Palo Alto will have to revise its plan to add more than 6,000 housing units over the next eight years after the Department Housing and Community Development (HCD) ruled on March 23 that the city's proposed Housing Element fails to meet state law.
According to a letter that HCD Proactive Housing Accountability Chief Melinda Coy sent to the city, Palo Alto will have to make a host of revisions to its document before it can win state approval. Palo Alto submitted its draft Housing Element to the HCD in late December after nearly two years of public hearings. The letter means it will now have to perform further analysis and consider new housing policies.
The Housing Element is the city's plan for meeting its state-mandated housing obligation, as set through the state's Regional Housing Needs Allocation (RHNA) process. In Palo Alto, the allocation totals 6,086 housing units between 2023 and 2031, roughly three times the number in the current eight-year RHNA cycle. Of those, 3,465 would have to be below-market-rate units among various income categories.
Under recent changes in state housing law, the document also must demonstrate the city's plan to "affirmatively further fair housing," which means explicitly addressing and combating disparities that have resulted from past patterns of segregation.
The HCD determination was not a surprise. Nearly every city that has submitted its plans to the state agency over the past year was required to make revisions. To date, Redwood City is the only jurisdiction in the Peninsula that has received a passing grade from the state agency.
Earlier this month, Palo Alto Planning Director Jonathan Lait said that based on other cities' experiences, he expected the HCD to request revisions. At the March 8 hearing in front of the Planning and Transportation Commission, he said he expected to see a "robust comment letter" from the HCD and that it might take several months for the city to obtain compliance.
"We already knew there are some things where we'll need to make some adjustments before we even made the submittal," Lait said at the March 8 meeting.
One area in which the city will have to make revisions is in its plan to affirmatively further fair housing. While the city's assessment of housing trends focuses on regional data and includes information about various parts of Santa Clara County, the HCD directed city planners to dig deeper and to look at neighborhood trends and "provide appropriate programmatic responses to address ongoing patterns and trends."
And while Palo Alto's document identifies "racially concentrated areas of affluence," it has not provided sufficient analysis on the factors that created the wealth in these neighborhoods, the HCD found.
"For example, the element could examine past land use practices, investments, quality or life relative to the rest of the City and region and then formulate appropriate programs to promote more inclusive communities and equitable quality of life," the letter states.
The HCD also directed the city to be more specific in listing the levels of affordability in recently approved housing projects, which can be used as credit in meeting the RHNA allocations. The city divided its pipeline projects into market-rate and below-market-rate projects without detailing the affordability level in the latter category.
The city's plan for creating 6,086 dwellings in the next eight years includes a host of strategies, including easing density restrictions in existing multifamily districts to allow for more units per acre; exploring construction of housing on city-owned parking lots; working with Stanford on two housing developments at university-owned sites; and encouraging the construction of accessory dwelling units. The most ambitious one, however, is rezoning manufacturing and light-industrial zones around San Antonio Road and Fabian Way to facilitate the replacement of existing commercial buildings with more than 2,000 housing units.
The HCD letter stated that the city needs to do far more work to convince the state agency that its biggest housing policy is actually viable. The city included factors such as development trends, ages of existing structures and community interest, among others, in making its case for the rezoning program.
But the HCD argued in its letter that the city must also include additional information about existing uses that "may constitute an impediment to additional residential development, past experiences converting existing uses to higher density residential development, current market demand for the existing use, existing leases or contracts that would perpetuate the existing use or prevent additional residential development or other relevant information to demonstrate the potential for redevelopment such as expressed owner and developer interest."
"Based on a complete analysis the element may need to add or revise programs to facilitate redevelopment," the letter states.
Similarly, the HCD is requesting more information about creating housing on city-owned parking lots, including a schedule of actions to facilitate the conversion and consideration of alternative sites that can be used if parking-lot sites aren't identified by a date early in the planning period.
In addition, the city is required to take a deeper look into its own zoning practices and consider potential constraints on constructing housing in all residential zones. The analysis, according to the letter, should "address any impacts on cost, supply, housing choice, feasibility, timing, approval certainty and ability to achieve maximum densities and include programs to address identified constraints."
The letter comes at a time when Palo Alto and other cities across the state are feeling ever greater pressure to get their Housing Elements certified. Because state law set a Jan. 31, 2023 deadline for Bay Area jurisdictions to get their documents certified, Palo Alto and most other cities are now out of compliance.
In some cities, including Los Altos and Mountain View, developers have proposed housing projects under a "builder's remedy" provision in state code, which allows projects that exceed zoning regulations to advance without city approval in jurisdictions that are out of compliance with housing laws.
Palo Alto is also part of a group of cities that are facing lawsuits from a coalition of housing advocates over its failure to adopt a certified Housing Element by the Jan. 31 deadline.
Read the full letter from the Department Housing and Community Development: