City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Planning and Development Services
Meeting Date: February 9, 2026
Report #:2512-5781
TITLE
Rental Residential Vacancy Rate Determination for Properties Containing Three or More Dwelling Units for the Second Half of 2025. CEQA: Not a Project, Pursuant to CEQA Guidelines Section 15378(b).
RECOMMENDATION
This is an informational report and City Council action is not required.
EXECUTIVE SUMMARY
This report transmits the reporting of the vacancy rates of properties containing three or more residential rental units for the second half of 2025. The vacancy rate was below the 3% threshold at 0.85% for the first half of calendar year 2025 and 1.01% for the second half of 2025; therefore, applications to convert residential rental to ownership units via a subdivision process are not eligible for consideration.
BACKGROUND
Planning staff prepares the Residential Vacancy Rate Determination Report twice a year to meet the requirements of Palo Alto Municipal Code (PAMC) Section 21.40.040, Determination of Vacancy Rate and Surplus. Section 21.40.0401 states the following:
In April and November of each year, the director of planning and community environment shall determine from the city utility meter records the vacancy rate and the vacancy surplus, if any, within the city limits. New market-priced rental units available to the general public, for which a certificate of use and occupancy has been issued since the last vacancy survey, shall be added on a unit-for-unit basis either to reduce the vacancy deficiency or to increase the vacancy surplus.
All conversions involving a change in the type of ownership of three or more rental units are subject to the provisions of this chapter. PAMC Section 21.40.020 includes a definition of 1 Municipal Code Chapter 21.40: https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-83254
“Vacancy Surplus” as the number of rental units being offered for rent or lease more than the 3% vacancy rate. Per PAMC Section 21.40.050, the City cannot accept tentative or preliminary parcel map applications for subdivisions created from conversions unless there is a vacancy surplus of 3% or more as of the most recent determination.
The purpose of the regulations pursuant to PAMC Chapter 21.40 is to seek a reasonable balance of rental and ownership housing in the City in a variety of individual choices of tenure, type, price, and location of housing. The provisions are also intended to protect the supply of multi-family rental housing stock in the City for low- and moderate-income families, and to reduce and avoid displacement of tenants, particularly seniors and families.
ANALYSIS
The multi-family rental vacancy rate was 0.85% for the first half and 1.01% for the second half of 2025, representing the lowest vacancy rate in the past decade. The average vacancy rate in 2025 is 0.93%, which is lower than the average vacancy rate in 2024 of 1.22%. According to CoStar, the multi-family residential vacancy rate in Palo Alto declined between November 2024 and November 2025, which is consistent with the City's residential rental vacancy rate analysis.
Staff prepared this analysis per PAMC Section 21.40.040 using the City of Palo Alto’s utility meter records. These records reveal the total number of “active” multi-family apartments and allow staff to determine the percentage of “vacant” multi-family apartments. Utility accounts associated with three or more rental units were identified. The results, along with those for the last 10 years, can be found in Table 1.
Table 1. Ten Years of Estimated Housing Units, Vacant Utility Accounts, and Vacancy Rate Year Estimated Housing
Units3
Utility Accounts
Deemed Vacant
Estimated Vacancy
Rate (Average)4
2015 7,901 92 1.22%
2016 7,912 118 1.45%
2017 7,928 131 1.58%
2018 7,928 132 1.52%
2019 7,931 141 1.83%
2020 8,057 226 2.80%
2021 8,057 55 1.13%
2022 8,057 56 1.16%
2023 8,057 68 1.32%
3 The U.S. Census Bureau Decennial Census 2010 data is used as a baseline for the total rental stock data in Palo Alto and changes (addition or demolition) to the total rental dwelling unit stock are tracked by staff biannually using the City of Palo Alto’s land use management system (Accela) to generate the vacancy rate. Staff expected to update the baseline with the release of the 2020 Decennial Census; however, the U.S. Census Bureau decided to discontinue the rental data point and staff will continue to use the original methodology. 4 This percentage is the number of utility accounts deemed “vacant” divided by the utility accounts sample size.
Year Estimated Housing
Units4
Utility Accounts
Deemed Vacant
Estimated Vacancy
Rate (Average)5
2024 8,057 61 1.22%
2025 (1st half) 8,057 42 0.85%
2025 (2nd half) 8,057 50 1.01%
Staff acknowledge there may be gaps and inconsistencies in this data methodology. Multi- family properties could have different types of utility accounts and for various reasons, not all accounts could be identified. Examples of data limitations include but are not limited to, addresses between databases may not match utility account addresses, there is not a one-to- one relationship between estimated three or more rental housing units and three or more rental unit utility accounts, instances where a property has one utility meter or all meters are billed to the property manager/owner, and some units with legacy “inactive” accounts may be vacant or no longer available to rent altogether. Accordingly, the data included in this analysis represents staff’s best effort to address these discrepancies.
With the implementation of the new Rental Registry Program (RRP) in October 2024, staff identified and included additional “three or more” rental properties in the 2025 report compared to the 2024 report. Staff analyzed the rental vacancy rate both with and without the inclusion of the newly added RRP rental units. The analysis showed a consistent reduction in the vacancy rate under both scenarios. Staff will continue to update and expand the list of qualifying properties in the 2026 reporting period, as the RRP continues to identify additional properties that meet the "three or more" rental unit threshold.
FISCAL/RESOURCE IMPACT
Planning staff prepares this report biannually and there are no additional resource impacts beyond the time it takes to prepare this report.
STAKEHOLDER ENGAGEMENT
This is an informational report for the City Council and does not require any external stakeholder engagement.
Planning and Development Services staff continues to coordinate with colleagues in the Utilities department to refine the analysis.
ENVIRONMENTAL REVIEW
4 The U.S. Census Bureau Decennial Census 2010 data is used as a baseline for the total rental stock data in Palo Alto and changes (addition or demolition) to the total rental dwelling unit stock are tracked by staff biannually using the City of Palo Alto’s land use management system (Accela) to generate the vacancy rate. Staff expected to update the baseline with the release of the 2020 Decennial Census; however, the U.S. Census Bureau decided to discontinue the rental data point and staff will continue to use the original methodology. 5 This percentage is the number of utility accounts deemed “vacant” divided by the utility accounts sample size.
This project is exempt from environmental review under Section 15061 of the California Environmental Quality Act Guidelines.
ATTACHMENTS: None.
APPROVED BY: Jonathan Lait, Planning and Development Services Director