Widespread community concern about the loss of 75 rental units at the downtown President Hotel Apartments is broadening the housing discussion (beyond how we can build more housing faster) to include long-overdue debate about what the city can do to prevent the loss of existing housing stock as well as an appropriate city role in protecting renters from displacement and unfair evictions. Such issues have dominated public comment at city council and planning commission meetings for the past two months.

Similarly, heightened turn-out of community voices likely contributed to the council’s surprise adoption of tighter citywide limits on office growth, critical scrutiny of Stanford’s expansion, and the scheduling of a special town meeting focused on traffic. In this election season, public officials are “listening.” It’s up to you to make sure you’re heard on issues that matter to you. 

In This Issue

• Guest Commentary:  With uncertain future for Hotel President, city should reach deeper into its toolkit to aid tenants
• Get Up To Speed:  Debate over renter protections heats up; animal shelter faces another day of reckoning; council reduces citywide limit on office growth; next steps on Stanford GUP.
• Looking Ahead:  PTC starts work on zoning ordinance to implement housing work plan; council to take up revised Colleagues Memo on renter protections.

Guest Commentary

With uncertain future for Hotel President, city should reach deeper into its toolkit to aid tenants.  

– Multiple writers contributed to this piece.

Dozens of Palo Altans living in the 75-unit Hotel President Apartments on University Avenue may be forced out before the end of this year and the building converted into a high-end hotel, creating enormous hardships for the existing tenants and undermining the city’s goal of increasing housing options.

The downtown six-story building, converted from a hotel use in 1968, was purchased in June by AJ Capital of Chicago, which sent notices to apartment tenants that they must leave by November 12.  Occupying mostly studio units that currently rent for approximately $2,200 a month, the tenants are a mix of professionals, retirees, and others who hope to stay and are looking to the City Council and community for support.

Other Palo Alto apartment dwellers are also at risk.  If AJ Capital prevails with its hotel conversion, it could pave the way for additional apartment buildings such as the 85-unit Laning Chateau at 345 Forest Avenue to evict its residents and convert to office space.  Between just these two buildings, Palo Alto could lose more apartments than are often built citywide in an entire year.

Proposed Emergency Ordinance – relocation assistance with or without just cause eviction requirements.

If the city hopes to protect renters and preserve housing, it will need to take action.  The council’s first agendized session responding to the Hotel President situation is Monday, August 27 at 8 pm, almost three months after the evictions were first announced.  The council will be considering whether to require that landlords of 50-plus unit apartment buildings in Palo Alto pay relocation assistance when evicting tenants who are not at fault.  The proposed ordinance would pay $7,000 in relocation assistance for each studio unit, plus an additional $3,000 if the unit is occupied by tenants with low incomes or who are disabled, 60 or older, or minors.  Units with one or more bedrooms would receive a larger base amount. AJ Capital offered Hotel President residents just $3,000 per unit back in June, so this could more than double what they will receive.  The council will also discuss whether to limit the reasons tenants can be evicted from large apartment buildings.

Whether the council will agree to pass either of these protections is unclear.  Last October, a Colleague’s Memo proposing that the city review its policies on no-fault eviction, rent stabilization, and other renter protections was supported only by councilmembers Tom DuBois, Karen Holman, and Lydia Kou.  Of the other six, two (Eric Filseth and Cory Wolbach) are now running for reelection and could switch to supporting renters.  Even so, nothing in this Monday’s council action will by itself preserve the building’s residential use or allow the tenants to stay longer.  For that, other steps are needed.

Leeway to limit evictions?

Back in 1985, the state legislature adopted the Ellis Act, enabling landlords to exit the residential rental business when they wish and severely limiting what cities can do to block this.  The act’s intent was to allow apartment owners to maximize their profit or simply to keep their building vacant, even if that takes away badly-needed housing and displaces renters.  Since AJ Capital plans to convert its property into a hotel, the Ellis Act seems to give it the right to evict all the tenants and may doom any hopes for retaining the residential use of the building.  The proposals being discussed on Monday night at City Council reflect this and explicitly acknowledge permissible evictions under the Ellis Act.

However, over the years, other California cities have crafted laws in response to the Ellis Act to soften the impact on tenants, such as not allowing units to be withdrawn from the rental market until an approved plan exists for some subsequent use.  For example, a Santa Rosa ordinance allows tenancies to be terminated when a building will be demolished only after “the landlord has obtained all necessary and proper demolition and related permits from the City.” This effectively requires a landlord to demonstrate the intent and ability to leave the rental market rather than just say so, evict tenants, and then re-rent to others.  The same Santa Rosa ordinance requires that any capital improvement plan (renovation) that would evict tenants must also be approved before those evictions take place.  Santa Rosa’s ordinance doesn’t override the Ellis Act but rather ensures the owner is actually invoking it to exit the residential rental market.

This approach to help renters in the face of the Ellis Act was also mentioned in an August 24 letter submitted to the City Council by the Law Foundation of Silicon Valley.  The letter points out that “cities are permitted to enact ordinances that offer additional protection to tenants when rental housing is taken off the market” and suggests that Palo Alto could “limit the timing of [eviction] notices in relation to the redevelopment process.”  In other words, when a building is going to be redeveloped for some other purpose, the evictions could be timed to come not at the outset but rather after some review or permitting.

If Palo Alto were to adopt such rules, AJ Capital would then need to present its hotel plans and receive permits before any evictions can proceed.  And that might prove to be difficult .. because there are at least four reasons why AJ Capital may not even be able to get permits for its proposed hotel.

Four Legal Problems

Although City Manager Jim Keene originally stated after the June sale that AJ Capital could convert the Hotel President back into a hotel, the City subsequently reversed itself, saying in a July 17 letter that a law governing oversized buildings Downtown actually prohibits the change if a remodel will occur.  The city has many “grandfathering” laws that allow buildings that are taller or have more floor space than is currently legal, such as the six-story Hotel President, to remain and stay in use but not necessarily to switch to any other use. Since most of the building’s floors were rented out as apartments back in 1986 when the grandfathering laws went into effect, those floors can only now be used for apartments and not converted through remodeling into a hotel.

The City’s July 17 letter cited just one of the relevant grandfathering laws.  A second one governing Downtown allows the building to rent out all its residential floors, even though it has about five times as much residential space as is legal. However, that same law states that if the residential use ceases for a full year, then those parts of the building can only be used for a legal, non-grandfathered use – and there is no such use, given the building’s size.  In other words, this second law means AJ Capital would be foolhardy to evict its tenants and stop renting out their units for a year, because after that it would be unable to use most of the building at all – wiping out most of its $65 million investment.

AJ Capital says it believes that the building can be legally converted to a hotel, but has advanced no legal argument to counter these two grandfathering laws.  Even if it were to get past that hurdle, it would face a third law called the Downtown Development Cap.  Established in 1986 out of concerns about traffic and parking, the cap places a one-year moratorium on new permits once 350,000 square feet of new Downtown commercial development have been built.   At a hearing on the cap earlier this year, city staff indicated only about 25,000 square feet remain under the cap before the moratorium is triggered. There may be even less left, depending on what is already in the pipeline and given that the city hasn’t yet totaled in new underground garages and some other spaces.  The Hotel President building was mostly residences back in 1986, so converting those units into a hotel would create tens of thousands of square feet of “new” commercial space and thus run into the moratorium.  Future councils might opt to extend the moratorium, thus blocking the hotel conversion for an indefinite time.

And then there’s a fourth problem, familiar to all Downtown residents and visitors: parking. The Hotel President’s basement has just seven parking spaces and the building isn’t required to provide parking for all its residences, thanks to yet another grandfathering law.  But if it converts its residential floors into a hotel, it will then need to provide over 150 new parking spaces.  Those cannot be retrofitted into the existing building and no other buildings downtown likely have that many unused spaces to lease out.  In the past, the city has sold parking exemptions for over $60,000 per space, but the city is under no obligation to continue this and may have violated its own law by not building the parking spaces before it sells them.  With no way to meet its parking requirements, the hotel could not operate.

Further Council Action Needed

It’s unclear that AJ Capital understood all the legal problems its hotel conversion faces.  Until it proposes a plan that conforms with city laws, regulations such as the those adopted by Santa Rosa and suggested by the Law Foundation of Silicon Valley could forestall the threatened evictions and protect against what could be a long term empty building in the heart of downtown.  If councilmembers wish to protect the Hotel President tenants and others, they will need to move quickly and expand eviction guidelines beyond what’s in the proposed ordinances for Monday night.

You can email your thoughts to the City Council at city.council@cityofpaloalto.org.

Get Up To Speed

Plight of Hotel President residents stimulates debate about renter protections.

As Hotel President tenants ride out uncertainty about their future, city staff has been drafting an emergency ordinance geared toward “mitigating the impact of no-fault evictions on large multifamily rentals.”  An emergency ordinance requires a yes vote by four-fifths vote of council members present and takes effect immediately upon adoption. On Monday night, council will consider two options:

1. an emergency ordinance requiring landlords of apartment buildings with 50 or more units to pay relocation assistance to tenants who are evicted at no fault of their own. The amount of assistance will approximate triple the market rate for a comparably sized unit to reflect “high start-up costs of a new tenancy, in addition to the cost of moving and potential lost wages.” Payments would range from $7,000 for a studio to $17,000 for three or more bedrooms.
2. an emergency ordinance that includes the above relocation assistance and also requires just cause for eviction, specifying nine circumstances in which a tenant may be evicted. Under the state’s Ellis Act, one allowable cause for eviction must be removal of the building from the residential rental market.

If adopted, the required relocation assistance would apply even where a landlord has given notice of eviction prior to the effective date of the ordinance, as is the case for Hotel President. Thus passage of the ordinance will more than double the $3,000 in relocation assistance the Hotel President tenants were previously given. However, the “just cause” requirements will not directly impact the Hotel President because the landlord does intend to exit the rental market.

The City Attorney Molly Stump has been careful to manage expectations as to the city’s ability to block evictions, but as indicated in the commentary above, the city may not be exhausting a full range of legal strategies to mitigate them.

In addition to the emergency ordinance on the docket this week, council is scheduled to consider a revised Colleagues Memo to develop additional renter protections. Although council rejected a similar proposal put forth by Councilmembers Tom DuBois, Karen Holman and Lydia Kou last October, with a narrower focus and the addition of Councilmember Cory Wolbach as a signatory, proponents hope to win over a council majority in support of substantive efforts to mitigate the substantial challenges faced by Palo Alto renters.

Community commitment tested as costs for Animal Shelter escalate.

The long saga of Palo Alto’s animal shelter will finally get down to details on August 27, when council will offer direction on the site use, facility improvements, operational changes and ongoing staff support that would be needed bring a draft contract forward for operation and management of the facility by Pets In Need. Since signing a joint “letter of intent” last August, the city and Pets In Need have been negotiating the interim facility improvements necessary for the nonprofit to take over operations of the shelter in what all agree is an “inadequate” facility that will ultimately need to be replaced.

Pets In Need will take the lead on fundraising for a new facility, but both parties agree that replacement will not be feasible for several years. In the meantime, costs for interim improvements have escalated significantly, with current city estimates upwards of $3 million. While that number is daunting, staff believes that if the city wants to provide a viable, full service animal shelter in Palo Alto, Pets In Need is the best option. Without that public-private partnership, overall operating costs for the city to run the shelter would be more expensive by as much as $500,000 annually.

Council to update ADU ordinance, including possible reduction of fees.

The ADU ordinance expanding opportunities for construction of second dwellings on residential lots has begun to bear quite a bit of fruit. 25 applications have been approved since adoption of the ordinance in 2017 and 29 more are under review according to the Department of Planning and Community Environment. On Monday, August 27, council will consider a further incentive of reduced permit fees, whether to extend an ADU density bonus to new primary homes, and possible mechanisms to promote below market rate rental of ADUs.

Other proposed updates clarify uncertainties discovered in the first year of implementation, including basement setback requirements, bonus lot coverage, replacement parking provisions, reduced height limits within Eichler tracts and encroachment of eaves into daylight planes. Click here for the staff report.

 

As county sifts through public comments on the Stanford GUP, PAUSD trustees step up engagement and Stanford proposes new approach on affordable housing.

The public comment period for the recirculated Environmental Impact Report on Stanford’s General Use Permit application closed in late July. According to county planning staff, they expect to respond to public comments next month, after which the county Planning Commission will hold a workshop and public hearings from September to November. The Santa Clara County Supervisors will follow up with additional public hearings in November and December before making a final decision on the GUP.

After sharply criticizing the adequacy of the GUP’s recirculated EIR, the Palo Alto School Board empaneled an ad hoc committee to facilitate timely, structured communications with the superintendent on issues related to Stanford’s expansion. The ad hoc committee, including board President Ken Dauber and Vice President Jennifer DiBrienza, will be strictly advisory, with all substantive decision-making left to the full board.

Facing critical public scrutiny of the expansion plans outlined in the GUP and the prospect of increased affordable housing impact fees under consideration by Santa Clara County, Stanford recently offered a new approach to meeting its affordable housing obligations. The Stanford proposal would replace the traditional payment of impact fees for unmet affordable housing demand with a plan to convert up to 200 existing on-campus apartments to below market rate units and create a loan fund to support future affordable housing projects.

 

In surprise move, council adopts citizen initiative to limit citywide office growth.

After a citizens’ initiative to reduce by half the citywide cap on new office and R&D development qualified for the November ballot, a deeply divided council commissioned a study of the likely impacts and assigned an ad hoc committee to develop a competing ballot measure over the summer break. The study concluded that the citizens’ initiative would have minimal fiscal consequences and the ad hoc committee declined to offer an alternative ballot measure.

Given the earlier resistance to the initiative by a council majority, City Manager Keene’s apparent distaste for it, and arguments from Mayor Kniss and Councilmembers Scharff and Fine that it undermined the Comprehensive Plan, most expected that council would place the citizens’ initiative on the ballot to stand the test of a citywide vote. Instead, after remaining uncharacteristically silent throughout the debate, Councilmember Wolbach surprised the room by joining Councilmembers DuBois, Filseth, Holman and Kou in voting to adopt the initiative and avoid a ballot campaign. The 5-4 vote for adoption (Fine, Kniss, Scharff and Tanaka dissenting) will change a key Comprehensive Plan policy and associated municipal codes to limit new office and R&D growth citywide (including the Stanford Research Park) to an annual average of about 50,000 square feet per year.

What is “real traffic”?

Mayor Kniss found herself in hot water after suggesting at the July 30 council meeting that community concern about traffic congestion in Palo Alto was “exaggerated” and that she rarely sees any “real traffic” in the vicinity of City Hall.  When council returned on August 13, Kniss described having “heard from all over this community about the trouble with traffic, the traffic jams and the traffic difficulties” and apologized “about misjudging the complexity and intensity of our traffic.” She also announced a special public meeting on the topic of traffic to be held on October 22.

Notable Upcoming Action

August 27, 2018

Safe Routes to School: Council will hold a study session on the Safe Routes to School Partnership Annual Update. Beginning at 5:00 pm (City Hall). Click here for staff report.

Animal Shelter: City Council will consider an operating agreement with Pets in Need and interim improvements to the Palo Alto Animal Shelter. Beginning at 6:40 pm (City Hall). Click here for staff report.

Emergency Renter Protection Ordinance: Council will consider adopting an ordinance requiring relocation assistance or relocation assistance plus just cause eviction protections for multifamily housing developments of 50 units or more. Beginning at 8:00 pm (City Hall). Click here for staff report.

Reaffirming City Commitment to a Diverse, Supportive, Inclusive and Protective Community. Council will consider recommendations from the Human Relations Commission (HRC) to support and extend Council Resolution Number 9653. Beginning at 9:00 pm (City Hall). Click here for staff report.

ADU Updates: Council will consider PTC approved updates to the ADU ordinance, including basement setback requirements, daylight planes, bonus lot coverage and floor area, reduced height limits within Eichler tracts, replacement parking provisions and more. Beginning at 9:30 pm. Click here for staff report.

August 28, 2018

Pickleball to be added to Tennis Court Use Policy: The Parks and Recreation Commission will consider revisions to the city’s Field and Tennis Court Use Policy to incorporate priority use times for Pickleball and allow for Pickleball tournament reservations. Meeting begins at 7:00 pm (City Hall). Click here for staff report.

August 29, 2018

Housing Work Plan: The Planning Commission will hold a study session on the framework for zoning changes to be included in a 2018 housing ordinance to “encourage production of a diversity of housing types in appropriate locations.” Meeting begins at 6:00 pm (City Hall). Click here for staff report.

3877 El Camino Real (at Curtner): The PTC will hold a hearing to approve a zoning map designation to allow subdivision of an existing 0.75 acre parcel into 17 residential condos and one commercial condo. Meeting begins at 6:00 pm (City Hall). Click here for staff report.

September 4, 2018 (Tentative)

Transparency in Labor Negotiations: The Council Finance Committee will discuss Colleagues Memo. Tentative, TBD.

September 10, 2018 (Tentative)

Grand Jury Report on Affordable Housing: Council will consider a draft letter of response to Grand Jury report on Santa Clara County Affordable Housing Crisis. Tentative, TBD.

Renter Protections: Council will consider a Colleagues Memo regarding rent stabilization. Tentative, TBD.

Rezoning of 788 San Antonio Road: Council will pre-screen a proposal to rezone from Service Commercial (CS) to Multi-Family Residential (RM-40) use and to redevelop the site with a three-story, 45,000 square foot residential project. Tentative, TBD.

Change of use at 980 Middlefield Road: Council will pre-screen a request to amend the existing Planned Community zone in order to change the allowed use from mortuary. Tentative, TBD.

State and Local Legislative Update: Council will hold a study session to receive an update from state legislative advocates. Tentative, TBD.

September 17, 2018 (Tentative)

Downtown Parking Garage: Council will hold a hearing to approve the Final Environmental Impact Report for the five-level parking structure at 375 Hamilton Avenue. Tentative, TBD.

Public Safety Building: Council will review the public Safety building design and status. Tentative, TBD.

Southgate RPP: Council will consider a resolution to continue the Southgate Residential Preferential Parking Program with Modifications, including limiting the number of available employee permits. Tentative, TBD.