Even as they hoped to turn over a new leaf and build community confidence, Adventurous Journeys Capital Partners, the owners of the President Hotel, stirred fresh controversy and community skepticism. In advance of an open house last week to unveil their plans for restoration of the historic building and renovations to convert it from housing to its original hotel use, the owners produced a glossy brochure claiming support from respected local nonprofits and touting $2.4 million in community donations. However, a footnote revealed that the donations were “to be confirmed and subject to change” and “contingent upon the hotel being issued a building permit.”
Having not forgotten the devastating impact of losing 75 units of naturally affordable housing, protesters at the open house carried signs condemning the proposed conversion and handed out flyers criticizing AJ Capital’s attempt to curry favor through supposed charitable donations that appear instead to be mere quid pro quo, calling on the city to hold the project accountable to our laws without exceptions, and urging the owners to pivot and restore housing at the President Hotel.
AJ Capital stimulated a firestorm of public opposition last year when it announced its intention to convert the 75-unit downtown President Hotel Apartments into a boutique hotel and evicted all residents. The outcry led City Council to enact an emergency ordinance requiring relocation assistance for tenants and a new law banning conversion of downtown housing in “grandfathered” buildings (those built before current development standards were adopted) to non-residential use. In March, AJ Capital’s building permit application was deemed incomplete and in violation of numerous zoning laws, including parking requirements.
In September AJ Capital submitted a new application. Whether they can overcome multiple zoning hurdles remains to be seen. They contend that because all the tenants had vacated before the city’s new ban on certain residential conversions kicked in, the President Hotel ceased to be housing rendering their project not a conversion. A study submitted by AJ Capital concludes that with a valet program parking demand for their 100-room hotel will be just 30-40 parking spaces, though the zoning code for new hotels would call for closer to 200. The President Hotel currently has 10 parking spaces. Current law also limits new hotels to a Floor Area Ratio of 2.0, while the proposed project has a FAR of approximately 5.5.
The city’s ambitious Housing Work Plan was approved to great fanfare in 2018. It outlined a balanced array of strategies designed to address housing production, affordability, and preservation. But key opportunities for the city to expand BMR supply and preserve existing, naturally more affordable units remain untapped.
First year policy changes pursuant to the HWP created new potential for significant growth in market rate, multifamily housing units and enabled approval of the Wilton Court project, a 59-unit, 100 percent affordable housing development in the Ventura neighborhood. However, Palo Alto still needs well over 1,000 new affordable units by 2023 to meet state mandated housing targets and inaction on housing preservation left the city with little recourse when faced with the conversion of the 75-unit President Hotel Apartments to hotel use. Since January 2019, the public has seen little action to move the remainder of the work plan forward.
On September 23, City Council will consider a Colleagues’ Memo by Councilmembers DuBois and Kou asking council to prioritize outstanding HWP affordable housing items as well as additional strategies to “produce affordability within the extremely low (0-30 percent Area Median Income), very low (31-50 percent AMI), and low (51-80 percent AMI) income limits.”
The Colleagues’ Memo calls for urgent action to:
Implement the “Palmer Fix,” a recent state law restoring the authority of local governments to require new multi-family rental housing to include a minimum percentage of Below Market Rate units (current city law only requires for-sale projects to include BMR housing). (HWP item 3.1)
Increase development impact fees to $64 per square foot for commercial projects. Santa Clara County recently adopted the same fee for commercial development at Stanford, based on a nexus study showing that the public cost to meet housing demand created by commercial growth in the area far exceeds that amount.
In addition to seeking action “as soon as possible” on those items, the memo asks council to:
Explore a “no net loss” policy when housing is redeveloped. (HWP item 3.3) The memo suggests considering an in-lieu fee or off-site replacement requirement if existing units are removed.
Explore protections for existing, naturally more affordable housing types such as cottage clusters and duplexes in low-density zones (HWP item 2.9) in order to preserve both “missing middle housing” and transitions between low and higher density zones.
Ensure that when mixed-use projects (mix of commercial, residential and/or retail use) are awarded density bonuses (typically extra floor area) the bonus is applied to the housing portion of the project to the extent legally permissible.
Explore citywide regulations to prevent conversion of existing housing to commercial/hotel use.
Staff indicates that a study of the Palmer Fix and possible adjustment of the city’s current inclusionary rate is currently underway and will be presented to the Planning and Transportation Commission in October, with possible council action on a new ordinance early next year. For all the other items, however, staff expects significant additional work would be required.
Market-rate housing production on pace, but affordable units lag far behind regional requirements
Since adoption of Palo Alto’s 2018 Comprehensive Plan Update, we often hear about the city’s goal of producing an average of 300 new housing units a year for the period 2015-2030. To meet the Regional Housing Needs Allocation, or RHNA requirements, set by the Association of Bay Area Governments, we need a total of 1,988 new units during the period 2015-2023. With only five years left in the plan horizon, that translates to an average of 308 new units per year from here on out. But those overall targets don’t tell the whole story. Built into the 1,988 total are specific targets for multiple levels of affordability.
What we don’t hear much about is that a full 70 percent of that mandated 1,988 total must be new Below Market Rate units.
According to the 2018 Housing Work Plan, the city anticipates exceeding the RHNA mandated target for the above moderate income category (serving households earning more than 120 percent of Area Median Income). The city’s 2018 progress report to the state bears that out, showing that more than half of the required above moderate income units were permitted in the first four years of the nine year RHNA planning horizon. If the recent annual average of 76 market rate units per year continues through 2023, Palo Alto will exceed its required market rate target by 97 units.
The first year of the city’s ambitious two-year Housing Work Plan saw intensive policy action to spur new housing by loosening zoning standards to allow significantly greater density and floor area, make housing projects more profitable through parking and design flexibility, and streamline approvals by reining in the public review process. But those development incentives are likely to overwhelmingly benefit market rate rather than affordable projects.
Meanwhile, we are and have historically been WAY behind in meeting required targets for Below Market Rate housing. According to the Housing Work Plan, during the period from 1998 through 2017, only 24 percent of approved new units qualified as affordable. To meet RHNA targets for units accessible to people earning up to 80 percent of the Area Median Income, the city will need an additional 1,022 subsidized units between now and 2023. Add in the moderate income category (81-120 percent of AMI) and the total affordable units still needed jumps to 1,258 — 82 percent of the city’s entire remaining RHNA obligation.
New Affordable Housing district unlikely to build sufficient supply
The principle affordability effort of the Housing Work Plan to date was the creation of an Affordable Housing overlay making special development incentives available to housing projects with 100 percent of units serving people earning up to 120 percent of AMI. Designed to accommodate a specific project, the overlay paved the way for the January 2019 approval of a 59-unit, 100 percent affordable project near Wilton Avenue in the Ventura neighborhood.
As important as that project is, it represents a mere drop in the bucket toward our 1,258 unit affordable housing deficit. Furthermore, given Palo Alto’s land costs, such projects are few and far between. If the city hopes to make more progress toward affordable housing targets, it will need several more of these AND an expanded toolkit.
State and local development incentives create urgent opportunity
What is the Palmer Fix?
For many years Palo Alto required inclusion of BMR units in both for-sale and rental housing projects, but in 2009 a California Court of Appeals in the “Palmer” case struck down a Los Angeles inclusionary rule, thereafter forbidding local governments from imposing inclusionary requirements on rental housing. The inability to condition development entitlements on inclusion of a limited number of BMR units has contributed to a decline in BMR production in communities across the state.
Following a failed legislative attempt in 2013 to reverse the Palmer rule, a 2015 State Supreme Court decision regarding a San Jose inclusionary law paved the way for the 2017 enactment of AB 1505, a State law explicitly authorizing local inclusionary rules for rental housing projects. That law became known as the “Palmer Fix” and since 2017 affordable housing advocates across the state have encouraged local governments to implement it.
Time is of the essence to implement the Palmer Fix
This year’s passage of substantial new state and local development incentives designed to spur market rate, multifamily housing production could lead to thousands of new market rate housing units in Palo Alto in the coming years. But because the city’s current inclusionary requirements only apply to certain for-sale units, that market rate growth won’t produce as many Below Market Rate units as it could.
The Housing Work Plan called for an economic study in mid-2018 of the impacts of a Palmer Fix at various inclusionary rates, and for council action at the end of last year. Yet the study, which also explores possible adjustments to the city’s existing inclusionary rate of 15 percent, has yet to see the light of day and staff doesn’t expect an ordinance to go to council until early next year. Every market rate rental project approved while city action on the Palmer Fix is delayed could represent a lost opportunity to expand BMR housing in the city.
Will recent action by Santa Clara County spur Palo Alto to raise commercial development impact fees?
Palo Alto, like most cities, imposes affordable housing impact fees on commercial development to offset some of the public cost of meeting the BMR demand created by a new commercial project. In 2017, Palo Alto’s commercial impact fees became a source of significant controversy. Supported by a nexus study showing that impact fees could be justified at up to $264 per square foot, the previous council had voted to raise the fees imposed on office and research and development projects from $20.37 to $60 per square foot. By the time the ordinance came up for a second reading, however, a new council majority had taken over. Under the new leadership, council reversed course, lowering the affordable housing fees to $35/sf.
In order to inform its decision on Stanford’s General Use Permit Application, Santa Clara County commissioned a nexus study in 2018 to understand the public cost of meeting affordable housing demand created by Stanford growth. The nexus study revealed that the public cost far exceeded the $36.22 per square foot impact fee the county then charged the university. County staff recommended raising the fee to $143.10/sf, but the Board of Supervisors opted for a more moderate increase to $68.50/sf. In addition the County Planning Commission conditioned its recommendation for approval of the Stanford GUP on a requirement that Stanford itself build at least 2,172 new housing units (not counting student beds) on campus.
Although the council’s political dynamics have not changed significantly since 2017, recent research and action taken by Santa Clara County may make the council more inclined to consider a higher fee.
Council discussion of the Colleagues’ Memo is scheduled to begin at 9:30 pm on Monday, September 23.
When City Council approved a new Housing Incentive Program early this year for Downtown, California Avenue, and El Camino Real area commercial zones, at least one property owner was paying attention.
Where applicable, the HIP allows for significant increases in built floor area relative to lot size, known as Floor Area Ratio, along with other housing development incentives. In October 2018, council had prescreened a project at 788-796 San Antonio Avenue that sought a zoning change from CS (Commercial Service) to RM-40 (Residential Mixed Use) to allow redevelopment of the site as a four-story, 54-unit residential project. Subsequent passage of the Housing Incentive Program (HIP), however, gave the applicant a better idea: if I stick with CS zoning and can get the city to extend the HIP to this part of town, I can build a much bigger project.
The property owner pitched City Council the idea of extending the HIP in May 2019. Despite last year’s sizable controversy over approval of two nearby Marriott hotels due to anticipated congestion impacts, City Council appeared open to the prospect, even though it would further densify the immediate area. So the applicant submitted new plans and requested zoning code amendments extending the HIP to all CS zoned properties adjacent to San Antonio Road between Middlefield and Charleston Roads. The new plans envision a mixed-use project with 102 for-sale housing units, with 15 percent restricted to below-market rate. The Architectural Review Board provided initial feedback on the project’s architecture, massing and site design on August 15.
This week the Planning and Transportation Commission will hold a public hearing on the scope of a required Environmental Impact Report for the project and will offer initial comments on the proposed zoning amendments which include the following:
Establishing a HIP that includes a waiver to allow up to a 2.0 FAR for housing projects (doubling the current FAR for combined residential and commercial use in that CS zoned site) and changes to lot coverage restrictions;
Eliminating unit density limits;
Allowing rooftop gardens to count towards required open space;
Excluding the first 1,500 square feet of retail floor area from parking requirements;
Amending the citywide retail preservation requirements to:
Modify waiver standards to allow exceptions for housing projects; or
Establish minimum retail floor area replacement requirements for housing projects, but not require full replacement; or
Waive all or part of the required replacement retail floor area from the maximum FAR for housing projects.
Though not subject to PTC review, the project also seeks approval of a nine percent parking reduction and a partial waiver of retail space requirements. In addition, the project requires demolition of a building that appears to be eligible for listing on the California Register for Historic Resources.
The PTC hearing will begin at 6:00 pm on September 11. More detail about the project is available in the staff report.
Stanford’s application for a General Use Permit for add 3.5 million square feet of new development will take center stage again this fall as the Santa Clara County Board of Supervisors begins final deliberations. On June 27, 2019, the county Planning Commission rejected Stanford’s bid for a Development Agreement that would credit the university for housing that is existing or already in the pipeline. Instead they recommended conditioned approval of Stanford’s expansion based on Alternative A from the Environmental Impact Report, which would require Stanford to build a minimum of 2,172 new units of housing (not counting student beds) – far exceeding the 550 new units proposed in Stanford’s application. 70 percent of the units in each income category must be be constructed on campus.
Regarding conditions related to traffic mitigation, the commission supported the recommendation that car trips be counted during the entire peak period of the commute (rather than a single hour), but did not support staff’s proposal to count reverse commute trips and average daily traffic as part of Stanford’s no-net-new-trips obligation, opting instead for further study to develop an alternative regulatory standard.
A third major component of recommended conditions of approval for the GUP is long term protection of the Stanford foothills. On August 28, the Midpeninsula Regional Open Space District sought to shore up that recommendation of the county staff and Planning Commission. The district unanimously passed a resolution asking the county to limit development outside of the university’s current Academic Growth Boundary for 99 years unless a supermajority (4 out of 5 supervisors) approve breaching the AGB. Read the District resolution.
Meanwhile, new research by a group of media organizations revealed that Stanford has been buying up single family homes in the area, now owning at least 37 in Palo Alto and 700 countywide. The media groups expect to publish and air their report in mid to late October.
The County hasscheduled study sessions and final public hearings on the following dates:
Tuesday, September 24: Study Session #1 at 1:30 pm Board of Supervisors’ Chambers, 70 West Hedding Street, San Jose
Tuesday, October 8, 2019: Study Session #2 at 1:30 pm Board of Supervisors’ Chambers, 70 West Hedding Street, San Jose
Tuesday, October 22, 2019: Public Hearing #1 at 6:00 pm City of Palo Alto Council Chambers, 250 Hamilton Avenue, Palo Alto
Tuesday, November 5, 2019: Public Hearing #2 at 1:30 pm Board of Supervisors’ Chambers, 70 West Hedding Street, San Jose
To get back up to speed on how we got here, check out our past coverage of the Stanford GUP and explore the county’s website dedicated to the project.
The Cubberley Community Center Master Plan offers an example of the tensions and trade-offs involved in an all out push to build housing supply — in particular, whether limited publicly-owned land should be committed to long-term residential use or dedicated to the community services and facilities necessary to support a growing population.
On May 9, city consultants will convene the fourth and final community engagement session on a master plan to redevelop the Cubberley site. Anticipated as a wrap-up of the community co-design process, the consultants recently announced, based on discussions with City Council and the School Board, that the final meeting will also cover four brand new housing scenarios for the site. The scope and magnitude of the new housing concepts have not yet been released. But to the extent they impinge significantly on the priorities developed throughout the seven-month community “co-design” process, they could meet with some pushback.
The first community meeting focused on identifying the kinds of programming/uses participants hoped to see on the consolidated 43-acre site (Cubberley plus Greendell School plus PAUSD owned property at 525 San Antonio Road). The second meeting focused on prioritizing those uses. Affordable housing registered as desirable to some in both meetings, but in both instances was heavily outweighed by other priorities. The third meeting presented a draft concept plan that introduced potential teacher housing on the PAUSD property at 525 San Antonio, but focused primarily on site organization, massing, circulation, parking, and architecture and landscape styles. After that meeting, 73 percent of participants agreed or strongly agreed that “The Cubberley Master Plan is on the right track.”
One of the five priorities in the city’s 2018 Housing Work Plan included “engag[ing] in community conversations about the use of publicly-owned land for affordable housing.” With no city action on that goal to date, the introduction of new housing concepts at the final meeting of the Cubberley design process may demonstrate that the “conversation” is past due.
If you’ve followed our coverage over the past two years, you know that the City of Palo Alto has worked intensively to complete several ambitious, and often controversial, steps to address the housing challenges posed by the recent and continuing jobs boom in Silicon Valley. Beginning with adoption of a new Comprehensive Plan focused on pursuing sufficient new housing to meet and exceed our regional share of new housing development (known as the Regional Housing Need Allocation or RHNA), the city has also:
encouraged new accessory dwelling units (known as ADUs or granny flats) in residential neighborhoods, exceeding state mandated incentives;
adopted special zoning overlays to encourage workforce and below-market rate housing development;
revamped the citywide zoning code to create major new developer incentives, including reduction of on-site parking requirements and up-zoning for denser housing near transit, our downtowns, and El Camino Real;
created a new streamlined approval process for residential and mixed use (housing plus office or retail) projects that include affordable units; and
adopted a citizens’ initiative to reduce the cumulative office/R&D square footage allowed in the city over the next 15 years in order to create room for housing to compete with the profitable allure of commercial rents.
Those efforts are just beginning to bear fruit, including 82 new applications for ADUs, and 50-plus unit housing projects approved in both of the special “affordable” overlay zones. This progress and the prospect of more to come from the city’s new up-zoning and streamlining programs is promising. Cities across the Bay Area are similarly making big changes to encourage more housing. Nonetheless, the State Legislature is pursuing a wide ranging strategy to wrest land-use decision-making from local communities, replacing zoning designed to suit local conditions with state-wide mandates that also block cities from making future adjustments as population and community impacts take shape.
You may have heard of Senate Bill 50, but did you know that there are over 200 housing-related bills before the State Legislature this year? Monday, May 6, the City Council will hold a joint study session with council members from Menlo Park and East Palo Alto, to hear from Palo Alto’s state lobbyist about where those bills stand, ask questions, and discuss opportunities to influence state legislation as it moves forward.
Please Help Protect the President Hotel Apartments and Residents Citywide
March 29, 2019 – By PAN (Palo Alto Neighborhoods) Committee on Development, Zoning, and Enforcement
The City Council will decide Monday night whether to remove a 2016 law that currently prevents the President Hotel Apartments and similar buildings from becoming hotels or offices.
The impact on tenants in downtown apartment buildings could be devastating. Already, occupants of the 75-unit lower-rent President Hotel Apartments have had to leave because the building’s recent buyer, AJ Capital, aims to convert the property into a luxury hotel. Other tenants downtown may be affected too if the city removes the 2016 law, which is blocking conversions from any use to another in so-called “grandfathered” or oversized buildings.
The city claims the 2016 law was actually an unintended cut-and-paste error and seeks to replace it by a narrower ordinance that limits just the conversion of housing in oversized Downtown buildings to other uses or fewer units. However, city staff fear that AJ Capital or perhaps other owners will challenge the narrower law in court and prevail. So the proposal on Monday night also includes a controversial “waiver” process that allows the City Council to exempt a developer from other zoning laws, thinking this might lead to a compromise that would avoid a court battle.
The City’s approach is insufficient and very worrisome. Instead of just protecting residents in specific Downtown buildings, the Council should enact a city-wide law to prevent all conversions of residences into commercial space, akin to its ban on groundfloor retail and similar uses converting into offices. Such a law could benefit thousands of renters across town and also potentially be easier to defend.
The waiver process is itself problematic. The proposal has no guarantee that apartment tenants will be notified when their landlord applies for a waiver. Without that, they could wake up one morning to discover the City Council has granted their building generous exemptions the night before and that the residents must all move out when their leases end. Instead, every tenant should receive notice of any waiver hearing for their building well in advance.
The waiver proposal also empowers a slim majority of four councilmembers to grant benefits worth tens of millions of dollars to a developer by placing no limit on how many zoning rules are eliminated or watered down. For example, a council majority could respond to a waiver request by granting rights to build an office tower with no parking. Nothing in our municipal code currently gives councilmembers so much unchecked power for a specific site.
When the seven-member Planning and Transportation Commission reviewed the waiver proposal in January, they unanimously recommended against it. They further advised the Council to obtain outside legal advice after expressing concerns that the waiver process might not even be necessary. Their votes reflected concerns raised by many residents who spoke and wrote to them.
From the beginning of the President Hotel Apartment tragedy, our city has failed to protect tenants and preserve rental units, despite repeated proclamations that housing is a top priority. That can change Monday night if we insist that the Council:
insure that any waiver process fully protects tenants,
limits developer exemptions to the very minimum required by law,
consider the unanimous Planning Commission recommendation to eliminate the waiver, and
look at adopting a city-wide residential preservation ordinance.
We encourage you to send an email in your own words to the City Council at City.Council@CityofPaloAlto.org. You can also attend Monday’s Council meeting to speak or support others on this issue.
“Jobs-rich” designation extends impacts well beyond transit zones in Palo Alto
March 3, 2019 – Palo Alto Matters
Since last year’s defeat of Senate Bill 827, State Senator Scott Weiner has returned to try his hand again at replacing local zoning control with one-size-fits-all, state mandated housing standards. SB-827 sought to encourage bigger, denser housing projects near transit. This year’s version, Senate Bill 50, extends state mandates beyond transit corridors to include all residentially zoned parcels in “Jobs-Rich” areas. Whether a community is jobs-rich would be determined by proximity to jobs, area median income and public school quality. By those indicators, it seems inevitable that SB-50 impacts would reach all of Palo Alto.
SB-50 creates a tiered system of incentives designed to make dense housing projects more appealing to developers by requiring cities to waive or adjust local zoning rules regarding such things as density, parking, height and the size of a building relative to the size of the lot (known as Floor Area Ratio). Eligible projects also must be granted up to three additional density bonuses of their choosing (e.g., site coverage, setback, or daylight plane adjustments, even more height or FAR, etc.). Different sets of incentives apply based on the category of a project’s location:
In a Jobs-rich area or within ¼ mile of a high quality bus corridor.
Within ½ mile of a train station.
Within ¼ mile of a train station.
Within a ¼ mile of a train station, for example, dense housing projects could be up to 55 feet high (rising to 75 feet with density bonuses), with building floor area of 3.25 times the size of the lot, and no on-site parking.
To help make SB-50 easier for people to understand, we partnered with the Embarcadero Institute, a 501(c)3 nonprofit organization, to commission a professional analysis and visual renderings of what SB-50 could mean, on-the-ground, for Palo Alto. The report explains SB-50’s system of tiered development incentives and maps out where each tier would apply in the city.
The report also calculates the theoretical maximum housing units that could be produced through SB-50 redevelopment, based on both SB50 incentives and underlying zoning. Those calculations take the very conservative approach of counting only transit rich areas (in the unlikely event that Palo Alto is not ultimately deemed jobs-rich) and not counting extra units that could be achieved through additional density bonuses that may be chosen by developers. Still the theoretical maximum comes to 58,000 units, more than three times the entire city’s current housing stock. Adding in the much larger jobs-rich area would yield a much higher number.
Projections regarding increased parking congestion due to the reduction or elimination of on-site parking requirements and new population growth were beyond the scope of the study. However it does note that car registrations per capita in Palo Alto have climbed by 14 percent in the last five years, reflecting car ownership trends across the Bay Area.
Finally, to show the look and feel of increased building density and intensity allowed under SB-50, the report includes before and after images at five Palo Alto locations showing possible projects if developers take advantage of the state mandated up-zoning. Again, a conservative approach was taken to exclude discretionary density bonuses, demonstrating only what could be built under the bill’s explicit provisions regarding elimination of unit density limits, increased height limits, and higher Floor Area Ratios (floor area relative to the size of the lot).
Without local controls, developers decide
Surely some will cheer the potential housing growth under SB-50 and welcome a new look and feel for the city. Others will hate it. But don’t be fooled into thinking that “this could never happen in Palo Alto.” With the elimination of local controls under SB-50, the market-driven choices of individual developers and their “reasonable judgment” about zoning requirements will drive the outcome.
Recent studies have shown that up-zoning to increase density significantly increases land values, creating a substantial market incentive to buy up property for redevelopment. Once a site is acquired, developers will be entitled to take advantage of SB-50’s development incentives, whether the city or its voters like it or not.
The only way the city could stop or constrain an eligible project is through a showing of significant adverse effect on public safety, the physical environment, or properties on the historic registry. In addition, thanks to changes to the state Housing Accountability Act enacted in 2017 (AB-678, SB-167, and AB-1515), courts must defer to the reasonable judgment of the developer rather than a local government’s planning department as to consistency with zoning requirements – without regard for the weight of evidence.
SB-50 is a no-turning-back proposition. Bigger and denser housing projects with little or no on-site parking could result in a radical shift, city-wide, from today’s detached-house development pattern to a townhouse and apartment development pattern. Over time, that may or may not lead to greater affordability or reduced car ownership. Either way, under SB-50’s mandates, it will be up to developers, not the city, to determine whether SB-50’s vision comes to fruition.
SB-50 has been referred to the Senate Housing Committee, chaired by State Senator Scott Weiner, and the Senate Governance and Finance Committee, chaired by State Senator Mike McGuire. Whether it will get amended and/or approved in committee and move forward to passage is still an open question. Let your local representatives know what you think about the bill:
There will be a joint hearing of the Senate Housing and Governance and Finance Committees on March 5, at 1:30 pm focused on: “Addressing California’s Housing Shortage: How Can We Create Environments to Facilitate Housing Development?” Livestream video will be available here. Or you can view it in the media archive after the fact.
Assemblymember Berman will hold a public Open House on March 7, from 4 to 6 pm at his District Office, 5050 El Camino Real, Suite 117, Los Altos.
State Senator Hill will be meeting with mayors and city managers from across the district to discuss housing on March 15.
Touted as balanced compromise, Compact faces criticism from cities and offers no assurance of cohesive legislation
March 2, 2019 – Palo Alto Matters
SB-50 is perhaps the most prominent in a slew of proposed state legislation to implement an ambitious regional housing plan known as the CASA Compact. The Compact was designed as an interdependent package to address all three legs of the housing stool: production, preservation, and renter protection. Supporters describe the Compact as a necessary, if imperfect, compromise and they hope that controversial elements will have a better chance of passing if they all advance together to the state Capitol. However the Compact itself has been met with strong criticism and there is no certainty or commitment that every piece will move forward.
What is the CASA Compact?
The CASA Compact was created by the Committee to House the Bay Area, a coalition of developers, business leaders, elected officials, labor interests and tenant advocates convened by the Metropolitan Transportation Commission. Recently endorsed by the MTC and the Association of Bay Area Governments, known as ABAG, the CASA Compact consists of an ambitious ten-point planto:
Spur housing construction through minimum zoning near transit; streamlined approvals and exemptions from the California Environmental Quality Act; property tax breaks for developers; use of public lands for affordable housing; and further incentives for accessory dwelling units. “Sensitive communities” with a high percentage of low income residents, would get a grace period of up to 5 years to propose community-driven alternatives to meet state performance standards (i.e., housing production goals).
Protect renters through just-cause eviction rules and relocation assistance; access to emergency rent assistance and legal help; and a temporary cap limiting the size of annual rent increases.
The Compact calls for $1.5 billion in local and regional “self-help” funding (through taxes, fees, bonds and revenue set-asides) to implement the plan including: $1 billion from taxpayers, property owners and local governments; $400 million from employers; and $400 million from developers. At least 60 percent of that funding would go towards housing production, ten percent would go towards renter protections, and 20 percent would go toward preservation.
Notably, the CASA Compact also calls for state legislation to create an independent Regional Housing Enterprise board comprised of MTC and ABAG representatives and the stakeholder representatives who developed the Compact itself. The unelected RHE would have authority to collect and disburse fees, taxes, and other revenues, allocate funding, and issue debt.
Competing interests of small and big cities
The Mayors of San Francisco, Oakland, and San Jose were all on the CASA Steering Committee and voted to approve the final CASA Compact. However, numerous other cities and towns have been strongly critical and objected that the interests of their cities were not represented. The Cities Association of Santa Clara County, representing 15 cities, argued that the Compact’s one-size-fits-all solutions neglect the diversity of needs in each city and threaten to leave cities “without adequate funding for the infrastructure that makes our communities whole – schools, transportation, etc.” Similarly, they argued that the failure to engage cities of all sizes in the plan’s development could lead to significant unintended consequences both locally and regionally.
The intrusion on local land use decision-making (and the associated exclusion of community interests).
The diversion of property tax revenues that are vital to local General Funds and could result in cuts to core services in every Bay Area city; and the redistribution of those funds to counties (perceived as likely to benefit big cities at the expense of smaller cities with lesser voice in county decision-making).
Undermining of effective and promising ongoing local strategies to confront jobs/housing imbalances and finance and support the availability of affordable housing.
Sunnyvale Mayor Glenn Hendricks likened the proposed funding mechanisms and changes to land use authority to “a direct assault on cities” and Mayor Steven Scharf of Cupertino described the Compact as “a product that 97 percent of Bay Area cities think is a terrible idea.” Palo Alto’s then-Mayor Liz Kniss wrote that “[i]t would be problematic for MTC, as an organization representing local governments, to advocate the sweeping legislative proposals embodied in the CASA Compact without clear and robust engagement opportunities for Bay Area communities.”
Selective enactment could subvert the “compromise.”
Without legislative action toward all three goals of production, preservation, and protection, the so-called compromise embodied in the CASA Compact falls apart. Although SB-50 is a fairly fleshed out bill, not every Compact element has received as much attention. And there is no mechanism to ensure cohesion among the bills seeking to implement various elements of the Compact. While housing production incentives have picked up steam, both in Sacramento and locally, they focus mostly on “missing middle” populations earning up to 150 percent of medium income or more. Efforts to expand low-income housing, renter protections and anti-displacement policies have faired more poorly.
Perhaps indicative of the fragile promise of the CASA Compact’s “compromise,” the California Apartment Association, which represents landlords and participated in the CASA planning process, has already said it “will oppose any [CASA Compact] related legislation aimed at implementing the rent control and just cause eviction elements.”
Would enforcing the Cap help us get more housing downtown?
February 8, 2019, by Palo Alto Matters
The City Council is poised to repeal the Downtown Commercial Cap in Monday, February 11 with potentially major impacts on commercial and housing development downtown. Many Palo Altans don’t know about the Downtown Commercial Cap or understandably confuse it with Palo Alto’s other commercial caps. So we thought it was time to get you up to speed on how the Downtown Cap fits into the big picture of land use management in the city. Read on or scroll down to learn why the Downtown Cap is suddenly a big deal and where our public officials stand on it.
With the profit margin for commercial space well above that for most housing, the right combination of commercial controls and housing incentives could be key to tilting our jobs/housing imbalance.
COMMERCIAL DEVELOPMENT CAPS
Having struggled for several decades with an outsized jobs to housing ratio and the negative local impacts it creates, the city over the years has created three major limitations on commercial (jobs producing) development:
City-wide Cumulative Cap: Imposes an 850,000 square foot limit on the total amount of office and research-and-development growth in the city by the year 2030 (excluding medical offices in the vicinity of Stanford Medical Center). The City-wide Cap was reduced from 1.7 million new square feet in response to a citizens initiative in the summer of 2018. The lower Cap equates to an annual average of about 57,000 new square feet of office/R&D.
Annual Limit: Regulates the pace of office/R&D growth in the California Avenue, downtown, and El Camino Real areas by limiting project approvals to 50,000 square feet of office/R&D development in a single year. The Annual Limit does, however, permit unused square footage to be rolled over and added to the subsequent year’s allowable growth and includes some exemptions.
Downtown Commercial Cap: A cumulative limit on the total amount of new commercial development specifically in the downtown district. This Downtown Cap applies to all new non-residential development (e.g., office, R&D, hotel, retail, etc.). Once 350,000 square feet of new commercial development has been approved (relative to a May 1986 baseline), a one-year moratorium is imposed, preventing new downtown commercial floor area for one year while the city undertakes study and implementation of appropriate new regulations to manage downtown land use and its impacts.
HOUSING DEVELOPMENT INCENTIVES
The city recently created substantial new incentives designed to make housing development more economically attractive and feasible. In addition to new Affordable and Workforce Housing Overlays, the newly approved Housing Ordinance makes major changes throughout the zoning code, including the downtown district, that convey millions of dollars worth of value by reducing development standards for parking, density, size, and the like for both new and existing residential and mixed-use projects.
However, private economic incentives continue to strongly favor office over housing development downtown (higher rents per square foot offer greater return on investment for developers/owners). The city’s recent Downtown Development Evaluation Residential Capacity and Feasibility Analysis (October 2017) concluded that “the strength of competing uses (specifically for office space)” is one of the primary barriers to significant residential development in downtown Palo Alto. Indeed, the city itself speculated in a recent staff report that the new Housing Ordinance “is not likely to persuade a land owner redeveloping their property to build residential housing instead of commercial.”
WHY THE URGENCY AROUND THE DOWNTOWN CAP?
The goal of controlling commercial growth embodied in the 33-year old Downtown Commercial Cap ordinance is about to become real. City staff estimates that only about 18,000 square feet of commercial growth remains allowable under the Cap. Once that 18,000 square feet are consumed, the moratorium will kick in, preventing any new non-residential development downtown for one year (or more if extended), while appropriate new policies are designed and implemented. That means the proposed conversion of the President Hotel Apartments to a hotel, which given its size “would puncture the cap,” must wait, as must other new office, retail, or other commercial projects. On the other hand, allowing little or no commercial expansion downtown, even temporarily, could encourage developers to switch to housing, especially given the new housing incentives.
Whatever the council does on Monday night will have prompt and lasting impact. They could repeal the Downtown Cap, rendering meaningless its longtime promise of controlling downtown commercial growth on the eve of fulfillment. They could retain the Cap and hold downtown commercial development static while the city figures out whether and/or how to accommodate more commercial growth. Or they could direct staff to return with a proposal to revise the Cap to prioritize current community needs and preferences such as enabling additional commercial growth only for local-serving retail and services. Whichever way they go, it could largely determine how much new housing gets built.
HOW WE GOT HERE
The city passed the Downtown Commercial Cap ordinance in 1986 due to widespread concern about negative community impacts from unfettered downtown commercial growth. The 350,000 square foot limit allows about 10 percent growth beyond the total downtown commercial square footage existing as of 1986. That Downtown Cap was later embedded in the city’s 1998 Comprehensive Plan and updated in the zoning code in 2006.
Consistent with the law, once cumulative approvals of new non-residential floor area reached 235,000 square feet, the city commissioned a study in 2013 to reevaluate the limit. The Downtown Development Study was to be completed in two-phases: a data collection and projection analysis Phase I, and a policy analysis Phase II to formulate appropriate response strategies. Phase I was completed and shared with City Council and the Planning and Transportation Commission in 2014 and 2015.
According to Monday night’s staff report however, work on the policy analysis Phase II was stayed in January 2017 when a slim 5-4 majority led by Cory Wolbach and Greg Scharff voted to eliminate the Downtown Cap from the city’s updated Comprehensive Plan. Without the benefit of the planned Phase II analysis, both council members and the community at large were denied the opportunity to consider informed policy alternatives.
Although no longer in the Comprehensive Plan, the city’s broad guiding policy framework, the Downtown Cap remains a city ordinance. Last summer, just as the controversy over the President Hotel was heating up, city staff brought a proposal to repeal the ordinance to the Planning and Transportation Commission. Staff interpreted City Council’s January 2017 action as signaling intent also to repeal the longstanding, underlying ordinance. Nonetheless, the PTC voted 4-0-1 against recommending repeal, primarily on the grounds that it seemed inconsistent with the city’s push to promote housing downtown and the groundswell of community support for the citizens initiative seeking to reduce office growth citywide. Now the fate of the Downtown Cap ordinance will return to council with Monday’s vote.
PRO OR CON?
Arguments against the Downtown Cap
Those seeking to repeal the Downtown Cap argue that the cap is too blunt an instrument. They contend that downtown’s transit resources make it a good place for commercial growth and that the City-wide Cumulative Cap together with the Annual Limit in the California Avenue, downtown and El Camino Real areas make the Downtown Commercial Cap unnecessary.
Arguments for the Downtown Cap
Supporters of the Downtown Cap counter that the concerns leading to its original enactment have been borne out, with significant downtown commercial growth exacerbating the jobs/housing imbalance, creating major traffic and parking problems, and contributing to spiking rents by squeezing out housing. Because the Citywide Cap and Annual Limit allow average annual office space to expand more and faster than the historic average, they assert that those tools are insufficient to slow commercial growth. Finally, they argue that enforcing the cap offers the best promise for actually getting needed, and vigorously prioritized, new housing downtown. If the Downtown Cap is repealed, the economic incentives favoring office growth will persist.
WHO STANDS WHERE?
Councilmembers Fine, Kniss, and Tanaka all voted to eliminate the Downtown Cap from the Comprehensive Plan in 2017 and Councilmembers Dubois, Filseth, and Kou voted to retain it. If those returning councilmembers maintain their position as to repeal of the Downtown Cap ordinance, that leaves newly elected Councilmember Alison Cormack as the swing vote. At a public debate during the campaign, she “didn’t see any reason to remove the Cap,” but cautioned that there may be details she didn’t know or wasn’t privy to. More recently, she has indicated in meetings with residents that her view of the issues has changed.
At the grassroots level, Palo Alto Neighborhoods (PAN) recently issued a call to action in support of keeping the Downtown Commercial Cap.
If you have an opinion regarding repeal or retention of the Downtown Commercial Cap ordinance, or suggestions for a “third way,” be sure to share it with City Council. You can email the full council at email@example.com or attend the City Council meeting on Monday, February 11 to speak or support others on the issue. The Downtown Cap item is scheduled for discussion beginning at 8:45 pm.