Item 13 Public Comments — Palo Alto City Council, April 15, 2024

From: [email protected]
To: Council, City; Planning Commission
Subject: revised HE
Date: Monday, April 15, 2024 11:11:21 AM
Attachments: PA-POLI-letter to PACC and PTC re Revised Housing Element 2024-04-14.pdf CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.

Dear Council and PTC members,
Previously staff has counted ADUs as for the above moderate income level.

In the new HE ADUs are spread among all 4 income groups, which means that most are for low and moderate income residents.

This is an admirable goal but
1) I see no evidence that current units are so affordable and hear many comments from council and others that they are not
2) I see no policies/incentives in the HE that would reduce ADU costs toward making them affordable, itself a tough challenge
3) And as the attached letter from John Kelley, with deep experience in ADU design and construction, points out, the city currently has
policies that constrain affordable ADU development.

I support John's call to further revise the HE before submitting to address these challenges unless council instead chooses to reclassify them as for the above moderate income group.

Stephen Levy
TO: Palo Alto City Council (City Council) and Planning & Transportation Commission (PTC)
RE: Recommendations re Agenda Item #13, “Joint City Council and Planning and Transportation Commission Meeting to Adopt a Resolution Amending the Comprehensive Plan by Adopting a Revised 2023-31 Housing Element [etc.]” and Comments re Staff Report 2312-2450 (Staff Report) DATE: April 14, 2024
FROM: John Kelley

RECOMMENDATION
City Staff have improved the prior version of the 2023-2031 Housing Element (Housing Element) in important ways, but the PTC and the City Council should direct City Staff to make further changes in the revised Housing Element prior to adopting it and delivering it to the California Department of Housing and Community Development (HCD).

DISCUSSION

1. ADUs Play a Crucial Role in the City’s Housing Element The City relies heavily on accessory dwelling units (ADUs) in attempting to meet its RHNA. For example, when comparing the “ADUs” row with the “Total Unit Surplus” row in Table 3-27, “Adequacy of Residential Site Inventory,” of the revised draft “Palo Alto Housing Element 2023-2031 (Redlined),” 1 for both (a) the combination of the “Very Low-Income” and the “Low-Income” columns and (b) the “Moderate Income” column, one can see that the “ADUs” values exceed the “Total Unit Surplus” values. Thus, if the City fails to produce very low-income, low-income, and moderate-income ADUs to the extent predicted, much of the “buffer” may disappear, the City may fail to satisfy its RHNA. Accordingly, assessing the City’s constraints on ADU production is vital in analyzing the sufficiency of the Revised Redline Housing Element.

2. The City’s ADU Projections Still Ignore Important Constraints The City relies on ABAG’s technical guidance for estimating the future distribution of ADUs by income category based on actual Palo Alto production figures from 2019-2021. 2 Yet the ABAG technical memo articulates its own limits: “ABAG conducted 2 https://abag.ca.gov/sites/default/files/documents/2022-03/ADUs-Projections-Memo-final.pdf , RRHE, p. 3-8.
1 “Revised Redline Housing Element” or “RRHE,”
https://paloaltohousingelement.com/wp-content/uploads/2024/04/Palo-Alto-Housing-Element-1.pdf , p. 3-72.
1 an analysis of ADU affordability and concluded that in most jurisdictions , the following assumptions are generally applicable.” 3 “Generally applicable,” however, does not necessarily mean “applicable in Palo Alto” (especially if one considers the “Palo Alto premium,” among other things). Thus, in assessing the RRHE, one must scrutinize the unique constraints that Palo Alto imposes on ADU production. 4 A. Impact Fees
Since an earlier draft of the Housing Element was submitted to the HCD in 2022, the City Council again raised the impact fees imposed on 750+ sf ADUs. 5 Today the FY2024 facial — essentially “MSRP,” because proportionality discounts apply to such ADUs — total of Community Center, general government, library, park, and public safety facilities fees for “Single Family” in Palo Alto totals $76,385, more than $3,000 greater than the base, $72,562 figure discussed in the RRHE. 6 Because Palo Alto changed both the categories used to calculate impact fees and the magnitude of the fees, 7 their effects were not reflected in 2019-2021 baseline ADU production figures that the City has relied upon in its RHNA projections. 8 Furthermore, as applied especially to ADUs, 8 https://www.paloaltoonline.com/news/2021/04/15/palo-alto-hikes-development-impact-fees-for-first-time-in -20-years Compare the figures on RRHE, p. 3-8.
7 Staff report for 4/20/2021 meeting , p. 8
6 FY2024 Fee Schedule, p. 65, and RRHE p. 4-64. Please note: in the RRHE, a range of values is provided, “$72,562 - $302,362.” See pgs. 4-63 – 4-64 for a discussion of how the $302,362 figure is calculated. The City acknowledges that such “larger projects involving detached single-family homes…..are rare….” RRHE p. 4-64. (Perhaps ADU impact fees could even exceed the “MSRP.”). 5 “ADOPTED MUNICIPAL FEE FISCAL YEAR SCHEDULE 2024,” “Impact & In-Lieu Fees,” “Development Impact Fees - Residential,” (FY2024 Fee Schedule)
( https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2024-city-bud get/adopted/fy24-muni-fee-book-final.pdf , p. 65.
4 Until recently, Palo Alto’s Tree Ordinance, PAMC Chapter 8.10, “TREE AND LANDSCAPE PRESERVATION AND MANAGEMENT,”
https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-65934#JD_Chapter8.10 , was among the most important, Palo-Alto-specific constraints on ADU production. At the City Council meeting on April 1, 2024, the City Council considered a Staff Report incorporating an important finding from the City Attorney:

During passage of the tree ordinance updates in January, staff confirmed during the Council Questions that based on CAO analysis of PAMC Chapter 18.09, the updated Title 8 and applicable state law, the tree ordinance would not apply to stand alone Table 1 ADU’s .

Staff Report 2403-2809,
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=4688&meetingTemplateType=2& compiledMeetingDocumentId=9485 , p. 1 (emphasis added). (Since this statement was attributed to the City Attorney’s Office, it is assumed that the City will follow that guidance and no longer apply the Tree Ordinance to what are, in effect, statewide exemption ADUs.) Attachment A, the ordinance proposed by City Staff, was amended at the April 1, 2024 meeting. See the video of the April 1, 2024 meeting, https://www.youtube.com/watch?v=s2PxdunJHco , beginning at approximately 6:06:59. 3 https://abag.ca.gov/sites/default/files/documents/2022-03/ADUs-Projections-Memo-final.pdf , p. 1 (emphasis added).
2 the City’s impact fee structure is (a) inequitable, for multiple reasons, only one of which is discussed in the RRHE, and (b) a significant impediment to production of ADUs, a point not addressed in the City’s RRHE financial feasibility analysis. Pgs. 4-64 - 4-65.

The City itself acknowledges that the basic, per-unit fee architecture is inequitable, but it promises to make amends:

In accordance with state law, fees for ADUs are only charged on ADUs larger than 750 square feet, and are charged in proportion to the fee that are or would be assessed on the primary unit. Because Palo Alto has historically charged per-unit fees for residential development, this has led to some inequitable results, as the fees for an ADU will depend not only on the size of the ADU, but also on the size of the primary unit, with higher fees required under state law when the primary unit is smaller. To avoid this scenario, the City will implement Programs

3.1 and 3.5 to convert fees to a per square foot calculation. 9 That is a step in the right direction but remains insufficient to correct past and continuing harms. This promise lacks a specific deadline, but Program 3.1 refers to December 2024. RRHE, p. 5-15. Still, that program omits some of the impact fees identified above, is not offered as a specific condition for present acceptance of the RRHE, and offers nothing to those previously saddled with inequitable housing impact fees to obtain permits for ADUs in Palo Alto. The City should:
● not submit a further revised Housing Element to the HCD until the current per-unit system is replaced;
● immediately place a moratorium on charging new impact fees for ADUs until such a new system is adopted; and, after its adoption,
● recalculate the impact fees for any ADU built after the revised fee schedule was first adopted in April, 2021, refunding the difference between the previously charged fees and those that would have been due under the new system to homeowners.

Even with such changes, however, the City would only be addressing one half of the inequities built into its current impact fee structure as applied to ADUs.

In the FY2024 Fee Schedule at p. 65, the phrases “Single Family” and “per unit” tell only a partial story. The City asserts that “the burden of housing costs is being more equitably distributed across project types,” pg. 4-65, but the discussion in the “DEVELOPMENT IMPACT FEES AND IN-LIEU FEES'' section, RRHE pgs. 4-63 – 4-65, 9 RRHE p. 4-64.
3 fails to make clear that, as currently implemented, “Single Family” and “per unit” essentially mean “brand new single-family on a vacant parcel.” This implicit meaning of the fee schedule language is noteworthy given the City’s observation that there is a “lack of vacant land in Palo Alto.” RRHE pgs. 4-64. It is inequitable to impose impact fees on ADUs that vary with the size of the primary dwelling on a parcel — such that a person with an 800 sf house might have to pay $76,385 to build an 800 sf ADU, whereas a neighbor with a 3,200 sf house would only pay a quarter of such fees to build an identical 800 sf ADU. But a far more fundamental inequity becomes evident when one compares single-family homes and ADUs.
● Instead of building an 800 sf ADU, the hypothetical homeowner with an 800 sf house could instead add 2,400 sf to the house, but since there was a pre-existing home on the lot, Palo Alto would not currently charge $76,385 in impact fees, nor indeed any of the park or other impact fees detailed above, on that home addition, even though it would be three times the size of the 800 sf ADU alternative.
● If the hypothetical neighbor, with a 3,200 sf house, had the capital and the desire, the neighbor might “scrape” the entire existing house, rebuild at or above grade 3,200 sf more luxuriously, and then add a basement, perhaps 2,400 sf in size, and, again, not pay any impact fees.

The City may “implement Program 3.1 Fee Waivers & Adjustments ” before New Year’s Eve 2024, RRHE pgs. 4-65, but this does not appear to include a commitment to alter the fundamental discrimination in Palo Alto’s impact fee architecture as implemented:
the City privileges substantial additions to and even complete “scrapes” of single-family homes, while seeking to shift the vast majority of all housing impact fees to new ADUs, apartments, condominiums, and townhomes. Palo Alto’s impact fees are, in essence, housing taxes on smaller, non-R-1 dwellings. Such taxes constrain ADU production.

As HCD has recognized, 10 one of the merits of ADUs as a housing production strategy is their low costs. This “lower denominator” means that the impact fees charged by Palo Alto constitute an outsized percentage of costs for ADUs. As a corollary, the financial feasibility analysis offered by the City, RRHE pgs. 4-64 - 4-65, is not applicable to ADUs. Rather than building four dozen townhomes, a Palo Alto homeowner may only be seeking to build a single 800 sf ADU. Adding even tens of thousands of dollars to an ADU project may make it significantly less attractive to an individual homeowner, who generally would have lower access to capital than the developer of 48 townhomes.

Even without reaching the full $76,385 amount, many homeowners with smaller homes 10 “ACCESSORY DWELLING UNIT HANDBOOK UPDATED JULY 2022” (“HCD 2022 ADU Handbook”)( https://www.hcd.ca.gov/sites/default/files/docs/policy-and-research/ADUHandbookUpdate.pdf ), p. 4.
4 will end up being charged $25,000, $30,000 or even more in “Planning Impact Fees'' before they can receive a building permit for an ADU from the City. Not everyone in Palo Alto can put $25,000 on a credit card or send an e-check for $30,000 to the City.

Thus the architecture of City’s housing impact fees — already heavily disadvantaging ADUs — further privileges more economically advantaged homeowners. The City’s financial feasibility tests will be cold comfort for many homeowners building ADUs.

The burden of the City’s impact fees on ADUs — whether $25,000 or $75,000 — will also affect the City’s ability to meet its RHNA, particularly for more affordable housing. This is especially true given the current interest rate environment. If one were able to obtain — which could be quite difficult — a 30-year fixed mortgage at 7% to build an ADU, $30,000 in marginal fees paid to Palo Alto would translate into an approximately $200 greater monthly payment. 11 $200 per month translates into a sizable percentage of the 1- and even 2-person rents described in “TABLE 2-18 MAXIMUM AFFORDABLE HOUSING COSTS, SANTA CLARA COUNTY, 2021” for the “Extremely Low Income,” “Very Low Income,” “Low Income,” and even “Median Income rental limits.

RRHE pg. 2-39. Thus the the City’s reliance on ADUs to meet its affordable housing goals is incoherent if not completely inconsistent:
● while relying on ADUs to provide a significant percentage of its more affordable units, and while knowing that any such tax will constitute a relatively larger proportion of project costs in comparison with, for example, R-1 developments, the City nonetheless taxes ADU production; and
● Program 3.1 does not appear to commit the City to correcting the taxation disparity between new smaller housing units — ADUs, apartments, etc. — and new additions to or “scrapes” of single-family homes.

Both the magnitude and the architecture of Palo Alto’s impact fees significantly constrain ADU production, particularly production of more affordable ADUs.

B. Utilities Policies
City of Palo Alto Utilities (CPAU) policies further constrain ADU production.

While the UAC may take up this issue at some point in the future, at present the City follows what is, in essence, a “one-parcel, one service” policy in R-1 neighborhoods.

This means that, for example, electrical, water, and sewer services for a primary 11 https://www.google.com/search?q=mortgage+calculator&oq=mortga&gs_lcrp=EgZjaHJvbWUqDQgAEAA YgwEYsQMYgAQyDQgAEAAYgwEYsQMYgAQyDQgBEAAYgwEYsQMYgAQyBggCEEUYPDIGCAMQR Rg8MgYIBBBFGD0yBggFEEUYPDIGCAYQRRhBMgYIBxBFGEGoAgCwAgA&sourceid=chrome&ie=UTF -8
5 dwelling and an ADU (or JADU) on the same lot will be provided and billed under one CPAU account. If a homeowner is seeking to build and rent an ADU (or JADU), this can cause several types of problems.
● Tiering problems. If a utility’s prices are tiered based on consumption (for example, higher per unit rates above one or more thresholds), then two households on a single account will be billed at a marginally higher rate than they would be billed on two separate accounts.
● Overhead and collections problems. Even with sub-metering equipment, a homeowner renting an ADU will be left with the tasks of calculating charges, billing, and receiving payment.
● Fundamental capital cost problems, especially with electrical services. Many existing single-family homes in Palo Alto have existing 100A or 200A electrical services. Adding even an 800 sf ADU may, based on the normal electrical load calculation methods followed by CPAU at present, and especially if a homeowner is seeking to build an all-electric ADU, result in approximately 100A (or more) of additional electrical load. While other techniques may be used, if one simply seeks to increase one’s electrical service capacity, present CPAU forms and policies can result in the need for an application to increase the existing electrical service to 400A, even though some of this capacity is not necessarily needed for the ADU. Such an electrical upgrade, including both the fees charged by CPAU and those charged by a contractor, can sometimes cost $10,000 or more. ● “Loser lottery.” That first $10,000 cost may not be the biggest cost. CPAU may, in addition, determine that there is not sufficient capacity in its local distribution system for a new 400A service, in which case an ADU applicant may have “won” a “loser lottery”: CPAU may determine that, because the ADU would exhaust local distribution capacity, the ADU applicant should bear the cost of, for example, upgrading a transformer, or, sometimes, even having also to place a large pedestal for new CPAU-owned electrical equipment in the applicant’s front yard. 12 The “winners” of such a “loser lottery” might have to pay tens of thousands of additional dollars to CPAU.

Returning to the prior mortgage cost analysis, all of these costs might add another $70, $140, $210, or more in monthly costs to an ADU project, further undermining its potential to help the City meet its housing affordability goals.

Other policies could and should be adopted by the City. 12 Requiring such payments and siting equipment on a homeowner’s land as conditions for obtaining a building permit may be quite improper, e.g., as requiring a “public benefit” from a building permit applicant. 6 ● CPAU could and should give homeowners building ADUs the option — as determined solely by the homeowner, and at the homeowner’s expense — to build a new ADU (or JADU) with its own utilities, particularly electrical and water utilities. The homeowner should decide if such capital investments make sense. ● CPAU could and should bear the costs of maintaining its own distribution capacity, a n issue that will probably return to the City Council in other contexts (e.g., future deliberations regarding S/CAP and electrical infrastructure). ● CPAU could and should move more quickly in accepting, working with, and even supporting alternative means of calculating electrical loads under the NEC.

With such changes, the City would begin to eliminate some of the most important constraints on ADU, and especially affordable ADU, housing production resulting from current CPAU policies.

C. Permitting Policies
Government Code sub-section 66314(a) allows a local agency to designate areas in which ADUs may be permitted based on “on the adequacy of water and sewer services and the impact of accessory dwelling units on traffic flow and public safety.” 13 Government Code sub-section 66317(c) provides: “No local ordinance, policy, or regulation, other than an accessory dwelling unit ordinance consistent with this article shall be the basis for the delay or denial of a building permit or a use permit under this section.” 14
Despite these and other limits on which types of considerations a local agency may consider in reviewing an ADU permit application ministerially, the City routinely routes ADU permit applications to multiple departments whose reviews are not specifically authorized under the California statute, including, Urban Forestry, Electrical Utilities, and the gas portion of WGW Utilities. Individualized reviews of ADU permit applications by such departments, particularly involving non-objective standards, frustrate the ministerial ADU permit application process. The City’s routinely subjecting 14 https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=1.&title=7.&part =&chapter=13.&article=2 . (formerly Government Code sub-section 65852.2(a)(7), see https://codes.findlaw.com/ca/government-code/gov-sect-65852-2/https://codes.findlaw.com/ca/governmen t-code/gov-sect-65852-2/ ).
13 https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=1.&title=7.&part =&chapter=13.&article=2 .
(formerly Government Code sub-section 65852.2(a)(1)(A), see https://codes.findlaw.com/ca/government-code/gov-sect-65852-2/https://codes.findlaw.com/ca/governmen t-code/gov-sect-65852-2/ ).
7 ADU applications to such reviews is another way in which it constrains ADU production, delays ADU permit issuance, and increases costs to those seeking to build ADUs.

D. Disavowing HCD’s AFFH Tools
The HCD has provided tools for determining whether certain types of ADUs are allowed in particular areas. The “Affirmatively Furthering Fair Housing Data and Mapping Resources” is an example of one such tool. 15 Using it, one can identify, for example, “High Quality Transit Stop Areas” within Palo Alto: 16 16 https://affh-data-and-mapping-resources-v-2-0-cahcd.hub.arcgis.com/datasets/636e3f917b3445929f4aa0 647afc4085_2/explore?location=37.436345%2C-122.134573%2C12.94 15 https://affh-data-and-mapping-resources-v-2-0-cahcd.hub.arcgis.com/ 8 Such a map should allow one, before filing an ADU building permit application, to determine with precision whether one can build, for example, an 18’ detached ADU on one’s property. See PAMC 18.09.030, Table 1, fn. 5. 17 Despite the availability of such tools, Palo Alto appears not to recognize their accuracy, and appears to base its determination of such areas based on its own compilation of data, which may well be inadequate and incomplete.

Failing to acknowledge and accept the legitimacy of such HCD-provided AFFH tools is another significant constraint on ADU production, because it makes it more difficult, more expensive, and more time-consuming to determine whether one can build the type of ADU that one might seek to build in Palo Alto; even more unfortunately, it can result in an incorrect determination of whether a particular design is permissible.

3. Compounding Effects and Cumulative Financial Metrics Extremely high and inequitable impact fees, costly utilities policies, onerous permitting practices, and disavowal of recognized AFFH tools are all, when considered individually, significant constraints on ADU production and especially on production of more affordable ADUs in Palo Alto. Considering them collectively compounds and multiplies deleterious effects, further reducing the likelihood of the RRHE being sufficient to meet Palo Alto’s RHNA mandates.
● Regulatory uncertainty, such as that caused by the City’s failure to acknowledge HCD-provided AFFH tools may keep an ADU project from ever commencing.

Knowing that friends or neighbors in other parts of Palo Alto can build 18’ detached ADUs (e.g., over an existing detached garage) may set an expectation for prospective ADU applicants that cannot be verified at the outset of a project. ● Prospective ADU applicants that live in smaller homes and that may also be less capital advantaged may be dissuaded from building larger ADUs when they can spend the money in better ways simply by adding onto their existing houses without incurring enormous impact fees. Why let the City charge $50,000 or $75,000 for an 800 sf ADU when the same overall budget might support an extra bedrooms or even more in a 900 sf or larger addition?
● How much will it actually cost, over the lifetime of an ADU, to pay higher marginal electrical and water service rates with single accounts for both primary dwellings and ADUs? Who will bear that financial risk?
● Would one decide not to build an all-electric ADU or even drop a project if CPAU failed to pay the costs for upgrading a transformer in its distribution plant? 17 https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-76751 9 ● Who, indeed, would ever want to be the grand-prize “winner” in a “loser lottery,” having to pay $10,000, $20,000, or even more to install a 400A electrical service, with the special bonus of housing a CPAU transformer in one’s front yard? ● Why should there be any review by Urban Forestry, Electrical Utilities or gas utilities of 800 sf or smaller ADUs? Why are such reviewing departments in Palo Alto also sometimes the very last to approve an ADU application, delaying what is supposed to be a maximum 60-day, completely objective, and ascertainable-in-advance, ministerial review process?
● Obtaining an ADU building permit from any local agency in California should be quick, easy, and inexpensive. Those are not the adjectives that many homeowners who have built, or who would like to build, ADUs in Palo Alto would use to describe the City’s permitting processes. Instead, as a result of other City policies and practices, those seeking to build ADUs and other residential dwellings often come face-to-face with the “Palo Alto Premium,” the implicit surcharge that contractors and others may impose for working in Palo Alto.

All of these effects, especially when considered in combination, take their cumulative toll, particularly on production of more affordable ADUs in Palo Alto. Yet the RRHE assumes, based on ABAG’s conclusions about circumstances in “most jurisdictions,” 18 that over 300 ADUs will be built in Palo Alto over the next several years, apparently for rental at the “Extremely Low Income,” “Very Low Income,” and “Low Income” prices described in Table 2-18. RRHE, pg. 2-39.

In the “AFFORDABILITY” section of the RRHE, the City seems almost to concede that this is fanciful.

When comparing the home prices and rents shown earlier in Figure 2-17, Figure 2-18, and Table 2-16 with the maximum affordable housing costs presented in Table 2-18 below, it is evident that extremely low-, very low- and low-income households in Palo Alto have almost no affordable housing options without substantial subsidies.

RRHE, pg. 2-39. How is the City intending to provide such subsidies for ADUs? While Section 2.6 of the RRHE, “HOUSING STOCK CHARACTERISTICS,” discusses, among other things, means of addressing expiring Section 8 project-based subsidies, RRHE, pgs. 2-83 - 2-88, it is unclear whether, and if so how, these or other discussions of potential subsidies would or could apply to the 300+ ADUs the RRHE assumes would be available at extremely low-, very low- and low-income rental prices. 18 https://abag.ca.gov/sites/default/files/documents/2022-03/ADUs-Projections-Memo-final.pdf , p. 1. 10 What is known is that the combination of extremely high and inequitable impact fees, costly utilities policies, onerous permitting practices, and disavowal of recognized AFFH tools operates as an anti-subsidy, as a housing tax, especially on ADUs.

The City does not appear to have offered an ADU-specific financial analysis of such constraints. What metrics might one use to assess the City’s policies and practices on ADU housing production? At least two come to mind.

One standard has a proven track record of success at the state level. During those parts of a fiscal year when its funding has not been fully allocated, and for eligible recipients, the maximum $40,000 grants offered by CalHFA appear to have been successful in stimulating ADU production.

CalHFA’s ADU Grant Program has already created more housing units in California by providing grants up to $40,000 to reimburse pre-development and non-recurring closing costs associated with the construction of an ADU.

Pre-development costs include site prep, architectural designs, permits, soil tests, impact fees, property surveys, and energy reports. 19 Under the 2023-24 state budget, which provided $25 million for the project, there appears to have been “high demand” 20 for such grants. As a first approximation, and certainly one that would appear to be more relevant to ADU construction than a survey of four dozen townhomes, a $40,000 marginal cost might be more than sufficient to have negative implications for ADU production.

A second method of calculation might be based upon the Santa Clara County ADU “Accessory Dwelling Unit Calculator.” 21 Assuming that one were seeking to build a “0 Bed / 1 Bath / 0 / 400 sqft” studio in Palo Alto, the calculator projected $184-224K in development costs, an estimated monthly rent of $1,600 - $2,000, monthly expenses of $1,500 - $1,900, based upon a capital structure of a $60,000 cash investment and a $144,000 loan with a 20 year term and an 8% interest rate, yielding an estimated monthly mortgage payment of $1,194. Since the estimated monthly rent was quite comparable to the estimated monthly expenditures with this capital structure, it appears that most of the economic benefit was projected to be realized as an increase in property value. “It is estimated that your ADU will increase your home value by $214,000.” 22 But using $60,000 in cash, and leveraging it with a $144,000 mortgage — even if one could obtain such a mortgage — to produce an increase in value of 22 https://santaclaracounty.aducalculator.org/
21 https://citiesassociation.org/documents/santa-clara-county-adu-calculator/ 20 https://www.calhfa.ca.gov/homeownership/bulletins/2023/2023-12.pdf 19 https://www.calhfa.ca.gov/adu/index.htm
11 $214,000 in a relatively illiquid asset with relatively high sales transaction costs would appear, on its face, to be only modestly attractive as an investment opportunity when 10-year Treasury bonds are yielding, at least at this time, over 4.5%. 23 As a result, one might expect an economically motivated ADU applicant to strive to increase rents higher, potentially to levels above what the City has contemplated in Table 2-18.

There is a substantial chance that Palo Alto’s constraints on ADU production will cause the City to fail to meet its projected targets for extremely low-, very low- and low-income ADUs. As a result, the City’s “Buffer above Remaining RHNA After Credits,” RRHE, pg. 3-72, for those categories of affordable housing units may be lost.

In addition to the policy changes discussed above — eliminating or greatly reducing impact fees on ADUs; returning previously inequitably levied impact fees to homeowners; allowing, at a homeowner’s option and expense, for separate electrical and water utilities services for ADUs; ending Urban Forestry, Electrical Utilities, and WGW gas-related departmental reviews; and accepting the results of HCD’s AFFH tools — this analysis points towards the types of policy interventions to which the City should commit itself if it truly intends to rely upon ADUs as an important source of extremely low-, very low- and low-income housing during the current RHNA cycle. It could and should:
● replicate the maximum $40,000 grants offered by CalHFA, perhaps in cooperation with CalHFA itself.
● offer qualifying ADU applicants, perhaps using the same income and other qualifications established by CalHFA, to provide, e.g., $200,000 - $300,000 loans at the City’s cost of capital to those applicants willing to offer rentals at federally approved rates for a period of 10 years with “on-bill payments,” perhaps through the CPAU’s own billing system; and
● immediately implement AB 1033: “ Accessory dwelling units, also referred to as ADUs and “granny flats,” have been available in California only as rentals. But a new law, Assembly Bill 1033 , is giving Californians the opportunity to buy and sell them as condominiums,” creating an important innovation to foster actual ownership of smaller homes in Palo Alto.

Palo Alto has the capability, the credit rating, and the spirit of innovation to provide capital and new forms of ownership for more affordable housing in our community. The City can augment ADU production, especially of more affordable ADUs, should the City Council demonstrate leadership and commitment to such goals. 23 https://www.bloomberg.com/markets/rates-bonds/government-bonds/us 12 From: Greg Schmid
To: Council, City
Subject: Comments on Item 13 of April 15, 2024 Council Agenda Date: Sunday, April 14, 2024 8:47:24 PM
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April 14, 2024

Dear Council Members and Commissioners,

This Housing Proposal before you tonight is destroying local democracy.

How can you approve it without raising a few fundamental questions. Let me point our four questions that need answers before you move ahead.

1. The whole RHNA process within the Plan Bay Area 2023-2031 is based on an overly aggressive—and, as it turns out, wrong-- Bay Area jobs forecast made by HCD in 2019. And it was asserted at that time that it would be illegal to have any public discussion of lowering that jobs forecast number until 2032—even though that forecast has proven wrong!

2. California Code requires that any state agency that makes a demographic forecast be in agreement with the State Demographer. In 2019, the State Demographer was projecting a population growth in the Bay Area of 17% for the period 2020-2030. But a dramatic change in employment patterns in knowledge based industries with a clear dispersion of jobs has the State Demographer now projecting a Bay Area decline in jobs of 1.7% between 2020-2030 instead of the projected increase. HCD’s base numbers are seriously outdated!

3. It is time for HCD to publish the Code required Guidebook (CA Code 65890) that would help local cities offer incentives to induce companies to disperse jobs to cheaper and more accessible communities.

4. The Bay Area has had one of the country’s most expensive and unequal housing markets.

One of the key goals of the Housing Element is to produce more affordable housing. But with affordable units in multiunit projects being paid for through inclusionary zoning, market rate units remain among the highest and the most unequal in the country.

Please do NOT approve this Housing Element until there is a clear open meeting discussion of the major shifts in the jobs market in and around Palo Alto. The people in the City must have the opportunity to discuss the longer term health and environmental impacts of concentrating jobs and housing in Palo Alto and the larger Bay Area—and look at the possibilities for jobs dispersion to less congested and more affordable areas. Following the California Government Code means keeping local democracy alive and maintaining a healthy and prosperous economy that benefits all.

Respectfully,
Gregory Schmid
gregschmid @sbcglobal.net
From: Scott O"Neil
To: HeUpdate; Council, City; Planning Commission
Subject: Palo Alto"s Third Housing Element Draft
Date: Sunday, April 14, 2024 8:40:52 PM
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Dear Palo Alto City Council, Planning and Transportation Commission, and City Staff, I am writing for myself (not PAF), to suggest the city’s best move toward certification on Monday is to reject the third housing element draft, and direct staff to come back with a fourth draft that uses an aggressive HIP implementation to address HCD’s concerns about the second draft.

This is necessary because the third draft, rather than taking the feedback to heart, re- evaluating their theory of compliance, and coming forward with a different policy direction – is instead trying to explain harder how the original strategy is fine. This was also the core strategy behind draft 2, which also failed to gain certification.

If you approve the draft in front of you, you will hit a “snooze button” on housing element progress that will run until HCD responds 60 days after submission. For draft 2, submission was weeks after Council approval. That is wasted time. It would be better, tactically, to ask staff to focus on delivering a HIP revision that addresses the city’s vulnerabilities on the HE now, with an eye toward a third draft submission that uses HIP to make a stronger compliance case on merits.

The City’s Theory of Compliance, and its Problems
The city’s long-standing position can be summarized thus:

What matters most is counting up enough units for RHNA.

A unit can be counted for RHNA if it can be built physically, based on zoning.

Economic feasibility does not matter.

Constraints analysis happens in the narrow context of the inventory physical feasibility analysis.

Not in a broader context of city-wide production.

Therefore, compliance on constraints for a zone can be evaluated by looking at the inventory development standards, even if those standards do not apply anywhere besides those inventory sites, and almost the entire zone (and city) uses older, more constrained standards.

Once the city has counted enough units, it cannot be noncompliant on Fair Housing law, because Palo Alto is a universally high-opportunity city. Therefore, units can go anywhere, and even be heavily concentrated in the South Palo Alto GM/ROLM areas.

I think the city could, with a little more work, cough up enough compliant units to tally up for RHNA. But the problem is foundational to the current approach:

The city has a legal duty to both recognize and mitigate constraints. This analysis is apart and separate from the inventory/RHNA exercise.
“Constraints” includes economic constraints created by zoning development standards.

If anyone wanted to argue that our zoning standards are not a governmental constraint, consider that the city has received applications for about 40% of its total RHNA within one year via “Builder’s Remedy” applications. Ie: when a zoning holiday was perceived, proposals went through the roof. This is despite the city not recognizing such applications as valid. The real opportunity must be much higher.

Our first Builder’s Remedy application arrived ~1.5 months after the city went noncompliant. The city rezoned in January, about ~3 months ago. If the rezoning addressed constraints, are there compliant applications outside GM/ROLM/ECRF?
Constraints analysis is not narrowly constrained to the inventory. This is especially true in a city like Palo Alto, which is only even addressing physical constraints for a few hundred parcels. That is: even if physical constraints were the bar (it is not), the city would need developer interest on nearly 100% of its inventory to credibly argue the constraint is mitigated.

This is because the rezoning in January was (outside of GM/ROLM and ECR focus area) only applied to actual inventory sites, not entire zones.

Compounding this problem: the city’s “opt out” approach to owner outreach means it cannot show development interest on almost any inventory sites.

The only exceptions to the city’s spot-zoning approach are ECR Focus, and South PA GM/ROLM. These are also the only places which arguably meet an economic feasibility standard. This “dumping” renders the HE illegal under Affirmatively Furthering Fair Housing (AFFH) law.

These are the problems the city is facing going into the draft. Instead of engaging with them, the draft recommits to its own premises, and tries to argue its way out of the situation.

The Way the City Argues, and its Problems
When discussing the first draft of the Housing Element, I gave the HCD reviewer some advice. Paraphrasing: “I don’t think I’ve ever caught Palo Alto in a lie, but they are selective about what they present. If you take their Element and add the facts we’re telling you – you’ll get a pretty good overall picture.”
Put another way: the city’s Housing Elements only appear compliant based on an assumption that the reader will be evaluating them unopposed. They have collapsed when viewed alongside fact-patterns like the PHZ proposal history (and now Builder’s Remedy proposal history), development timeline history, pre-approval activity, PAF’s geospatial analysis of zoning effects, independent review of sites in the inventory, besides many others.

The third draft continues to demonstrate the City’s belief that if the city only makes enough arguments like this, then it will achieve certification. This approach has not been serving the city well.

Case Study 1: “Stranded Parcels”
Going back to the first draft, PAF has been arguing that you cannot count certain sites which have what they call “stranded parcels.” The original archetypical example being, the Downtown Whole Foods parking lots, which were initially included separate of the store.

These do not pass a smell test. Is Whole Foods going to close down so the parking lots can be redeveloped? How would the store function during construction? PAF’s argument is you need to consider both parcels, together, as one unit.

The city has removed many (~250-300) of these sites from the inventory, including Whole Foods. However, others remain. Including APN 137-01-078 at High Street, 2137 El Camino, 3760 El Camino, and others. (Totaling ~50-75 units.) HCD in its letters has been saying the city needs to rely on “local knowledge” which has been taken as a nod to arguments like this one.

I believe the following section of draft 3 must be motivated by the “entangled land use” argument, and intended to rebut to argue the remaining sites can, in fact, partially redevelop:

This should be obvious, but: Novato is 51 miles away as the crow flies, Pinole is 40 miles away. Neither is in an adjacent county. These cannot, in principle, provide “local knowledge.”
Even setting that matter aside, though the city is flat wrong about its applicability. For one thing, “The Village at San Antonio Center” is a separate property from the adjacent “San Antonio Shopping Center.” What is now “The Village” is a single site that was completely redeveloped in two phases. I do not believe you can point to any business at the new site and say “The Village” redeveloped their parking.

Moreover, what all three of these projects have in common, is scale. Five acres in Pinole, and six in Novato. San Antonio Village is even larger, at 16 acres, and it’s certainly close enough to serve as a local precedent.

Notably, there is a supermarket in the new redevelopment at the Village. A Safeway, moved in from another site. At no point was this Safeway operating while its only parking lot was being redeveloped into housing. This is the kind of thing the city would need to show happening to rebut our “entangled land use” argument.

Which brings us back to scale. Palo Alto Forward has only applied the “entangled land use” argument to small sites that can’t be easily split up. The city cannot rebut this by providing examples of much larger sites spanning numerous businesses, being partially redeveloped, or redeveloped in phases. We have not applied this argument to sites like Transport St APN 147-02-017, and Park Blvd APN 124-28-003, which could more conceivably be split apart from the parent site.

Case Study 2: Streamlined Review
The Housing Element asserts:
“This new process allows multifamily projects that meet objective standards to be considered for approval following City staff completeness review and one study session with the ARB from submittal to approval (2 months from being deemed complete). Notably, this streamlined review is available for projects receiving density bonuses and other incentives or concessions such as under State Density Bonus Law. Therefore, the vast majority of housing projects will be eligible for streamlined review.”
Almost all apartment projects require rezoning today, and the city’s spotzoning approach (meaning: the practice of applying different development standards to individual parcels identified as inventory sites) failed to upzone almost every parcel in the city to even physically-feasible zoning –GM/ROLM and El Camino Focus area notwithstanding. The Housing Element continues to say of the rezoning process “While the rezoning process is undoubtedly lengthy, this reflects the complex nature of a request to amend the City’s zoning code.”
The truth of the bolded statement about streamline review thus necessarily boils down to the future distribution of projects between ones eligible for streamlining, and ones requiring rezoning. So how much of the city is eligible for streamlined review? Unfortunately: not much.

Remember, because the city did not take the RHNA zoning global, most of El Camino Real still has base zoning with FAR 1.25 or less for residential projects. This is a very big deal, quantitatively! Inventory zoning applies only to about 150 acres of parcels. The core of Palo Alto is probably somewhere in the range of 5,000 acres. Excluding SFH areas, it’s on the order of 1,000 acres.

The only way the city’s claim here can be true is if there’s an absolutely uncanny degree of correlation between inventory site owners, and owners interested in redevelopment.

Unfortunately, the city’s “opt-out” owner outreach strategy means there is no reason to believe such a correlation exists.

It is not credible to assert that “the vast majority” of housing projects going forward will be confined to a few hundred physically (but not economically) feasible parcels, plus GM/ROLM.

Case Study 3: Pre-application delays for PHZ/Rezoning
applications
On p. 4-57, the Housing Element asserts:
“Rezoning applications typically have a longer timeframe since they must be heard by both the Planning and Transportation Commission and the City Council. This process generally takes about a year. It begins with a required preliminary screening with the City Council. … The City Council generally hears the prescreen request within 2 months.” As I explained in my 11/5/2023 to the city “Shift in HCD Posture on Pre-Applications & Implications for Palo Alto”, this is false. In short, I went through the records for all of the PHZ applications I could find -which was almost all of them-, and ran the numbers. A 2 month delay has never happened, as far as I could tell. The city’s best time was 74 days.

Mean time was 129 days –more than four months.

How HIP Can Save the Day
The city is making bad arguments because it needs to sustain a bad position.

Economic constraints created by zoning are a “rock”, and Affirmatively Furthering Fair Housing law is a “hard place.” The city’s spot-zoning outside of GM/ROLM has put it in between these two things. It can try to argue that it can produce at scale, but only by validating fears that it is “dumping” housing in South Palo Alto.

ECR Focus Area helps a little, but not much. For a few reasons:

1. The area is very small. (~30 acres)

2. The largest site in the focus area has grandfathered structures that will not be replaceable, especially economically. Palo Alto Square ia about 20 acres.

3. It’s hard to argue you’re Affirmatively Furthering Fair Housing when you’re only upzoning an area to try get credit for surrendering to two Builder’s Remedy applicants whom you do not want to fight in court.

What HIP can add to the picture, is a policy vehicle for taking economically credible upzoning broad enough to smash both the rock and the hard place. Taking reforms more broadly also allows more of the city to qualify for expedited review.

HCD has challenged the city:
“the element mentions the isolation of lower-income units in the Research; Office and Limited Manufacturing (ROLM) zone; however, the element provides minimal information on how this zone improves fair housing.”
I have read the updated Housing Element and not found a credible answer to this. What HIP offers, is an opportunity to answer, honestly:
“It cannot. However, because the GM/ROLM area is no longer the overwhelmingly majority of our economically feasible apartment rezoning, it does not need to. Taken holistically, our lower-cost production is spread far and wide throughout the city, and that is how we are Affirmatively Furthering Fair Housing.”
Conclusion
The city deserves credit for implementing much of Draft 2 in a straightforward way via the rezoning ordinance. It represents a good-faith effort at reaching a physical feasibility standard. Taken on its own terms, it might reach certification.

Palo Alto’s problem is that its own terms are not the terms. The City is not going to respond to my concerns and PAF’s concerns, and most importantly: HCD’s concerns by explaining harder how we shouldn’t have those concerns. Especially not with the arguments I’m reading.

There have been implications in some quarters that PAF is responsible for the Housing Element being uncertified. This may be narrowly true, in the sense that if they were not writing letters, HCD might have accepted an earlier draft out of partial ignorance. But the deeper reason why HCD is rejecting these drafts, is because they are bad. Because they are bad, PAF has been able to marshal good arguments against them.

It does not need to be this way for the next draft. The city is holding all the cards, and can reshape the facts to deny PAF good arguments. HIP offers a promising vehicle for this.

My concern is: if you submit this draft, you risk being taken as obfuscatory and deceptive.

That will be counterproductive. Much better -and faster- to accept development standards as a governmental constraint due to impact on economic feasibility citywide, explicitly in the Constraints section. Then, focus on getting HIP nailed down to mitigate that constraint broadly. Finally, use HIP as a vehicle to submit a draft 3 that offers substantive changes.

From: John Kelley
To: Council, City; Planning Commission
Subject: PA-POLI-letter to PACC and PTC re Revised Housing Element 2024-04-14 --- Please direct City Staff to make further changes
Date: Sunday, April 14, 2024 8:39:15 PM
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TO: Palo Alto City Council (City Council) and Planning & Transportation Commission (PTC)
RE: Recommendations re Agenda Item #13, “Joint City Council and Planning and Transportation Commission Meeting to Adopt a Resolution Amending the Comprehensive Plan by Adopting a Revised 2023‐31 Housing Element [etc.]” and Comments re Staff Report 2312-2450 (Staff Report)
DATE: April 14, 2024
FROM: John Kelley

Please see the accompanying PDF for more details.

Thank you,
John Kelley
[email protected]
TO: Palo Alto City Council (City Council) and Planning & Transportation Commission (PTC)
RE: Recommendations re Agenda Item #13, “Joint City Council and Planning and Transportation Commission Meeting to Adopt a Resolution Amending the Comprehensive Plan by Adopting a Revised 2023-31 Housing Element [etc.]” and Comments re Staff Report 2312-2450 (Staff Report) DATE: April 14, 2024
FROM: John Kelley

DISCUSSION

The City itself acknowledges that the basic, per-unit fee architecture is inequitable, but it promises to make amends:

Even with such changes, however, the City would only be addressing one half of the inequities built into its current impact fee structure as applied to ADUs.

Both the magnitude and the architecture of Palo Alto’s impact fees significantly constrain ADU production, particularly production of more affordable ADUs.

B. Utilities Policies
City of Palo Alto Utilities (CPAU) policies further constrain ADU production.

While the UAC may take up this issue at some point in the future, at present the City follows what is, in essence, a “one-parcel, one service” policy in R-1 neighborhoods.

With such changes, the City would begin to eliminate some of the most important constraints on ADU, and especially affordable ADU, housing production resulting from current CPAU policies.

In the “AFFORDABILITY” section of the RRHE, the City seems almost to concede that this is fanciful.

Palo Alto has the capability, the credit rating, and the spirit of innovation to provide capital and new forms of ownership for more affordable housing in our community. The City can augment ADU production, especially of more affordable ADUs, should the City Council demonstrate leadership and commitment to such goals. 23 https://www.bloomberg.com/markets/rates-bonds/government-bonds/us 12 From: Palo Alto Forward
To: Council, City
Subject: 4/15 Council - Agenda Item #13
Date: Sunday, April 14, 2024 8:27:37 PM
Attachments: Item #13 - HE Cmnt Letter 3rd Draft.pdf
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Please find our attached comment letter on Item #13 for the April 15th City Council meeting.

Thank you as always!
--
Amie Ashton
Executive Director, Palo Alto Forward
650-793-1585
April 14, 2024
SUBJECT: Agenda Item #13 - 3rd Draft of the Housing Element Dear Mayor Stone and Honorable Council Members,
Palo Alto Forward is a non-profit organization focused on innovating and expanding housing choices and transportation mobility for a vibrant, welcoming, and sustainable Palo Alto. We are a broad coalition with a multi-generational membership that includes students and retirees, renters and homeowners, and residents new and old.

We have been engaged in the Housing Element process at every stage. Our board and membership have written extensive comment letters (several are posted at our website ), attended nearly all meetings of the Housing Element Working Group, and provided public comments throughout the process. We want to thank you for making Housing for Social and Economic Balance a priority for 2024 and for all your work on Palo Alto’s 6th cycle Housing Element.

We also commend City staff for making several good-faith changes on this 3rd Draft of the Housing Element, especially as it relates to removing several housing-infeasible parcels from the Site Inventory. We feel that it is moving closer to achieving compliance with the California State Department of Housing and Community Development (HCD) requirements. We understand clearly the breadth of challenges Staff has faced over the last few months.

However, we have reviewed the 3rd Draft of the Housing Element and still see that there are serious governmental constraints to the production of housing, especially the higher-density apartment housing that we desperately need.

At a minimum, we suggest the following five additions to the Housing Element to bring this 3rd draft closer to HCD approval:
1) Extend the El Camino Real Housing Focus Area to More Parcels The El Camino Housing Focus area is very small. The largest site in the Housing Focus Area (Palo Alto Square, which comprises about two thirds of its total area) has existing tall tower structures that are occupied and are unlikely to be replaced with housing in the near term due to existing leases. Other than the parcels in the El Camino Housing Focus Area most of the base zoning for parcels along El Camino Real still only allows Floor Area Ratios of 1.0 or less for residential projects. When one excludes Palo Alto Square due to the grandfathered structures, 1 and the Creekside site (which due to the unusual setback, seems to have deterred the project applicant though it is still in the inventory), almost the entire opportunity becomes the Acclaim site, 330 El Camino Real, and a few small parcels totaling about three acres. The pipeline likely reflects the entire total future impact of this program for the cycle. But the standards are good, so expanding the program should address this problem.

Further, there is property owner/developer interest in extending the Housing Focus Area.

Additionally, there are Builder's Remedy applications that have already been submitted on El Camino Real that propose development standards that are close to what was approved for the El Camino Focus Area. Extending the Housing Focus Area to more parcels will show HCD that we are serious about locating housing more broadly across the city--and not just out on San Antonio Road far from transit and local retail.
2) Commit to (not study) Reducing City Impact Fees The most recent HCD letter to the City stated that the Housing Element "should specifically commit to reducing impact fees comprehensively and not limit the scope of the program to park fees."
An impact fee study will be completed in September 2024, with an additional study postponed to December 2025. Modifications to Program 3.1 reference only three specific impact fees, and ignore the tremendous disparities between additions to single-family dwellings or complete “scrapes,” (demolitions) on the one hand, and ADUs, SB 9 units, apartments, condominiums, and townhouses, on the other hand. Commit to (a) implementing the recommendations contained within the study, especially as it relates to not overburdening smaller projects and ADUs with fees, (b) placing a moratorium on new per-unit fees until a new fee schedule is approved, (c) rebating previously charged inequitable impact fees back to the beginning of FY2023, and (d) ending the disparities between ADUs and other smaller units in comparison with single-family additions and “scrapes.” Our residents are clamoring for equity and fairness, and more action and less study.
3) Commit to (not study) Making the Housing Incentive Program (HIP) Economically Feasible
Based on the El Camino Real Focus Area projects and developer engagement, we know what zoning changes will get housing built. The HIP program is being framed as a major policy vehicle to facilitate housing; it needs to be crafted such that it can allow economically credible projects across the city–something not possible without extensive zoning incentives. It must be noted that the Housing Element does not provide details about the HIP zoning incentives or process, which makes it difficult to rely on this program as a tool to facilitate additional housing.

Results of the economic feasibility study have also not been provided. A HIP which commits to allowing economically feasible apartments in more places will also show that we are credibly 2 From: Hamilton Hitchings
To: Council, City; HeUpdate; Planning Commission
Subject: City Council Housing Element Input
Date: Sunday, April 14, 2024 5:53:47 PM
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Dear City of Palo Alto,
I want to thank the City of Palo Alto staff and their consultants for the very hard, extensive and costly work they have conducted creating the Housing Element, and the high quality of material they have produced. In addition, working directly with HCD to address their concerns. I was a former member of the Housing Element Working Group, but these are my comments.

The city provided HCD with these 920 pages including 350 for the housing element and 119 pages for Appendix C: Assessment of Fair Housing as well as other appendixes. HCD responded to the city that this information was insufficient. Many of HCD’s requests in the rejection letters were for more information and analysis only.

HCD's delays in certifying Palo Alto's Housing Element creates uncertainty and instability for housing developers, which postpones investing in and committing capital to building housing projects. Thus reducing the rate of housing production until the rules are solidified relative to what it could be otherwise. Furthermore, HCDs continued requests for additional information and analysis diverts city staff from executing on creating affordable housing in our city.

California State Housing Element Law (Article 10.6) section 65581 (c) states:

To recognize that each locality is best capable of determining what efforts are required by it to contribute to the attainment of the state housing goal, provided such a determination is compatible with the state housing goal and regional housing needs.

My opinion is that HCD is overreaching this clause of state law. I feel that HCD has gone overboard on requesting additional information and analysis. For example, after Palo Alto explained its two census tracts had a higher rate of poverty because one contained Stanford Students living adjacent to Stanford and the other primarily contained an senior affordable housing site, HCD demanded more information as one of reasons for rejection in a previous letter to the city. Given that they have already rejected the element twice and the city has worked hard to answer all their information and analysis requests to date, I’d request any additional letters from HCD do not ask for additional information and analysis.

Despite Palo Alto's RHNA numbers being tripled above those of the last cycle and Palo Alto only having 0.5% vacant land, Palo Alto managed to meet its new RHNA numbers by identifying sites that could be redeveloped in the first version of its Housing Element onwards. In addition, it provided 10% extra units as a buffer in case any problems were found with existing sites. The City proposed many new projects to create affordable housing including the HomeKey project (providing transitional housing for 200 folks per year), more safe parking (already implemented), downtown parking lot(s) with 100% BMR housing, Wilton Court (58 units 100% BMR already occupied), El Camino Real corridor upzoning with large projects in the pipeline, special needs housing, teacher housing, many market rate higher density projects, etc…There are currently 1,118 units that have been entitled or are going through the review process and should be entitled by the end of this year assuming we don’t have too many distractions.

Dear City Council, please pass this latest version of the Housing Element or if you do require changes, that it does not need to come back to council.

Dear HCD, please certify our housing element so the city can focus on implementing these and many other exciting programs. Thus housing developers will know what the rules are and can raise and commit capital to building more housing. -------------------------------------
Additional Note to City Staff on the Housing Element
The housing element. Figure ES-3 on page ES-5 says Palo Alto home prices increased 40% between 2021 and 2022. This is a false and misleading graphic. According to Zillow the price increased 16% between January 1, 2021 and December 31st, 2022:
https://www.zillow.com/home-values/26374/palo-alto-ca/
Please consider revising the housing price increase so it is not cherrypicking the post Covid crash low to the height of the recovery (before going down again) but a timeframe more reflective of the overall housing price growth through ups and downs.

From: Henry Etzkowitz
To: Council, City
Cc: Kristina Loquist; Council, City; [email protected]; Representative Eshoo; Roberta Ahlquist; [email protected]
Subject: Housing Element
Date: Sunday, April 14, 2024 3:38:58 PM
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________________________________

The last element and the current proposal both share common basic flaws that make it unlikely that the housing deficit will seriously be addressed without further steps. 1 the assumption that Palo Alto is a suburb. The documents acknowledge that Palo Alto has significantly more jobs than housing and that many employees commute from places, known and unknown, to Palo Alto. This is the very definition of an urban area, in this case with “invisible suburbs.” For example, some Stanford medical technicians carpool more than two hours a day each way from the Central Valley.

Palo Alto has a stronger reality as a Center of employment and a subsidiary function as a housing location. A reasonable objective might be to bring the two functions into alignment. Likely, this would require a step change increase in housing provision.

2. A second misconception in the documents is that Palo Alto is “built out.” Thought of as a city, the one story commercial and industrial spaces may be viewed as “taxpayers,” temporary structures only in place until their sites need to be utilized for denser high rise buildings. As secondary shopping areas like California street empty out, high rise housing can provide the demand to make these shopping areas viable, one again. 3 relative neglect of border issues. For example, through purchase of Oak Creek apartments, Stanford recently removed 750 units from the Palo Alto housing stock to address its housing needs without any plan to redress the deficit.

The only meaningful pushback to date has been from Santa Clara County’s 5% increase in expectation of campus housing provision. As previously suggested, the Stanford Shopping center parking garages provide an ideal base for high rise housing development.

Beyond the element which provides general guidelines a stronger methodology for housing provision is required.

Palo Alto’ assumption of responsibility for electricity provision in an earlier era should be considered as a model along with public-private and university-public partnerships.

Sincerely
Henry Etzkowitz
Co organizer
Community of Oak Creek Residents
Sent from my iPhone
From: Ellen Smith
To: Council, City
Subject: Housing Element
Date: Saturday, April 13, 2024 2:53:57 PM
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As a long-time resident of Palo Alto, I have watched it transform from a mostly middle-class community with a range of housing options and costs to a tech-rich enclave. If we are serious about welcoming diversity of income, real change has to happen.

Therefore, I urge you, in establishing our housing element, to do the following, as recommended by Palo Alto Forward:

1. Extend the El Camino Real Focus Area to more parcels - there is developer interest and it shows that we are placing housing more broadly across the city (not just out on San Antonio)

2. Commit to (not study) modifying city impact fees - per the impact fee study results coming in May

3. Commit to (not study) making the Housing Incentive Program (HIP) feasible based on the El Camino Real Focus Area and developer engagement - we know what zoning changes will get housing built, let's do it

4. Engage on the Builder's Remedy projects - 2000+ units have been submitted (or 30% of our 8-year housing goal), which includes 400 units of affordable housing AT NO COST TO THE CITY
Ellen Smith
850 Webster Street, Apt 427
From: Patty Irish
To: Council, City
Subject: A letter about the Housing Element for Palo Alto Date: Friday, April 12, 2024 4:36:26 PM
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Dear Mayor and City Council members,
I am writing concerning the Housing Element you are going to submit again and will be discussing this Monday.

I suggest some additions and changes.

1. Extend the El Camino Real and California Ave. Focus Area to add more parcels - there is developer interest and it shows that we are placing housing more broadly across the city (not just out on San Antonio)

2. Commit to (not study) modifying city impact fees - per the impact fee study results coming in May

3. Commit to (not study) making the Housing Incentive Program (HIP) feasible based on the El Camino Real and California Ave. Focus Area and developer engagement - we know what zoning changes will get housing built, let's do it

I live at Channing House and know what a gift it is to live where all of our 250 residents can get downtown easily for many of the services we need.

Also we have 175 employees and 150 of those will probably qualify for subsidized housing and presently drive many miles to come to work.

If you want to discuss this further I welcome additional conversation and ACTION.

Thank you,
Patty Irish
--
Patty Irish
850 Webster St. #628
Palo Alto, CA 94301
650-324-7407
650-245-3906
cell
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Palo Alto City CouncilApril 15, 2024

Palo Alto City Council
April 15, 2024