The city's Housing Element, which is now going through a 30-day public review period, will ultimately be submitted to the state Department of Housing and Community Development. It lays out the city's strategies for adding its regional mandate of 6,086 housing units by 2031 — a target was developed through the Regional Housing Needs Allocation (RHNA) process. The 329-page document also lists strategies for preserving existing housing, streamlining the development approval process and promoting affordable housing.
Getting the state to approve the city's Housing Element will be a key priority in the coming months for the City Council, which will see three seats turn over to new members. All council candidates and sitting members have named housing as a top priority item, though there is some disagreement over how aggressively the city should strive to meet the state goals.
The newly released Housing Element proposes dozens of strategies to stimulate housing production, none more ambitious than the plan to rezone industrial and commercial zones around San Antonio Road and Fabian Way for residential use. The plan projects that this strategy will net 2,141 new dwellings, or 35% of the city's total allocation.
In adopting this strategy last August, council members agreed that it will require them to relax development standards such as height and density limits to encourage residential developments. The Housing Element pegs the density limits for residential development in general manufacturing (GM) and ROLM zones at 81.25 dwellings per acre, which is roughly twice as dense as the city currently allows in most of its multi-family residential districts.
But the strategy is also a gamble. The Housing Element assumes that many property owners will actually move ahead with the conversion. To back up that assertion, it points to broad market trends which support "redevelopment of office space at densities much higher than 65 dwelling units per acre." The document notes that the city had an office vacancy rate of 10.5% in the second quarter of 2022, while vacancy rates for industrial and research-and-development spaces is 5.9%. Both of these are higher than the regional averages of 10.1% and 4.6%, respectively.
The document also cites several recent examples of housing developments that took over commercial sites. This includes the newly constructed affordable-housing development at 3703 El Camino Real known as Wilton Court, which includes 59 apartments; the 129-apartment development that was proposed by Charities Housing for 2001 El Camino Real, the former site of Mike's Bikes; and a teacher-housing development spearheaded by Santa Clara County for a site next to the Palo Alto Courthouse. Once completed, it would include 110 apartments.
"Recent reports indicate a slowing of demand for new office and industrial space, which may bolster the desire for residential or mixed-use development on sites in GM and ROLM zones," the Housing Element states.
But while the city has recently received two applications for residential developments on San Antonio Road, it remains to be seen whether property owners in the area will actually move ahead with the types of conversions that the Housing Element envisions. And it's not clear whether the Department of Housing and Community Development agrees with the city's assessment that the strategy will actually spur construction of more than 2,000 new dwellings.
Furthermore, council members also acknowledged in recent meetings that the area lacks critical amenities and that some of the sites may not be suitable for housing, particularly if they are located near industries with high uses of hazardous materials.
"I'm not opposed to significant housing in these areas, but I think we are not yet informed and realistic about certainly the adjacency to true industrial processes next door and that are not compatible to having housing immediately adjacent," Burt said during the council's Aug. 22 discussion, just before the council adopted the strategy.
"I think we're having discussions about what we wish were the case, as opposed to what is the case."
He and others also noted that the area is currently deficient in public transportation, biking amenities and neighborhood-serving retail. Council member Eric Filseth said he supports "doubling down" on housing around San Antonio but noted that the plan would require significant infrastructure upgrades.
"I think we're going to have to go aggressive here on the development standards," he said. "The worst case is that we put a little bit here and it's not enough to bring in all the other stuff that we want to have happen, the transportation and retail and so forth over time So I think we've got to have enough density here so that it drives the other stuff."
Other strategies in the Housing Element include increasing density for new housing developments in transit corridors, allowing residential projects on city-owned parking lots and church lots and revising the zoning code to increase the number of dwelling units allowed in existing multi-family zones.
The upzoning strategy, which is expected to net about 1,017 new dwellings over the eight year period, would turn existing RM-20 zones (which allow 20 units per acre) into RM-30 zones and turn current RM-30 zones into RM-40 zones. Areas within a quarter mile of Caltrain stations would be upzoned to allow up to 50 dwelling units per acre.
Accessory dwelling units (ADUs) also play a key part in the city's strategy. The small backyard dwellings have recently been proliferating in greater numbers around town thanks to new state laws and the Housing Element assumes that the city will see about 64 new ADUs per year, for a total of 512 in the eight-year period.
The document also identifies two sites owned by Stanford University that could accommodate new housing and pledges to make zoning changes to facilitate these developments. This includes a site at 1100 Welch Road, which according to the city and Stanford can accommodate about 425 dwellings; a site at 3128 El Camino that could potentially accommodate about 315; and a site at 3300 El Camino, which could accommodate another 200. The Housing Element does not, however, include the site around the downtown Transit Center, which Stanford had identified as an area that could accommodate about 270 apartments. While some housing advocates encouraged the city to include the site in the Housing Element, the council ultimately decided that the centrally located University Avenue property requires significantly more planning and agreed to defer consideration of housing here until the next Housing Element cycle.
Though city leaders agree that it's important for the city to adopt a legal Housing Element, they have different opinions on whether the growth is practically achievable, particularly given the higher number of below-market-rate units that the city would need to approve to meet regional goals. Julie Lythcott-Haims, who was elected on Tuesday, has embraced the mandate and said the city needs to work hard to achieve the goal and go beyond it.
Others, including Mayor Pat Burt, have characterized the target as virtually unachievable, even as they stressed the need to make progress on housing.
The Department of Housing and Community Development has taken a more assertive approach this year toward reviewing Housing Elements in the current cycle than in prior ones, in most cases rejecting cities' initial submissions and demanding revisions. Cities that fail to get their Housing Element certified run the risk of becoming ineligible for grant funding or, in the most extreme scenario, lose some of their land use authority.
On Monday night, Burt was among council members who criticized the housing-mandate process and argued that it is creating unachievable goals for affordable housing and threatening to take away "most of our local control over local democratic land use policies" if the RHNA targets aren't met.
"It's basically setting up a process that appears to be 'failure by design,'" Burt said. "Not inadvertently, but it really appears that it is by design that this outcome will happen."
Council member Greer Stone agreed and pointed to Newsom's recent withdrawal of $2 billion in funding homelessness programs from local jurisdictions, a move that he called "pretty absurd" given the high costs of creating affordable housing. Stone lamented the fact that the state's mandates for more housing aren't accompanied by state funding, which he said is required to produce the needed below-market-rate residences.
"I think where we spend our money reflects our true values and the state just continues to push for deregulation and not actually provide the funding for us to be able to hit those RHNA targets," Stone said Monday. "I want to point that out and hope in the next legislative cycle we can push for actual funding for these affordable-housing projects that we so desperately need."
The draft Housing Element acknowledges the drastic need for affordable housing, noting that homeownership is effectively out of reach for households that make less than the city's median income of $174,003 in 2020 inflation-adjusted dollars.
Residents are also experiencing "sharp increases in rent prices and are sometimes often forced into substandard living." About 17% of households spend between 30% and 50% of their income on housing, while another 13% spend more than 50%, which places them in the "severely cost burdened category." These residents, the document notes, may have little disposable income left after housing costs.
It also lists the many challenges that Palo Alto faces when it comes to actually creating the needed housing. The Housing Element calls Palo Alto "a built-out community with very little developable land vacant, with no opportunities to annex additional areas to accommodate future housing needs."
"The high demand for developable land, coupled with the smaller lot sizes in the city, makes multi-family residential development difficult," the document states.
The city plans to host an online community meeting on Nov. 16 to gather community feedback about the draft Housing Element. The council and the Planning and Transportation Commission are scheduled to discuss the document on Nov. 28.