March 31, 2017

Palo Alto Approves New Affordable Housing Impact Fees


After the new City Council voted to reopen the discussion on impact fees in January, the Palo Alto City Council finally adopted a new set of impact fees for residential and non-residential development to fund affordable housing at its March 28th meeting.  The Council voted 5-4 to set the fees at the following levels:

  • Residential for sale (in-lieu fees) – single family detached – $75/square foot
  • Residential for sale (in-lieu fees) – attached (townhomes, condos) – $50/square foot
  • Residential rental – $20/square foot
  • Office and R&D – $35/square foot
  • Hotel and Retail – $20.37/square foot (no change)

The Council also approved a provision that would give the Council the discretion to allow developers to pay in-lieu fees rather than produce the required percentage of inclusionary units, under special circumstances — including instances where the in-lieu fees would allow for the creation of more affordable units than the inclusionary requirement, or if a pending affordable housing project is in need of funds.

SV@Home advocated for this sort of flexibility regarding options for “alternative compliance” with the existing inclusionary housing requirement in order for developers and the city to negotiate and agree upon the option — whether providing inclusionary units on site, paying in-lieu fees, working with an affordable housing developer to provide deed-restricted units off-site, or dedicating land — that both suits the particular project and supports the city in meeting its affordable housing goals.  We expect that further reading(s) of the ordinance will take place before the new fee levels are officially adopted.

We thank the City Council, Planning and Transportation Commission, and City of Palo Alto staff for their efforts over many months to adopt these new fees, which will go a long way in generating the resources the City needs to to meet the challenges it faces in adequately housing.