housing," DuBois said in an interview. "We've also spent tens of millions of dollars, under council direction, out of our affordable-housing fund."

There are areas, he said, where Mountain View is leading and Palo Alto is trying to follow its example. This includes a tax for large businesses to pay for transportation and housing. Palo Alto, he noted, is planning to place a similar measure on the 2022 ballot.

DuBois said he was not convinced, however, that area plans with commercial components are necessarily a solution. If you're creating more demand for housing that you're building, he asked, are you really getting ahead?

"We're really trying to take a new tack, where I think a lot of cities in the county are sticking to the old recipe of mixed-use development, which doesn't seem to be working," DuBois said. "At least Palo Alto is trying to do something different — restraining office growth and trying to incentivize housing."

Randy Tsuda, president and CEO of the nonprofit housing developer Alta Housing, said the report underscores just how much work is needed to construct more affordable housing, and cautioned against seizing on just any one solution proffered by the grand jury. Area-specific plans help, he said, but there also needs to be financial mechanisms to make affordable housing feasible while state-level support continues to fall short. That could mean more public subsidies or easing of design standards for projects that bring badly needed affordable units to the community.

"The report pointed to a need for an ecosystem of support for affordable housing to make it successful," Tsuda said. "It's not simply political will, it's not simply community support or effective land use policies and plans. You need it all, and you need the funding."