County hikes Stanford fees for affordable housing

Despite a heavy pushback from Stanford University, the Santa Clara County Board of Supervisors approved on Tuesday new policies that require the university to pay higher fees to support affordable housing and to construct more such housing as part of its expansion plans.

The new housing impact fee policy, which the board adopted by a unanimous vote, nearly doubles how much Stanford would be required to pay for every square foot of new development, from the existing level of $36.22 to $68.50, with the higher fee set to kick in on July 1, 2020. The “inclusionary housing” zoning ordinance would require 16 percent of all market-rate housing for faculty and staff to be designated as affordable housing.

In adopting the new housing-impact fee, the board opted not to move ahead with a prior proposal, which would have raised the fee up to $143.10 per square foot. That fee was supported by a nexus study that the county commissioned to evaluate what it would take to subsidize the construction of the 964 units that would be required for accommodate employees making up to 120 percent of area median income. Even the relatively lower fee of $68.50 per square foot, however, is by far the highest in the region.

The new ordinances moved ahead Tuesday despite heavy opposition from Stanford, which proposed that the county forego the two ordinances and to instead collaborate with the university on a development agreement that would generate more below-market-rate housing sooner. In late July, the university proposed converting up to 200 apartments on its campus into below-market-rate units and creating an evergreen fund that would pool investments from area employers and foundations to invest in future housing projects.

Stanford officials reiterated their objections on Tuesday and requested that the board delay its vote on the two ordinances. Jean McCown, Stanford’s associate vice president for government and community relations, argued that the ordinances will not achieve affordable housing in the near-term and urged the board to consider options to produce housing in a more expeditious manner. Jean Snider, the university’s associate vice president for real estate, emphasized that all employers throughout the county generate the need for affordable housing and suggested it’s unfair for the county to single out Stanford.

“The recommended fee is four times the Bay Area’s average commercial linkage fee,” Snider said. “How is this justified?”

Stanford had also requested that the supervisors, at the very least, include a “sunset” clause to both ordinances ensuring that each would be repealed as soon as the development agreement is reached.

Robert Reidy, Stanford’s vice president for land, buildings and real estate, requested in a letter that the discussions of the potential agreement begin as soon as possible. He proposed that the board appoint two supervisors to serve on an ad hoc committee that would negotiate with Stanford. A draft agreement would then be presented for formal hearings on Stanford’s 2018 General Use Permit application, which the board plans to take up early next year.

The university also alleges that the fee of $68.50 per square foot is “excessive,” “unsupported,” and based on a study that suffers from “serious mathematical and logical errors.” If these errors were corrected, the nexus study supports a maximum fee of no more than $17 to $20, according to Stanford.

Specifically, the county study on which the $68.50 fee is based on assumes that the initial funding to build affordable housing is a permanent subsidy, rather than a loan that gets repaid over the lifetime of the project, Stanford’s letter states. The university also claims that the study overstates land-acquisition costs and that it bases its fee on housing demand outside of the county’s jurisdictional boundaries.

Stanford also protested that the new inclusionary rules are “unfair and unsupported” and that the ordinance ignores “the significant contributions that Stanford makes in providing this affordable housing.” The university specifically took issue with a rule that doubles the requirement for below-market-rate housing from 16 percent to 32 percent in cases where Stanford converts existing market-rate units rather than builds new ones.

While the ordinance intends to spur more construction of below-market-rate units, Stanford characterized the higher requirement as a “penalty that discourages the use of Stanford’s extensive stock of existing market-rate housing to comply with the affordability rules, rather than a meaningful alternative to comply.”

“There is no evidentiary support for doubling the requirements, just because the affordable units are converted rather than constructed,” the letter from Stanford stated.

The board didn’t buy these arguments. Board President Joe Simitian acknowledged that the Stanford fee would be higher than fees elsewhere. He also noted, however, that the fees in places like Palo Alto, Mountain View and Menlo Park have been insufficient in addressing the jobs to housing imbalance. Palo Alto has an ratio of about 3.49 jobs per housing units — the highest in the county. Mountain View and Menlo Park each have a ration of about 2.5 to 1.

“Surrounding communities aren’t getting the job done with the fee they have in place. That’s why we’re having this conversation,” Simitian said. “If we keep doing what we’re doing, we’ll keep getting what we got, which is a 2.5 or 3.5 jobs-housing imbalance.”

Simitian also rejected Stanford’s criticism about being uniquely — and, hence, unfairly — targeted by the new ordinances. Stanford, he observed, is indeed unique in that it has about 4,000 acres of developed space.

“When we look at the county, we don’t have another one of these because we appropriately push development into incorporated communities,” said Simitian, whose district includes Palo Alto.

The debate over broader housing policies is also expected to continue next year, as the board reviews Stanford’s ambitious application to build up to 2.275 million square feet of academic space and 3,150 new units (a combination of apartments and student beds) by 2035 as part of its 2018 General Use Permit application. Earlier this year, the county responded to demands for more housing by commissioning an analysis that considers two additional alternatives, each with significantly more units.

During Tuesday’s more narrow discussion, Simitian’s colleagues generally agreed that the county needs to do more to encourage housing, particularly for those with incomes at or below the area median income. Supervisor Ken Yeager called the lack of affordable housing “the issue of our time.”

“We’ve been trying to respond. The county is doing more than we ever had relating to housing but we obviously need to do more. I’d rather not wait to act.”

Numerous members of the public, including housing advocates and local officials, also encouraged the board to act. Mountain View Mayor Lenny Siegel (speaking for himself and not the city) said the new inclusionary-zoning requirement has the potential to generate a huge number of affordable housing units as a byproduct of Stanford’s expansion.

The university, he said, should not be allowed to shift the impact of its growth on other communities, he said.

“Stanford is the root of the jobs-housing imbalance,” Siegel said. “They aren’t being singled out; they’re jumping out. They have more land than Mountain View.”

Even in approving the two ordinances, the board left the door open for revising or even repealing them, should the county reach a development agreement with Stanford over an alternative proposal. Simitian included in his motion a clause that explicitly authorizes the board to “suspend, amend or rescind” the new rules at a future date, pending an agreement.

“I remain optimistic that the discussion will continue with Stanford,” Supervisor Dave Cortese said. “I’m looking at this as essentially a package that could be superseded by something more attractive to all of us down the road.”

Mountain View Voice staff writer Kevin Forestieri contributed to this report.