Palo Alto's housing production has varied wildly over the years, but now the city is aiming to see 300 or more residences built annually. Source: city of Palo Alto. Chart by Paul Llewellyn.
March 23, 2018

Palo Alto Weekly: Palo Alto Sets Sights on Affordable Housing


SV@Home Policy Associate Nicole Montojo recently spoke at a Palo Alto city council meeting on affordable housing, where she said that “specific” or “precise” plans are effective tools to spur the production of high-density housing developments near transit.

Her comments were included in an article by Gennady Sheyner of the Palo Alto Weekly on the city’s plans to create more affordable housing.

See the original story at Palo Alto Online.

Palo Alto sets sights on affordable housing

With a new plan, Palo Alto tries to triple its housing production

By Gennady Sheyner

• Watch Fran Wagstaff, retired president of MidPen Housing, discuss this issue with Weekly journalists on an episode of “Behind the Headlines.”

Fran Wagstaff doesn’t have to look far to see the transformation of Palo Alto’s housing market.

Over the past decade, her Midtown neighborhood has gentrified, with property values going through the roof and out-of-town buyers gobbling up properties as investments, she told the Weekly.

The house across the street is only occupied by its owners for one or two weeks per year, she said.

“Every scrap of land is being redeveloped,” Wagstaff said.

But when it comes to new affordable-housing developments, the story is completely different. Like other cities, Palo Alto is facing a “perfect storm” of obstacles that hinder construction of affordable housing: sky-high land costs, rising construction costs and a recent federal tax bill that reduced the incentive to invest in affordable-housing projects by cutting tax credits for corporations.

For Wagstaff, the issue hits close to home in other ways. She spent 25 years leading the nonprofit MidPen Housing (formerly known as Mid-Peninsula Housing Coalition) during which time it developed more than 6,000 affordable-housing units in the region, including Palo Alto Gardens, a 156-apartment complex on San Antonio Road, and Page Mill Court, a 24-apartment development on Ash Street. She retired from her position as executive director in 2008.

“Housing is the ultimate determination for social welfare for people in every economic group,” she told the Weekly.

Palo Alto’s City Council is attempting to make inroads in addressing the region’s overall housing shortage. Last month, the council designated housing as a top priority and set as a goal the creation of 300 units this year, as well as every year from now through 2030. It also approved last month a Housing Work Plan that aims to achieve this goal.

But housing advocates like Wagstaff aren’t optimistic the plan will make a significant enough difference — and for good reason. Over the years, she has seen commercial construction boom and housing lag behind, trends that exacerbated the city’s jobs-to-housing imbalance of 3-to-1.

In recent years, Palo Alto’s housing production plummeted to new lows. In 2014, the city produced just 40 housing units, according to the most recent progress report in its Housing Element, a state-mandated document. While the number went up to 246 in 2015 (thanks in large part to two housing projects that Stanford University developed under a 2005 agreement with the city), it dwindled to 18 units in 2016 and 89 in 2017. The bulk of last year’s residential construction — 70 apartments at 2500 El Camino Real — also were approved in 2005 under the agreement between Palo Alto and Stanford.

If the city has been lagging on housing overall, its progress on affordable housing has been particularly lackluster. Between 2007-2014, the city produced 1,602 total units, which is 37 percent of its Regional Housing Needs Allocation, according to the Housing Element for that period. Of those, 290 units — or 16 percent of the regional goal — were affordable.

The current housing cycle, which runs from 2014 to 2023, also is off to a less-than-promising start. The 121 affordable units that the city has produced so far comprise just 8 percent of its regional target.

“I’ve seen a lot of goals (set) in Palo Alto, but I haven’t seen a lot of affordable-housing goals being achieved,” Wagstaff said.

Palo Alto’s housing production seems especially paltry in the context of the region. Last year, Silicon Valley saw a surge of residential construction, with more than 12,021 building permits for homes being issued — 5,339 more than during 2016, according to the 2018 Silicon Valley Index, an annual report issued by the nonprofit Joint Venture Silicon Valley. In Santa Clara County, cities issued 2.4 times more permits for residential units in the first 11 months of the year than in all of 2016, according to the Index.

Up and down the Peninsula, cities are passing new laws and establishing “specific” or “precise” plans for neighborhoods with access to public transit and then approving housing developments within those. In Mountain View, the City Council ended 2017 by approving a Google-centric precise plan for the North Bayshore area that could include 9,850 housing units, 2,000 of which would be offered at below-market-rate pricing (this is in addition to the roughly 5,000 units now being built or seeking planning approvals). The city also is moving ahead with a precise plan for the East Whisman area with 5,000 new homes, which includes 1,000 at below-market rate.

Menlo Park recently approved a mixed-use development with 183 apartments on El Camino Real, the largest project in a concept plan that the city approved for its downtown area in 2012. It also is considering Facebook’s “Willow Village” redevelopment, which would include offices, retail space and 1,500 housing units, of which 225 would be at below-market rate.

In Redwood City, construction is proceeding on MidPen Housing’s 117-unit housing development for very-low income seniors at a city-owned property at 707 Bradford St. And in May 2016, the City Council amended its Downtown Precise Plan to specify that 375 of the 2,500 housing units planned for the downtown must be designated as “affordable.”

But while other cities are swinging for the fences, Palo Alto is content with singles and doubles: a zoning tweak here, a density bonus there and a few dozen units here and there. Last October, the City Council approved the Sobrato Organization’s mixed-use development at 3001 El Camino Real (the former site of Mike’s Bikes), which includes 50 apartments. In the next few months, the council will consider a project a few blocks to the north — a 57-unit apartment complex proposed by Windy Hill Property Ventures for the central intersection of El Camino and Page Mill Road. The project is seen as a prototype of both a “car-light” development (fewer parking spots and more transit subsidies for its residents) and “workforce housing,” with apartments designated for residents who make 120 percent of the area median income, the upper limit of what’s considered “affordable housing.”

“All of us by now agree that the region has a housing crisis,” Planning Director Hillary Gitelman told the council during its Feb. 5 discussion of the new Housing Work Plan. “The rate of housing production has declined as the rate of job growth and housing prices have increased.”

The problem of creating affordable housing is certainly not unique to Palo Alto. According to the 2018 Index of Silicon Valley, only 7 percent of all the housing units produced in the region in 2016 and 2017 — or 699 total — were designated as affordable. Of those, 287 were for households earning less than 50 percent of the area median income.

But if building affordable housing is always hard, in Palo Alto, it’s particularly so, Wagstaff said. The 50-foot building-height limit that the city approved in the 1970s remains more or less sacrosanct, which means developing projects with more than a few dozen units is practically impossible. Zoning and parking standards are relatively inflexible, even for senior housing and affordable housing, whose residents tend to drive less. Then there’s the approval process, which she said is far more onerous — and expensive — in Palo Alto than anywhere else.

In the past, the city considered affordable housing a public benefit worthy of granting developers with zoning exceptions. That was the case in 1961, when medical pioneer Russell V. A. Lee spearheaded the construction of Channing House, an 11-story retirement community with two stories of underground parking at 850 Webster St.

To enable the project, the council rezoned the site from R-4, which allowed up to four residential units per acre, to “planned community” (PC), a zoning district that offers zoning exceptions in exchange for public benefits on a case-by-case basis. When Channing House opened its doors in January 1964, 270 seniors moved in, according to the Palo Alto Historical Association.

Today, hundreds of seniors sit on waiting lists for below-market-rate housing, without much hope for another Channing House. In 2013, the council effectively abolished the PC zone after voters overturned the council’s last PC approval — an application from the nonprofit Palo Alto Housing to build 60 apartments for low-income seniors and 12 market-rate single-family homes on a former orchard on Maybell Avenue. In freezing PCs, the council all but ensured that projects like the Maybell development won’t even have a chance to go through the city’s infamously grueling approval process.

Facing a restrictive development climate, Palo Alto Housing, which has been building affordable housing since early 1970s, has shifted its sights to Mountain View, Redwood City and Sunnyvale. No other developer has stepped in to provide housing for the city’s neediest residents.

In fact, the Palo Alto council hasn’t approved a new affordable-housing complex since November 2009, when it green-lighted a 50-unit development for low-income families at 801 Alma St.

Even that exception proved the rule. The developer, Eden Housing, had initially proposed 96 units and two buildings, one for senior housing and another for low-income families. But after an outpouring of neighborhood opposition led by residents of a recently constructed condominium complex at 800 High St. (a project that relied on the PC zone to win approval), Eden dropped the 46 senior apartments from the plan.

(The only affordable-housing bright spot of late was the city’s contribution of $14.5 million toward the purchase and preservation of the low-income Buena Vista Mobile Home Park in Palo Alto, a deal that was completed last year.)

Taken as a whole, the 45 policies in the work plan represent the city planning staff’s best stab at addressing the City Council’s housing priority and goal of 300 units per year.

The policies include near-term tweaks to the zoning code — including new overlay zones that would allow developers to provide less parking and build more densely when developing workforce housing (housing for those earning about 120 percent of the area median income) and below-market-rate housing.

They also include policies for encouraging more development near public-transit corridors and a “minimum density” requirement for multi-family residential projects.

Nicole Montojo, policy associate with SV@Home — a nonprofit that advocates for affordable housing in Santa Clara County — said she is encouraged by Palo Alto’s Housing Work Plan, which she says lays out a “clear path” toward addressing the housing shortage. She also lauded the proposed expansion of the city’s “inclusionary zoning” program, which requires market-rate developments to designate a percentage of their units as below-market rate.

She also said her group has been advocating for increased density and against the idea that this necessarily means high-rise towers will be built.

“Our goal is to challenge a lot of false notions of what higher-density may look like,” she said.

Palo Alto’s plan does include some policies aimed at increasing density. One would expand the existing “pedestrian and transit-oriented development” overlay zone on California Avenue (which loosens development standards near public transit) and establish a similar overlay downtown as a way to encourage construction of new housing near transit. It also recommends “limited exceptions” to the 50-foot height limit for housing projects within one-quarter mile of a railroad station.

But the work plan is also notable for what’s not in it: the PC zone, which has traditionally given nonprofit developers of affordable housing and senior housing the types of height and density exceptions they need to make their projects financially viable. Besides Channing House, the PC enabled the construction of Lytton Gardens, Webster House and — four years ago — the Treehouse at 488 W. Charleston Road.

The plan also is mum on the subject of “Palo Alto process” — the bureaucratic marathon that developers say often deters them from moving ahead with applications.

And whereas cities like Mountain View, Menlo Park and Redwood City have used “specific” or “precise” plans to promote high-density development near transit, in Palo Alto, the council actually deleted from its newly updated Comprehensive Plan last year a policy to create a “coordinated area plan” (Palo Alto’s version of the precise plan) for downtown. It is, however, moving ahead with a plan in the North Ventura neighborhood, which council members see as ripe for redevelopment.

Montojo said specific plans are among the more effective tools being used in the region to spur housing. She lauded Mountain View’s plan for North Bayshore, both for its goals and for bringing stakeholders together and developing specific goals for affordable housing. She called specific plans “a key tool” and said her group is looking forward to seeing what Palo Alto does in the North Ventura area.

“It’s critical, given that the zoning in general in Palo Alto — as it currently stands — won’t allow for all of the housing that needs to get built.”

For Mayor Liz Kniss, one of the council’s staunchest housing advocates, the Housing Work Plan represents a chance for the city to get out of the housing slump. Just minutes after her election as mayor in January, Kniss told the crowd assembled in City Hall that Palo Alto needs to get “more creative” on housing and made a pitch for approving one senior-housing project this year. She also acknowledged the pushback the council will likely receive from the community as it considers new housing projects and asked residents to “keep an open mind” when those projects get to the council for approval.

“When this comes up this year,” she said, “think through: Would I like my kids to live here? Would I like to stay here as long as possible?”

During the council’s February retreat, Kniss asserted that the goal of building 300 residences a year is achievable.

“It’s daunting somewhat, but I believe we can do it,” Kniss said.

Her colleagues have agreed that the goal is worth pursuing. Last November, in a rare show of unity on the hot-button issue, the council unanimously endorsed a memo penned by Councilman Adrian Fine, which led to the creation of the Housing Work Plan.

As Kniss noted, the push for housing will surely meet with community resistance, particularly when staff begins exploring next year changes to single-family residential neighborhoods. But housing advocates can point to some promising motivators — including the 2016 election (in which Kniss and Fine both made housing their central issue); a recent National Citizen Survey in which only 6 percent of the respondents gave Palo Alto high grades in the “affordable housing” category; and an earlier survey in which 76 percent of the respondents called housing an “extremely serious” or “very serious” problem, ranking it above traffic.

“We heard there’s a housing problem — that’s unquestionable at this point,” Fine said during a February discussion of the housing plan. “We heard it from the public. It’s time for us to stop studying the issue and actually do something.”

Three months into the new year, it remains to be seen whether the goal of 300 is realistic or merely aspirational. Gitelman, the planning director, said she believes it’s achievable, even as she acknowledged that adjusting the city’s zoning standards can only do so much. She pointed to other — potentially more impactful — programs in the work plan that the city hasn’t tried yet.

The city, she told the Weekly, will need to do something “really meaningful” with the North Ventura Concept Area Plan. The area includes the site of Fry’s Electronics, which alone has “reasonable capacity of 221 units” (and a maximum yield of 374 units), according to the city’s Housing Element. The new plan is expected to identify other potential housing sites in North Ventura, along with opportunities for parks, retail and amenities.

“We don’t even know how many units that’s going to yield,” Gitelman said.

Then there’s the bigger wildcard: Stanford University. The Housing Work Plan calls for exploring with Stanford University various options for adding to the Stanford Research Park a “diverse mix of uses,” including residential development, a hotel, a conference center, space for startups and a transit center to create a “vibrant, innovation-oriented community.”

The plan also considers allowing housing at Stanford Shopping Center and near the Stanford University Medical Center. Gitelman told the Weekly that city staff will reach out to Stanford next year, after the university completes its General Use Permit process with the Santa Clara County, in which it’s asking for permission to develop more square feet on campus.

“Potentially, when we talk to Stanford about housing in the Research Park and the Shopping Center, that may be our opportunity to get more than 40, 50 or 60 units,” Gitelman said.

And what of the city’s waylaid PC zoning? Even though reforming and reviving the PC process isn’t in the Housing Work Plan, the door remains ajar. The council hasn’t officially abolished the tool, and Gitelman said staff can bring it upon the council’s request.

As for speeding up the approvals process, Gitelman believes Senate Bill 35 will make a dramatic difference. The new law, authored by Sen. Scott Wiener, creates a streamlined process for multi-family housing projects that are consistent with “objective zoning standards” such as the city’s height and density regulations. The bill gives cities 60 days to determine whether the proposed development qualifies for the streamlining and another 30 days to review the project — practically warp speed by Palo Alto’s historic standards.

“I think SB35 is a game-changer for affordable-housing developers,” Gitelman said. “As long as they’re zoning compliant, it’s by-right in 90 days. What can be better than that, from their perspective?”

Chart courtesy of Paul Llewellyn, City of Palo Alto.