When Palo Alto approved last fall a new program that would allow developers to build affordable housing on downtown parking lots, city leaders weren't sure whether anyone would take them up on the offer.
This summer, two nonprofit groups are preparing to do just that. The nonprofit organizations Alta Housing and MidPen Housing have each indicated that they would like to work with the city to explore the proposal. While the plans of each organization are still in the very early phases, if approved they could bring up to 250 below-market-rate apartments to the city's downtown.
Alta and MidPen both responded to a recent request for information, which invited developers to propose housing projects for 12 parking lots. The request follows the City Council's approval last November of a Housing Element draft that listed dozens of new programs aimed at achieving Palo Alto's target of getting 6,086 new dwellings built between 2023 and 2031. These include a program to allow affordable housing where cars now park.
Because some of the parking lots are relatively small, the city encouraged developers to submit "an innovative approach incorporating one or more sites to maximize the potential for critically needed affordable housing and public parking."
Alta Housing is taking up the challenge. The local nonprofit, which earlier this year opened the 59-apartment Wilton Court development in the Ventura neighborhood, is eying three parking lots in Downtown North.
Two of these are adjacent lots located between University and Lytton avenues, just south of senior-services nonprofit Avenidas: Lot A is between Emerson and Ramona streets; Lot C is between Ramona and Bryant, next to Cogswell Plaza. The third, Lot T, is two blocks east of these, between Waverley and Kipling streets.
Randy Tsuda, CEO of Alta Housing, told Palo Alto Online that the organization is hoping to discuss with the city proposals that would result in a mix of types of units, some for seniors and others offering one-, two- and three-bedrooms.
A housing development at Lot C could be particularly well-suited for senior apartments because of the site's location next to Avenidas, Palo Alto's primary senior-services nonprofit.
Lot A, meanwhile, is located next to the Barker Hotel, a 26-unit affordable-housing development on Emerson that is also owned by Alta Housing. Constructing another residential complex next to the Barker Hotel would allow residents of the two developments share amenities that benefit both buildings, he said.
"It would be a way of leveraging and improving," Tsuda said.
He said the organization envisions these developments would be between five and six stories tall and contain 55 to 70 apartments each. Thus, if the council opts to move ahead with the maximum number of housing units on all three lots, Alta could create 210 affordable apartments in the downtown area.
The city's request for information notes that the residential developments should consist 100% of affordable housing and that the maximum affordability level should be no more than 80% of Santa Clara County area median income.
Alternatively, developers could designate these units as "workforce housing" for employees of the city of Palo Alto or the Palo Alto Unified School District.
And what about parking?
A key point of negotiations would be what to do about parking. Council members indicated in the past that they wanted to see projects that contain both housing and parking. When the council first endorsed the idea in December 2021, it specifically requested proposals that would result in a new garage with a possible housing component.
The city's request requires replacement of existing parking spaces (the 12 lots have 702 spaces between them) and an addition of 130 new parking spaces, construction of which would be subsidized by downtown in-lieu parking fees. The city noted, however, that replacement parking "may be located at one or more of the available sites."
Alta is hoping to shift parking away from the lots where its new residential developments would stand, Tsuda said. A new parking facility on a separate site could potentially accommodate both the residents of its new developments and the general public, he said.
Tsuda said Alta was "thrilled" to see the city put out its request for information even earlier than the organization had expected it.
"That's a great first step," he said. "We're eager to get the feedback from staff and, ultimately, the City Council on how they want to proceed."
MidPen Housing is also preparing for further discussions with the council and local residents before it refines its proposal. Lyn Hikida, the company's vice president for corporate communications and public relations, said MidPen has only been evaluating possibilities at a "high level." (She noted that the city had so far only issued a request for information, not a request for proposals.)
Hikida said in an email that MidPen believes many of the lots have the potential to support affordable housing with about 40 apartments per lot and that the nonprofit "would look to work together with the City and with the community on determining location and number."
"While we know our proposal will be for 100% affordable housing, we'll be engaging deeply with the community and other stakeholders as we develop and refine project details," she wrote.
While the recent request for information focused exclusively on downtown parking lots, the city's Housing Element indicates that the city will consider lots near California Avenue as well. The document estimates that if it succeeds in getting four affordable-housing projects downtown and two near California Avenue, these developments would realistically yield 212 apartments.
Palo Alto's most recent Housing Element draft, which the city submitted in June and which is currently being reviewed by the state Department of Housing and Community Development, commits the city to issuing a request for proposals this year "with the intent to select a development partner in 2024."
If things go as planned, the city will then select a development partner to secure project approval for one or more sites by 2025 with the intent to build at least 168 affordable units on six city-owned sites by 2031.
Funding, however, remains a wildcard, a factor that both the city and the developers freely acknowledge. Palo Alto issued two loans totaling $20 million to Alta Housing to make Wilton Court possible, and Tsuda said that if the city moves forward with its new proposals, the nonprofit would need to engage the city in conversation about how to get the projects funded.
This could include local funds as well as potential revenue from a regional housing bond that is being floated for the 2024 ballot. That housing bond could bring in $10 billion to $20 billion in funding for affordable housing in the nine Bay Area counties.
But even with these challenges on the horizon, Tsuda lauded the city for addressing one major hurdle facing developers of affordable housing in Palo Alto: high land costs.
"When cities have public land that is already secured and they can make that available for affordable housing, that is particularly beneficial to us," Tsuda said. "We don't have to purchase the land out on the open market and compete with other developers."