The policy of housing: what makes housing more plentiful and more affordable?

This is a long post. It gets to the heart of why Palo Alto Forward exists, though: how to make housing more affordable and more available, and how can we have transportation solutions that support a more sustainable city.


The tl;dr of the post below: everyone says that they are “pro-housing”, and sometimes policy discussions at City Council are framed such that each side has a “pro-housing” claim.  We wanted to dissect these policy discussions around a lens of “what would actually make housing more affordable, and what would serve to make housing less affordable”.  If you’re interested, read on :)

As all of our members and followers know, Palo Alto Forward was formed to focus on two related issues: housing and transportation.

 

We believe that housing supply and affordability--and the transportation infrastructure needed to support housing—lies at the heart of many of our region’s problems.  This belief is shared by our local residents, as seen by Palo Altans’ answers to the National Citizen’s Survey: 76% are extremely dissatisfied or dissatisfied with “availability of quality affordable housing”.                                                                                                                                                                                                                         

We believe that policy decisions are a major contributing factor to this crisis.  Our zoning codes, our decisions around funding affordable housing, our renter protections, and other policy decisions directly impact the supply and diversity of housing available, which in turn impacts affordability.

As a service to our community, we are highlighting the major issues that involve housing that can be impacted by policies.  We encourage everyone to conduct their own research and decide which candidates would go farthest in helping to achieve your goals.

How to make housing more affordable and accessible:

Our view is that this is primarily a problem of supply.  We simply don’t build enough housing.  In order to meet our Comprehensive Plan housing goals, we would need to build 303 units each year, but we have only built a small fraction of those units (BOTH below market rate units AND market rate units).

This has happened for decades; we have consistently underbuilt (as have our neighboring communities).  




In addition to increasing housing supply overall, investment in affordable housing and solid renter protections are also important.  Both of these are critical planks in creating a just, vibrant community.  However, neither should be used to undermine the primary goal of making housing more affordable for everyone.

 

Why don’t we build more units?

 

As a community, we make it incredibly difficult to create reasonably priced housing.  The most obvious barriers are:

  • Density maximums: it is not permitted to build a building entirely consisting of small units, because Palo Alto has a maximum density allowable
  • Floor Area Ratio (“FAR”) maximums: only a portion of each lot can be used for building
  • Height maximums: we only allow 4 story buildings (55 feet) in Palo Alto
  • Parking requirements: building parking places in Palo Alto is incredibly expensive (the rule of thumb that developers and planners use is $60,000/space).  We require developers to build a large amount of parking per apartment, regardless of whether residents will all be owning and parking cars.  Furthermore, we require the parking to be provided on site (for a large project, this would take place underground); since, in Palo Alto, we are working with mostly small parcels, the need to build individual underground parking lots is a huge barrier to choosing to build a residential development (vs. commercial, which has lower parking requirements)

 

If we put the above restrictions in the context of the President Hotel, a beloved apartment building on University Avenue, it would be non-compliant across all of these dimensions today: it is 70 feet tall, is far too dense, violates maximum FARs, and is underparked.  And yet, it is one of the best and most affordable options for people in Palo Alto who want to live close to our downtown.

 

Recent examples of policy discussions aimed at increasing the supply and diversity of housing:

  • The Comprehensive Plan: As our guiding planning document for the next several decades, the Comprehensive Plan sparked many important discussions: eg., the rate of housing formation, zoning for density, etc.  A higher target would have resulted in zoning decisions to make housing more affordable to build.
  • Accessory Dwelling Units: our Council’s discussion and adoption of rules to make it easier to create ADUs (aka “granny units”)
  • Affordable Housing Overlay zone: our Council’s discussion and adoption of rules to allow for greater density, heights, and less parking for 100% affordable housing projects in certain areas.
  • Workforce Housing project (2755 El Camino): Our Council’s discussion and approval of a 57 “small unit/ transit-oriented” development that represents the set of policy goals discussed above to make housing more affordable

At the same time, there are policy discussions that sound like they are about making housing more affordable, but which actually serve to make housing far more difficult to build:

 

The tip-off for these measures is that they are usually strongly opposed by advocacy organizations for affordable housing (like SV@home) or non-profit housing developers (like Palo Alto Housing Corp).  A second clue is whether proposals reduce costs and add units or whether they raise costs and reduce the number of units that can be built

 

  • Requiring overly high % of affordable units: There is a sweetspot for affordable units: requiring too few leaves our city with almost no affordable units; requiring too many makes projects uneconomical, and none get built.  This was a lesson that San Francisco recently learned when they passed “Prop C”, increasing inclusionary proportion to 25%, and seeing building applications plummet (thus supplying fewer affordable units).  SPUR recommends 14-18% inclusionary units
    • Palo Alto Forward supports inclusionary requirements up to 20%
  • Similarly, raising the “impact fees” to an unsustainable level makes all projects unattractive, therefore destroying the primary source of local affordable housing fund (impact fees).  
  • Requiring ONLY inclusionary units (instead of in-lieu fees paid into our affordable housing fund): in lieu fees actually have a larger impact on affordable housing formation, since non-profit developers (eg., PAH) use `fees to apply for shares in the tax credit dollars that are used to fund the majority of projects—in other words, the in lieu fees are not only flexible, they are a force multiplier
  • Renter protections: rent control is a controversial topic among economists and planners.  Without adding any supply to Palo Alto, rent control simply creates a lottery system for the lucky few.  As Krugman notes:  In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.''
    • Palo Alto Forward supports many renter protection measures (E.g. those proposed in the recent memo by four members of Council), but we agree with the economist view that “classic rent control” serves to lower the supply and increase the overall price of housing.

 

We hope that this memo is a useful primer on the housing-related discussions in Palo Alto.  

 

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