City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: City Manager
Meeting Date: January 13, 2025
Report #:2410-3572
TITLE
Update on Palo Alto Homekey (Interim Housing Shelter at 1237 San Antonio Road)
RECOMMENDATION
This is an informational report as a status update on the Palo Alto Homekey project. No Council action is requested.
BACKGROUND
Project Homekey is an initiative of the California Department of Housing and Community Development (HCD) that supports eligible entities, including local governments, in forming partnerships with the State to purchase, renovate, or lease diverse housing options. These developments offer temporary or permanent homes for individuals facing homelessness and those vulnerable to health issues. To expedite housing solutions, Project Homekey offers numerous regulatory waivers and enforces strict timelines.
In 2021, the City partnered with LifeMoves to apply for Homekey funding for a modular interim housing facility that includes on-site support services and was awarded the funds in August 2022. In November 2022, the City and LifeMoves reassessed the project’s scope due to sharp cost increases driven by economic instability, high inflation, and supply chain disruptions.
LifeMoves engaged a new construction firm, Devcon, in December 2022. Although the change led to identified cost savings, it also impacted the construction timeline as the team revised project plans. Proposed savings included adjustments such as relocating the fire loop road, creating separate entrances for GreenWaste and the Palo Alto Homekey site, and repositioning buildings away from San Antonio Road to avoid interference with an existing gas line.
On June 12, 2023, City Council approved a lease agreement with LifeMoves for use of 1237 San Antonio Road for a term of nine years and approved a revenue agreement with Santa Clara County to enable the County to execute an operating agreement with LifeMoves for interim
housing operations.1 Additionally, Council approved $4.5 million in the City’s annual budget for the project, consisting of $2 million to help close the project’s capital funding gap, $500,000 to cover City permit fees, and $2 million to reinstate certain project elements removed as cost savings (decorative fencing, shade sails, photovoltaic system, electric vehicle charging, and storage/trash enclosure fire sprinklers). Later that summer, in August 2023, Council approved an extraterritorial utility service agreement with the City of Mountain View to connect the Homekey project to City of Mountain View water and sewer utility services.2
ANALYSIS
Project Update
The below timeline highlights some milestones in the Homekey project since the last time a related item appeared before Council.
Table 1 Palo Alto Homekey Project Recent Milestones
Date Milestone
September 2023 HCD approved an extension for the Homekey project, allowing construction to be completed by February 2025. This approval followed extensive advocacy efforts by the City, in partnership with Palo Alto’s state delegation, Santa Clara County, and Townsend Public Affairs.
October 2023 The City of Palo Alto and partners broke ground at the Homekey site.3 January 2024 The City facilitated a Good Neighbor Agreement between LifeMoves and GreenWaste to proactively address potential noise impacts.4 The City issued the building permit.
Modular unit construction begins at an offsite factory in Pennsylvania.
June 2024
City Council approved $185,000 in Community Development Block Grant (CDBG) funds for an on-site play structure and recreation area.5 September 2024 Overall construction is 67% complete as of September 31 and the first shipment of modulars arrived.
December 2024 Modular production is 100% complete. Overall construction is 75% complete.
1 City Council Staff Report, June 12, 2023
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=2481&meetingTemplateType=2 2 City Council Staff Report, August 21, 2023
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=2894&meetingTemplateType=2 3 City of Palo Alto Press Release, October 31, 2023 News Release: Officials Break Ground on Homekey Palo Alto – City of Palo Alto, CA
4 See Attachment B: Good Neighbor Agreement.
5 Council Report, June 22, 2024,
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=5122&meetingTemplateType=2&comp iledMeetingDocumentId=10522
By early October 2024, the construction team had completed installing underground utilities, pouring the building pads, installing the elevator, framing the community building, and delivering three modular housing units. However, there have been significant delays relating to modular production. These delays, as detailed in the memo from LifeMoves included as Attachment A, have been mitigated as much as feasible by focusing on sitework and changing construction activity sequencing (e.g., installing light posts). The initial anticipated date to set the modulars was November, but as of mid-December, 45 modules, approximately 2/3 of the total units had arrived in California. These units require additional mechanical component installation and exterior finishing once delivered in California. Once all units have arrived, been finished and set, the construction team will provide a recovery schedule. Upon receipt of the recovery schedule, staff will inform Council of overall schedule impacts. Should the recovery schedule be insufficient to meet the required HCD deadlines, the City, Santa Clara County, and LifeMoves will request an extension with HCD.
FISCAL/RESOURCE IMPACT
This report is for information sharing only. No additional funding is requested with this item. As reported previously, the Palo Alto Homekey project is funded with $26.6 million in Project Homekey funds from HCD, combined with City and Santa Clara County funding, generous local donations, including from Palo Alto Community Fund, Sobrato Philanthropies, and The Peery Foundation. The City’s initial financial contributions to the project included land for the project, staff time, and a pledge of $1 million a year towards operations, for seven years. In response to a capital funding gap, last year City Council approved contributing $4.5 million to capital costs, consisting of $2 million towards unspecified capital costs, $2 million towards specific project elements (solar and EV chargers, decorative fencing, and sunshade sails). Additionally, earlier this year, the City approved $185,000 in CDBG funds towards a recreation area.
STAKEHOLDER ENGAGEMENT
Stakeholder engagement includes regular and additional as-needed meetings between partners (LifeMoves, Santa Clara County Office of Supportive Housing, and Santa Clara County Housing Authority). Staff and LifeMoves will plan press events during significant milestones such as when the units are being stacked/set and at the opening of the facility. Also, this informational report serves as an update to the public about the project status.
ENVIRONMENTAL REVIEW
This item is presented only for Council’s information and therefore it is not a project subject to environmental review by the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: Schedule Update Memo
Attachment B: Good Neighbor Agreement
APPROVED BY:
Ed Shikada, City Manager