Item No. 1
Town of Atherton
CITY COUNCIL AND PLANNING COMMISSION STUDY SESSION
STAFF REPORT
TO: HONORABLE MAYOR AND CITY COUNCIL
PLANNING COMMISSION
GEORGE RODERICKS, CITY MANAGER
FROM: BRITTANY BENDIX, CONSULTING TOWN PLANNER
DATE: JUNE 23, 2025
SUBJECT: STUDY SESSION ON PROPOSED INCLUSIONARY
HOUSING ORDINANCE AND IMPLEMENTATION
RECOMMENDATION
Staff recommends that the City Council and Planning Commission discuss and consider recommendations for the Town’s inclusionary housing program and to provide feedback to staff.
BACKGROUND
On January 8, 2025, the Town of Atherton held a joint Study Session with the City Council and Planning Commission to discuss direction for the Town’s inclusionary housing program. The Study Session and staff report covered an introduction to inclusionary housing programs, requirements by the State of California for program adoption, and an overview of the Atherton 2023-2031 Housing Element as it relates to potential inclusionary housing policies. The information presented by staff for the January Study Session also introduced the following two reports prepared by Bay Area Economics (BAE):
• Inclusionary Housing Feasibility Analysis:
An evaluation of the financial feasibility of residential development in Atherton with the inclusionary housing requirements that the Town is currently considering. • Inclusionary Housing In-Lieu Fee Analysis:
Inclusionary Housing Ordinance
June 23, 2025
An analysis of potential in-lieu fees that could be considered as part of an inclusionary housing program. In-lieu fees are fees that may be applied “in-lieu” of on-site construction of affordable units.
The materials for the January 8, 2025 Study Session are available on the Town’s Inclusionary Housing Website: https://www.ci.atherton.ca.us/677/Inclusionary-Housing-Ordinance While the primary purpose of the meeting served as an introduction to the Town’s options for adopting an inclusionary housing, the timing of the Study Session coincided with the Town’s receipt of comments from the California Department of Housing and Community Development (HCD) on the Atherton 2023-2031 Housing Element.
General feedback to staff at the Study Session included the following:
• Prioritize achieving certification of the housing element. • Preference towards pursuing an inclusionary program applicable to the Menlo School, Menlo College and Sacred Heart sites within the Public Facilities and Schools (PFS) zoning district and RM-20/40 zoning district overlay.
• Concern regarding the application of an inclusionary program to the sites on Bay Road, Ravenswood Avenue and Oakwood Boulevard, within the R-1A Single Family zoning district and the RM-10 zoning district overlay. These concerns specifically related to the application of State density bonuses and a desire by some decision makers to reconsider the list of sites to be included in the RM-10 overlay.
• Concern regarding the application of an inclusionary program to single-family home construction. As raised in the Study Session staff report, pursuit of this program could require additional analysis by BAE, depending on the type of development applicable to the program (i.e. new construction vs. alteration projects).
Since the January 8, 2025 Study Session the Town has completed two compulsory housing milestones. First, the Town submitted its 2024 Annual Progress Report (APR) on housing production to HCD on April 1, 2025. The implications of the Town’s 2024 APR are discussed further in this report as the performance evaluation may inform the prioritization of various inclusionary programs. Second, the Town received certification of its 2023-2031 Housing Element by HCD on May 5, 2025. (Attachment 1) The certification letter from HCD States that it found that the Town’s adopted element meets statutory requirements “based on, among other items, the completion of Program 3.11(C) (New Multi-family Housing Development).” The relation of this program requirement to the Town’s adoption of an inclusionary program is analyzed further below.
Inclusionary Housing Ordinance
June 23, 2025
ANALYSIS
Atherton’s Current RHNA performance
The APR is the reporting mechanism that the State uses to evaluate each jurisdiction’s annual performance in housing production. The report captures various stages of permitting review and counts the number of units provided through issued permits towards the Regional Housing Needs Allocation (RHNA) of that jurisdiction. Table A is a summary of the information submitted to HCD for 2024. The RHNA requirement coincides with the span of the eight-year planning cycle for the current housing element, ranging from 2023 to 2031. The 2024 APR reflects the Town’s performance for two years, or 25%, of the current housing cycle. As shown in Table A, the Town is out-performing in the Very Low- and Above Moderate-Income categories, having produced
29.8% and 47.9% of the RHNA, respectively.
Table A: Summary of Atherton’s 2024 APR
Income Level
% of Area Median
Income (AMI)1
Required Housing
Units per RHNA
2024 APR
Performance
Remaining
Housing Units
Very Low
0-50% of AMI 94 28
(29.8%)
66 (70.2%)
Low
50-80% of AMI 54 12
(22.2%)
42 (77.8%)
Moderate
80-120% of AMI 56 2
(3.6%)
54 (96.4%)
Above Moderate
+120% of AMI 144 69
(47.9%)
75 (52.1%)
Overall Total 348 111
(31.9%)
237
(68.1%)
Atherton’s Lower Income Unit Strategy
The success of the Town’s production of below moderate-income units can be attributed to its production of Accessory Dwelling Units (ADUs) and the collection of voluntary rental survey data. If the Town continues to perform well in the lower income categories, and exceed its RHNA at those income levels, those units will roll over to the next upper income level. Note that overperformance in the above moderate-income category does not roll over to lower income levels.
The Town’s approach to lower income units in the adopted 2023-2031 Housing Element is summarized in Table B. When comparing totals in Tables A and B note that the RHNA requirement includes a buffer. This buffer is a requirement by the State to ensure that local 1 The 2025 average median income (AMI) for a household of four in San Mateo County is approximately $186,000.
Inclusionary Housing Ordinance
June 23, 2025
jurisdictions set targets that include a tolerance for flexibility. The key takeaway from Table B is the degree to which it relies on ADUs to meet unit production targets (48%) when compared to the multifamily overlay program (22.2%) that relies on adoption of an inclusionary housing program to generate lower income units.
The Town must produce 162 units at the very low-, low- and moderate-income levels to satisfy its remaining RHNA requirements between 2025 and 2031. If the Town relies on ADUs as the predominate strategy for these income levels, the Town will need to issue permits for 27 ADUs per year, for the next six years, with rental survey responses that correspond to these income levels.
While this rate of ADU production could be achieved, the survey response at specific income levels is uncertain as they are self-reported.
Table B: Atherton’s Plan for Meeting RHNA by Category
Income Level
% of Area Median
Income (AMI)
Required
Housing Units
per RHNA
with Buffer
ADUs Multi-Family
Overlay
Other
Programs2
Very Low
0-50% of AMI 120 62
(51.7%)
57 (47.5%)
1 (0.8%)
Low
50-80% of AMI 77 62
(80.5%)
14 (18.2%)
1 (1.3%)
Moderate
80-120% of AMI 89 62
(69.7%)
25 (28.1%)
2 (2.2%)
Above
Moderate
+120% of AMI
147 22
(15%)
0 (0%)
125
(85%)
Overall Total 433 208
(48%)
96 (22.2%)
129
(29.8%)
Current Zoning Shortfall of Lower-Income Units
The 96 units included in the multifamily overlay projections are anticipated to come entirely from the development of the Menlo College, Menlo School and Sacred Heart sites within the RM-20/40 overlay zone, allowing densities between 20 and 40 units per acre. These sites are also identified 2 This data comes from Table HE-11 in the adopted Housing Element. The “other programs” category reflects a tally of other programs addressed in Table HE-11 including pipeline projects, development of underutilized parcels and development resulting from urban lots splits applying State law – 2021 Senate Bill (SB) 9.
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June 23, 2025
in Program 3.811(C) of the Housing Element as part of the Town’s shortfall strategy. The shortfall strategy requires the Town to allow for the ministerial development of multifamily housing at a minimum density of 20 dwelling units per acre, of which 20 percent or more of the units are affordable to lower income households. The Town has already adopted the RM-20/40 overlay district to accommodate this density by-right, without discretionary review; however, adoption of an inclusionary program is necessary to ensure that the affordability component is met. Although the Town may anticipate that the RM-20/40 property owners will provide affordable units based on the housing’s affiliation with the institutional uses of the properties, without an adopted inclusionary housing program the Town has no control over the percentage of units and the affordability level.
DISCUSSION
Four key pathways for further discussion by the City Council and Planning Commission are outlined below to frame the Study Session:
1. No Ordinance Adoption
This path presumes that the Town does not take any action on an inclusionary housing program at this time. This approach would rely entirely on ADUs for lower income units and conflict with Housing Element Program 3.811(C). Additionally, it would limit the ability to create and support a fund to facilitate the development of affordable housing within the Town. While the Town may consider further postponing adoption of an inclusionary housing program, staff strongly recommends against a course of no action.
2. RM-20/40 On-Site Program:
This path would facilitate the adoption of a program focused solely on the development of affordable units on RM-20/40 properties. These are the sites owned by Menlo College, Menlo School and Sacred Heart. This path continues to rely predominantly on ADU production but sets a framework requiring on-site inclusionary housing as part of any future housing development on the school sites. Opportunities to fund affordable housing efforts elsewhere in Town would be limited, as the focus of this program would be unit production and not in-lieu fee generation. Staff recommends that at a minimum, the Town pursues this program and structure it to align with Program 3.811(C) of the Housing Element and address concerns raised in HCD’s certification letter. This would require at least a 20 percent affordability component for units affordable to lower income households. Funding for projects on these sites is a potential constraint to any future development.
3. RM-20/40 On-Site Program + RM-10:
This path could extend the RM-20/40 program to all or a portion of the eleven RM-10 sites.
The 2023-2031 Housing Element program does not rely on the RM-10 properties to Inclusionary Housing Ordinance
June 23, 2025
produce lower income housing units. This provides greater policy flexibility for the Town.
There are eight sites within the R-1A zoning district that have the RM-10 overlay, enabling a density of 10 dwelling units per acre. With a 20 percent inclusionary housing program, these eight sites could yield 17 lower income units, approximately 11.5% of the 148 very low- or low-income units identified in Table A. Alternatively, allowing the RM-10 properties to pay in-lieu fees could generate funding for off-site housing development in the Town.
Staff recognizes that there are concerns that the application of an inclusionary requirement on the RM-10 sites may encourage developers to pursue concessions and incentives with the State’s Density Bonus Program. While the State program is applicable with or without a local inclusionary housing program, this concern has also raised questions as to whether the Town should re-visit the extent of sites within the RM-10 overlay.
Site selection is not the subject of this report and was not publicly noticed as part of this Study Session. If the Town desires further discussion of that topic in advance of considering any RM-10 inclusionary program, staff recommends tabling the RM-10 inclusionary program until a site discussion proceeds. The timing of that effort may also require updates to the BAE analysis to address any valuation changes.
4. Townwide Program
This path takes a townwide approach by including single-family development within the inclusionary housing program with a goal to set fees at a realistic amount that would alleviate pressure on ADU production and generate funding to support off-site affordable housing development within the Town. This approach provides the most flexibility and financial viability; however, it also comes with the most concern within the community.
As previously raised at the January 8, 2025, Study Session, including single-family residences beyond net new development would require additional analysis by BAE.
NEXT STEPS
The objective of this Study Session is to acquire additional feedback that will assist staff in drafting an inclusionary housing ordinance. Staff anticipates that the earliest a formal ordinance could proceed to the Planning Commission for a recommendation, and then to the City Council for adoption would be July 2025. This timeline assumes no changes to the BAE study.
CEQA
This Study Session is statutorily exempt from CEQA under Section 15262, Feasibility and Planning Studies.
Inclusionary Housing Ordinance
June 23, 2025
NOTICE
Public notification was achieved by posting the City Council agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Legal advertisement of this hearing was published in The Almanac newspaper, 10 days prior to the hearing date. At the time of the publication of this report, the Town has not received any public comment or inquiries on the application beyond what was attached to this staff report.
ATTACHMENTS
1. HCD Certification Letter – May 5, 2025