Needed Changes for Housing

**This is the third of 4 blogs in this series related to ways we can strengthen Palo Alto’s draft Housing Element.**

Let’s Do This!

 California law requires cities to make realistic plans for new housing at all income levels. This includes a duty to remove government constraints on building new housing.

 Right now, Palo Alto’s plan, known as its Housing Element, is being updated. We have an opportunity to change outdated rules that unreasonably limit new construction and make many housing projects infeasible. Current zoning places excessive limits on density, height, and floor area, and requires too much parking. Our unreasonable and outdated baseline zoning requirements make it infeasible to build apartments, both economically and structurally. To get any apartment project approved, builders must ask the city to effectively change the law just for them by running a byzantine and unpredictable rezoning gauntlet, which they often fail. The city also imposes excessive and inequitable impact fees, and processes permit applications very slowly­­--both of which reduce housing supply and increase housing cost.

Palo Alto Forward recently explained these issues in our comment letter to city and state officials. This post provides a summary.

Why does Palo Alto have to remove constraints on new housing?

Per current state law, the Housing Element must, among other things, “remove governmental constraints” on building new housing. This includes “land use controls, building codes and their enforcement, site improvements, fees and other extractions required of developers, local processing and permit procedures, and any locally adopted ordinances that directly impact the cost and supply of residential development.”

How can we foster housing we need (mainly new apartments)?

We cannot meet our Regional Housing Needs Allocation (RHNA) obligation of 6,086 unit without building new apartments. But Palo Alto’s zoning makes apartment construction infeasible, as shown by comparing (1) its baseline rules, to (2) recently proposed/approved projects. In Palo Alto, the best source of actual housing proposals is the City’s Planned Home Zone (PHZ) process. Through the PHZ process, developers are invited to “request changes from the base zoning regulations” in exchange for providing 20% of units as deed-restricted affordable housing. The PHZ proposals are thus excellent indicators of what development standards are necessary to enable production of housing.

Height in Palo Alto is generally limited to 30 to 40 feet in residential areas, and 35 to 50 feet in commercial areas. But the PHZ proposals are much taller: 56 feet on average (ranging from 45 to 67 feet) with some recent projects as high as 85 feet.

Palo Alto could raise the height limit to 85 feet in downtown and other transit rich areas, and 60 feet elsewhere. This would allow buildings to reach five to seven stories, rather than just four. Height has environmental, equity, and economic benefits built in. And tall buildings can be beautiful. Notably, our downtown Hotel President is 90 feet tall. Further, placing density upwards instead of outwards can create more ground for recreational space, bike parking, architectural features, pedestrian uses, and public art.

Floor area ratio (FAR) means total square footage area, per land area. For example, with a FAR limit of 0.5 and a parcel of 10,000 square feet, a one-story building could have 5,000 square feet, or a four-story building could have 1,250 square feet per floor. Palo Alto’s zoning imposes FAR limits of 0.5 to 1.0. But the PHZ proposals are much higher: 3.0 on average (ranging from 1.9 to 4.1).

 Palo Alto could lift the FAR limit to at least 3.0. The PHZ process shows this increase would help make new apartments economically feasible.

Density means dwelling units per acre (du/ac). Palo Alto’s zoning imposes a limit of 30 to 50 du/ac on almost the whole city. But the PHZ proposals are much denser: 115 du/ac on average (ranging from 86 to 150). Likewise, two recently approved projects have 102 and 130 du/ac.

 We could eliminate density limits, as is being done in other California cities. Instead, the city could rely on height and FAR to control the physical dimensions of new housing. This would allow a wider variety and diversity of homes and households without significantly changing the physical character of a neighborhood.

Parking minimums in Palo Alto are one space per 1-bedroom unit and two spaces per 2-bedroom unit. The PHZ proposals on average are 1.25 spaces per unit (ranging from 0.7 to 1.9).

Palo Alto could eliminate parking minimums. A parking space can raise construction costs by $80,000 or more. Last year, California legislation ended parking minimums within a half mile of transit, and San Jose ended them citywide, as have a growing number of other cities. Repeal of a minimum will not impose a maximum: some apartment dwellers want on-site parking, so developers will continue to provide it but at rates that reflect actual market demand.

There is no rule requiring swimming pools for every home, and yet swimming pools are built in sufficient numbers to allow people who can afford them to access them. Parking is more popular, so we shouldn't expect to have to mandate to get it. Doing so is unfair to people who cannot or do not want to drive, and to families that choose to have only one car.

What else can we do to facilitate the housing we need?

Impact fees for Palo Alto’s parks, community centers, and libraries raise the price by about $64,000 for a detached home and about $47,000 for an apartment unit. As the city acknowledges, these fees “could impact affordable housing projects with limited budgets,” and are among “the highest” in the region. Moreover, the per-unit structure of these fees is regressive. The smaller the home price, the larger the impact fee as a percentage of that price, and vice versa. As a result, lower-income buyers are subsidizing higher-income buyers.

Palo Alto could greatly reduce its housing impact fees and should end the regressive fee structure (per unit) and adopt a more equitable structure (such as per square foot).

Faster permit timelines in Palo Alto would lower housing costs and iincrease housing supply. Our city’s “lengthy approval process” was emphasized by a Santa Clara County Civil Grand Jury in its 2021 report on why Mountain View has made so much more progress than Palo Alto in building affordable housing. State government data show that Palo Alto averages 271 days for permitting and 300 days for entitlement. The latter does not count the unreported months in Palo Alto’s prescreening process. The city’s draft Housing Element acknowledges it takes “12 months or more” for projects that require rezoning. Moreover, this long process has too many chokepoints, where a reviewer can reject the proposal or impose costly changes. It is widely known that such discretional uncertainty during the process can incentivize corruption and exacerbate inequities.

This is an entirely solvable problem. Palo Alto could reduce entitlement timelines to under one year and make housing at certain densities on certain sites “by right” (i.e. no hearings at all). Further, it could reduce the number of stages of review by eliminating the prescreening process, and allowing concurrent review by the Architectural Review Board and the Planning and Transportation Commission. Additionally, planners could be given clear direction and authority to streamline the CEQA process wherever feasible.

Follow this blog series for more information regarding the Housing Element and how we can work together to make it stronger and get the housing we need!