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On paper, it seemed like a project no one could oppose: a 60-unit apartment complex for low-income seniors in one of the Bay Area’s most jobs-saturated cities. It had construction financing in place, support from local elected leaders, and perhaps most important, a 2.4-acre plot of land on the pricey south side of Palo Alto.
But the Maybell affordable housing project never got so far as to put a spade in the ground. It was resoundingly rejected by Palo Altans in a 2013 voter referendum, becoming a sobering example among Bay Area urban planners of the uphill battle facing construction of low-income housing in suburban communities.
“Having some initial opposition is par for the course, but that’s usually overcome once neighbors visit our other housing sites,” explained Candice Gonzalez of the nonprofit Palo Alto Housing Corporation, the would-be developer of the project. “But this was a total shock. It was the perfect storm of people being opposed to development in Palo Alto.”
To this day, Gonzalez’s organization has not attempted another below-market-rate housing project in its hometown. Instead, it has shifted its focus to Mountain View and Redwood City, areas Gonzalez describes as easier and, in some ways, more welcoming.
Even the land-use and zoning rules in Palo Alto put up barriers to subsidized housing project. For example, Gonzalez’s organization is currently working to build 67 affordable-housing units at a half-acre site on El Camino Real in Mountain View. They previously investigated going for a similar apartment project at a half-acre site just down the street in Palo Alto, but they would have been limited to just 13 housing units due to the city’s density rules.
The regulations, and public sentiment, that sunk the Maybell project is indicative of the patchwork of rules in Bay Area cities, counties and communities that make tackling the regional housing shortage so difficult.
There’s broad consensus on the cause of the problem. Bay Area policy experts and politicians are mostly in agreement that a surplus of jobs and a scarcity of housing is creating a mounting crisis for the Silicon Valley economy.
Part 1 of the Voice’s series “Out of Balance” last week examined the widening gap between job growth and housing construction in Santa Clara County and the impact on Silicon Valley’s economy. But this raises the question: If almost everyone agrees there’s a growing problem here, then who’s supposed to be solving it?
The answer? It’s really complicated. The Bay Area includes nine counties and 109 cities, ranging from densely populated San Francisco to the rural stretches of Morgan Hill. Each of those communities comes with its own land-use authority and elected government.
To guide those assorted communities, state lawmakers created a hierarchy to be the steady hand on the tiller. Two agencies — the Association of Bay Area Governments and the Metropolitan Transportation Commission — are tasked with shepherding development toward a larger regional strategy. In very basic terms, state housing officials every eight years determine a total number of homes that need to be built in the Bay Area, and ABAG officials assign a quota to each city for how much housing to incorporate into their future plans.
The reality, however, falls far from that vision. From 2007 to 2014, Santa Clara County’s goal was to build slightly more than 60,000 new homes. Only 45,000 homes were granted permits, and many of them were hardly the kind that were supposed to be built.
More than 80 percent of the housing approved for construction were high-end homes, priced for those earning more than $120,000 or more annually. Meanwhile, cities almost universally failed to meet their allocations for below-market-rate housing for low- and moderate-income residents.
Numbers for some cities were wildly off the mark. Mountain View was supposed to grant clearances for nearly 500 median-income units. Only four such homes were approved. Los Altos had a goal of around 70 high-end houses, but the city instead signed off on more than 700. To varying degrees, every city in the county was unable to meet its housing allocation, even though these were the same goals each city added to their respective housing elements, which serve as a blueprint guiding future development.
Trying to determine the reason for this is tricky, said Gillian Adams, ABAG senior planner. It could be that political forces in a city are firmly opposed to low-income housing, as demonstrated by Palo Alto in 2013, when citizens passed a ballot measure to stop a 60-unit affordable housing project for seniors. But it could also be a result of the market, Adams said. If developers aren’t interested, cities have limited power to push forward costly housing projects on their own.
“There’s no penalty for not approving housing,” Adams said. “That’s because it’s hard to determine what’s causing it. Is it a lack of will, or is it a lack of market interest?”
Regional planning agencies like ABAG and MTC operate under the theory that they can catch more flies with honey, with $600 million in government grants they’ve been doling out since 2012 to cities, primarily for transportation improvements to encourage high-density developments near transit hubs.
That funding goes a long way toward helping overcome local resistance and encouraging local officials to see the larger picture, said MTC principal planner Doug Johnson.
But is it enough? “I do feel that housing is a little bit of a tragedy-of-the-commons situation, and we’re still not getting to the collective impact,” Johnson said. “We have to acknowledge there’s a tension here — it’s great for folks who already live there, and it’s not so great for people who are having kids and need a new home.”
Some experts say that only offering incentives simply isn’t enough, particularly as some cities continue to resist housing growth. Some form of beefed-up system may be needed to compel local authorities who willfully flout the greater regional problems, said Gabriel Metcalf, president of the San Francisco Bay Area Planning and Urban Research Association. He proposes rescinding some of cities’ local land-use control — a controversial idea that probably sounds like heresy to pretty much every Bay Area city council and planning commission.
“We have proven definitively that the current system doesn’t work,” Metcalf said. “Ultimately, I think Bay Area cities need to either change their ways and allow housing to be built, or I think we need to consider moving away from the system of local control.”
That shift may come faster than expected. In an effort to streamline new housing, California Gov. Jerry Brown is proposing laws to allow developers to bypass local building restrictions for housing projects with at least 5 percent of their units affordable to low-income residents.
Hurdles to affordable housing
The majority of new homes constructed in Santa Clara County over the last decade are affordable only to families making six-figure salaries, raising the question: What’s holding back affordable housing development in the region? The answer, according to housing advocates in Silicon Valley, is that the high cost of land — combined with a dearth of city-sponsored affordable housing funds — is making it financially infeasible or outright impossible to compete with companies putting luxury apartments on the market.
Housing Trust Silicon Valley has been a key player in the affordable housing development market. Since 1998, the organization has leveraged more than $55 million in loans to help affordable housing companies and nonprofits acquire land in the Bay Area, including affordable housing developers in Mountain View. The Housing Trust put down $350,000 in early loans for the Franklin Street Apartments in Mountain View, as well as $625,000 in loans for San Antonio Place, both with units for low- and extremely low-income families.
But to make developments like these a reality, it takes a big commitment by the city. Kevin Zwick, CEO of Housing Trust Silicon Valley, told the Voice in an interview that federal and state tax credits are critical if a developer wants to build an affordable housing development. And in order to compete for the limited pool of government subsidies, some kind of third party — whether a local government or a private company — needs to contribute about a third of the total project cost as a subsidy or loan.
“Far and away, the biggest limiter is local investment from the public side,” Zwick said. “For affordable housing projects to get completed, the most important thing is the local money.”
The affordable housing shortage in Santa Clara County can be tracked going back to 2007, but Zwick said the situation got a whole lot worse in late 2011, when Gov. Brown signed a bill that dissolved California’s redevelopment agencies, which had traditionally been a big source of affordable housing money.
State law required that at least 20 percent of redevelopment agency funds had to be earmarked for housing projects for low- and moderate-income families, creating a local funding source for cities to pursue affordable housing projects. With redevelopment agencies, Zwick said, cities in Santa Clara County had about $65 million each year for these projects, all of which has now been redistributed to other services.
“That was funding cities could use to not only start up new affordable housing, but also provide the permanent subsidies needed to keep the developments affordable,” he said. “Now cities don’t have enough to do both.”
That’s exactly what happened in Milpitas, a South Bay city that traditionally has had more affordable housing. After the city lost redevelopment funds around 2011, the number of affordable-housing projects “slowed to a trickle,” and the situation has yet to improve significantly, said Milpitas Planning Director Tim Wong.
What did spring back was a series of high-end apartment and townhouse developments. Private investors were keen on building residences near the city’s future BART station, Wong explained. Milpitas ended up building more than 6,400 housing units priced for those earning more than $126,000 annually, more than six times the number the city was slated to approve in its ABAG allocation. During the same period, only about 700 units were built for all lower-income categories.
Wong gave assurances that the lopsided development wasn’t something to be concerned about.
“This is the direction the Milpitas community decided to take,” he said.
There are some local efforts to bring affordable housing funds back to Santa Clara County. Earlier this year, the Santa Clara County Board of Supervisors agreed to put a $950 million affordable housing bond on the November ballot to build housing for low and extremely low-income families in the area. If the bond passes, Zwick said, its revenue would provide the badly needed local money required to make affordable housing developments a feasible option for developers. Zwick estimates that the bond could leverage between $2 billion and $3 billion in additional state and federal dollars.
“That’s going to spur a tremendous amount of new affordable housing development,” Zwick said.
Throughout the entire development process, from land acquisition to construction, affordable housing developers never get a leg up over private developers creating market-rate homes. Alex Sanchez, the executive vice president of ROEM corporation, a private company that specializes in building affordable housing throughout California, told the Voice that subsidies are a necessary incentive to even compete in the development market.
In Mountain View, ROEM built the subsidized Franklin Street Apartments and Studio 819 Apartments on North Rengstorff Avenue that are available to families making less than 50 percent of Santa Clara County’s median income of $106,000. In the coming months, the company plans to break ground on the recently approved 116-unit affordable housing project at 779 Evelyn Avenue. In all of its affordable projects throughout the state, Sanchez said, the company has had to build on market-rate land, design the project with market-rate architects, and use market-rate contractors to build them. With no measures to cut costs in sight, he said, it’s practically impossible to finance the project without equity from tax credits and local subsidies — usually in the form of city loans.
“All the engineers and planners, they’re all paid the market rate, and the financing has no place to go to make it affordable without subsidies,” he said.
Although it sounds like an uphill battle, Sanchez said that the finance structure is the only thing that really changes, and the company doesn’t take a financial hit for pursuing affordable housing projects.
Mountain View’s example
Although development patterns show that Santa Clara County didn’t even come close to building its target number of affordable housing units in recent years, there are some signs that cities have changed tempo, and are now rigorously pursuing ways to generate more affordable housing funds and encourage development of low-income apartments in areas filled with homes for the well-heeled.
In Mountain View, for example, the city contributed $5.8 million towards an affordable housing project aimed at serving veterans late last year, and in March committed $22 million toward building ROEM’s apartment complex on Evelyn Avenue. And as city planners prepare for a windfall in new affordable housing funding in the coming years, Mountain View could be one of the few cities turning the tide.
Over the next month, the city of Mountain View will be holding a workshop with affordable housing groups including MidPen Housing and Palo Alto Housing Corporation to brainstorm ways to bring more affordable housing developments to the city. The workshop could prove timely, as Mountain View city staff expect to see between $70 million and $80 million in additional affordable housing fees rolling in over the next three years, said Randy Tsuda, the city’s community development director. By comparison, the city collected $25 million over the last three years.
“I think we’re pretty confident … that we will be getting additional funds and substantial affordable housing funds over the next year or two,” Tsuda said “We are constantly contacting affordable housing developers and constantly being contacted by them.”
Mountain View’s City Council laid the groundwork for more affordable housing back in December 2014, when council members agreed to charge higher development fees on new office and rental housing development than any other city in the region. Companies looking to build offices larger than 10,000 square feet now have to pay the city $25 per square foot of new development, all of which will flow into the city’s affordable housing fund.
Sanchez commended Mountain View for its efforts to work with developers and bring more affordable housing to the city, and said the Franklin Street apartments are a “jewel of a project,” that’s compatible with the neighborhood and adds value to the area.
“I think Mountain View is a model community. They have figured out how to do this. I think they have invested in quality and affordability at the same time, which is very unique,” Sanchez said.
Zwick, working with the housing trust, said Mountain View, Sunnyvale and San Jose have traditionally been the “major forces” trying to seek resources for more affordable housing. But he said Mountain View is ahead of the game, and has taken the initiative to increase fees in preparation for what is now an affordability crisis in the housing market.
“If every city did what Mountain View did, we’d be in great shape. We’d be back in the position (when) we had redevelopment agencies,” Zwick said.
Read the entire Out of Balance series:
Part 1, Acres of office space
Part 2, Regulations, residents often hamper affordable housing
The dismal science: economics. Basic math is to be used. The amount of money to be used for “affordable housing” is a drop in the bucket with rental units costing around 700K (high land valuation) each to build. To get “affordable housing” you have to wait for years and be lucky enough to win the lottery. The great majority who don’t get subsidized housing pay for the few luck winners. Politicians can’t come clean about this because it will lose them votes. Developed countries are also broke because of the retiring baby boomers. Now global warming. Heh, but the sun’s still shining. George Drysdale a social science teacher
The voters knew that there is not a big need for low income SENIOR housing in Palo Alto! This would have been mainly occupied by parents of immigrants residing in Palo Alto, just like the existing low income housing projects Palo Alto already has (specifically the one near Terman Middle School). The parents are low income because they are retired and they currently live with their children, who are high income. Why subsidize housing for high income families?
The cost of land is high in Palo Alto, and you could raise the value of any piece of land if you granted it an exemption to have 5 times the density that zoning allows. Thankfully, the stupid idea in Sacramento to allow skipping over local rules would not apply to cases where local zoning was so completely violated.
It’s still a really bad idea, because many cities already require more than 5% low income units from every project. The state law would cut that back down to 5%. And this is progress?
Note that this fake character, “George Drysdale”, has been posting the same garbage across other websites.
He claims that all economists agree that rent control is a bad idea. ALL economists. Yet, that is simply not true. Thousands do not hold that opinion. Since he is incorrect on that basic fact, it is safe to assume the rest of his writing is garbage.
But even if what he writes is true, that’s ok economists would believe that rent control devestates communities, that is simply not the case in MV. By state law, rent control would only apply to older rentals. That is a small percent of what we have now. And, a big AND, it won’t apply to any new housing!!!
So, how can rent control devastate MV? It can’t. It won’t cause MV to fall like the “Soviet Union”. What it WILL do is to provide some stability to renters in some of the lower priced units.
But, but, but what about the contention that rent controlled units would not be slick, fancy and have all the amenities? Well, guess who PAYS for those amenities? THE RENTERS!!!! Not every renter wants those amenities (how many actually USE the pool?). So by preventing the landlords from raising the rent by double-digits, we will have apartments with more modest amenities, but with happy long term MV residents.
The 50-era right wing voter will continue to argue for Reagans supply-side economics, Bush’s wars and brilliant tax cut on the wealthy. They will continue to argue that the ’07 economic collapse and the 9/11 attack was unrelated to the Republicsn party controlling the presidency during those events. Now they are coming out of the woodworks to complain about rent control. Wake up! The barbarians are at the gates!
Rent control is the right thing to do.
Why is Mountain View the only city trying to provide housing for everyone? It’s not only our responsibility. The other cities don’t step up because they know it’s a bad idea. Mountain View is the only city being silly and now we’ll all pay the price. I never thought I would say this, but I can’t wait to move out of this city.
Thank you again, authors, for this well-researched article. I don’t agree with it completely, though. Mr. @Drysdale makes a valid point, which nobody here has rebutted, about subsidized housing. Too often, the bulk of the discussion is about a few hundred units of subsidized housing here and there, which are a drop in the bucket compared to pent-up demand.
The United States population grows by about 1% a year. I believe that all Bay Area cities, Mountain View included, should target a 1.5% annual growth of their housing stock. The extra 0.5% is to make up for past decades of artificially stunted growth and stimulate the economy.
It would certainly be nice if more of the housing that is built could be priced lower. However, this is probably only a dream, even if Mountain View allowed 20-story towers. Everyone always wants to live in the newest apartments, with beautiful fixtures and the latest fads in interior design. In fact, only the well-heeled can afford it. But if cities don’t allow this housing to be built, the upper middle class will gobble up the older housing stock, driving up prices. Conversely, the new construction that we’re seeing now will reduce upward price pressure on apartments that could be home to the middle class.
Interestingly, I personally know three young couples (late 20’s to early/mid 30’s) with no children (and no immediate plans for children) with both spouses working full time, and when these couples where very recently looking for a new place to live (for various reasons; newlyweds, relocating after living overseas, etc.) not one of these couples was interested in living in any of the newly constructed 4-6 story apartment buildings that have recently sprung up, up and down the Peninsula…not because they couldn’t afford them, but because they didn’t want to live stacked on top of each other with no real sense of privacy or open space. They each wound up in small, older apartment complexes (one only 4 units) with lots of open space, balconies, trees, parking and quiet. These apartments are in Mountain View, Los Gatos, & Palo Alto…and my friends are thrilled that they were able to find something other than the new, dense, mid/high-rise apartments.
Don’t be fooled, not all young professionals desire to live in those dense 4-6 story apartment buildings…it seems more like we are being told that’s where we ‘should’ want to live.
The emperor has no clothes.
Wow, so the voice article missed the details of the Maybell project. it was 2 fold. 12 units of market rate housing where the city code only allowed 6 or so, issue #1. Then there was the issue of the so-called affordable housing, where it would be 60 units
where the city code allowed 10 homes. So 6 times the allowed density on the affordable proposal and twice the density on the money making market-rate portion. These are material aspects contributing to the opposition. A better location might well have
resulted in a different response, as would a less monstrous proposal or one not limiting itself to senior housing. There’s just no reason to focus on seniors for affordable housing in Palo Alto. It makes the project garner LESS support, not more, because there is less such need.
Palo Alto is infamous for objecting to any new dense housing project, but putting the kybosh on senior housing is a new low, even for them.
Senior housing is in short supply in the Bay Area, and most voters realize this. People don’t realize that they will certainly need senior housing someday, and most will want to remain in the communities they’re familiar with, near long-time friends and neighbors.
Stopping denser, close-in senior or other housing is really like shooting yourself in the foot.
@Clarity:
That’s fine, not everyone wants to live in midrise apartment blocks. And yet, people still line up to pay $4000/month for those apartments. I also know a bunch of people who want the quiet life. But I also have colleagues who commute from San Francisco to San Jose every day because this area is too boring for them. Different strokes for different folks.
And in any case, nobody is suggesting that we should get rid of the quiet neighborhoods that we have. The overwhelming majority of Mountain View and Palo Alto residents today live in quiet neighborhoods. All we want is to set aside a few areas for higher density. And that’s exactly what ABAG is pushing: “priority development areas”. El Camino, San Antonio, downtown, etc.
I assume that Mr. Noack did a lot of research before writing his article. Unfortunately, his article strongly suggests that he clearly doesn’t understand the issues behind the Maybell Referendum at all.
He quotes one of the people, Candice Gonzalez, who must still be in denial as to what caused her organization, the Palo Alto Housing Corporation (PAHC), to lose the Referendum even though outspending the neighborhood 9 to 1 and, for reasons still unknown to the neighborhood, never opening up discussions with the neighborhood once the Referendum papers were filed and later after her organization lost the Referendum. Did Mr. Noack talk with anyone from the neighborhood? He certainly doesn’t quote any of us who were deeply involved at the time.
We were not “opposed to development in Palo Alto” as Ms. Gonzalez states. We were opposed to the development the PAHC proposed, with 12 two- and three-story homes on extremely small lots (in addition to the 60 senior units). We have two such single-family developments nearby in Palo Alto and the neighborhood felt that the one proposed by the PAHC was not compatible with our neighborhood. In addition, the 60 senior units were going to be squeezed onto one acre – or RM-60 in Palo Alto zoning terms. The property was zoned RM-15 (a maximum of 15 units per acre) and the highest density residential zone we have in Palo Alto is RM-40 (40 units per acre), which is pretty dense. The RM-60 proposed (albeit couched in a Planned Community rezone) was off the charts on the high side. Parking and traffic were unresolved ancillary issues, particularly regarding Maybell Avenue, which was and still is a designated “Safe Route to Schools”, as we have four schools in our neighborhood and Maybell is a heavily traveled road to get students to and from those schools.
But, bottom line, it was the unwavering and inflexible demand of the PAHC and its supporters (including the Palo Alto City Council) that they simply had to have the 12 homes on extremely small lots, which the neighborhood strenuously objected to. But why discuss the issues with the neighborhood when you know you are going to win the Referendum?
The lesson to be learned: when a developer of any type is proposing something that people in the neighborhood strongly oppose, sit down with them and see if mutually satisfactory solutions can be found. It’s been done before in Palo Alto. I suspect it can be done again IF developers are open minded and don’t stonewall their demands.
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Thank you, Mark Noack and Kevin Forestieri, for this excellent article that provides an in-depth primer on this complicated and contentious issue.
The proposed senior housing project in Palo Alto included 60 senior units PLUS 12 selling some of the land to a developer to build an additional 12 units of market rate housing on a lot that was zoned for 13 or so units. So 72 units in total. I suspect if it was simply senior housing, the project would have gone through.
More agitation from the Voice in favor of government sponsored housing and ultimately, rent control. Get over it – the peninsula cities are very nice places to live and not everyone can afford to live here. In any event, it looks like the market may be peaking. If so, will all the tenants who have been agitating for rent control agree to pay above market rents to help out their landlords? Doubtful.
The opening of this article – on the proposed Maybell project – demonstrates why this problem has been so hard to address. Rather than listen to the various stakeholders and trying to engage in problem-solving, the advocates engaged in bullying and demonizing anyone who raised questions. Concerned about the impact of the traffic pattern on a safe-route to schools — you weren’t really concerned about the safety of children, but it was only a smokescreen to keep poor minorities out of the neighborhood. Never mind that there was already substantial amounts of affordable housing, including the Buena Vista Mobile Home Park, in the neighborhood. Never mind that the vast majority of concerns expressed were for the market-rate housing that occupied over half of the project. Never mind that Palo Alto Housing Corp gave contradictory answers to questions and was repeatedly caught misrepresenting the project. …
Ask yourself, does a Walgreens Drug Store qualify as a grocery store? Does a Planned Parenthood clinic qualify as an appropriate medical facility for seniors? To the sponsors of the Maybell project they did.
Even when the writing was on the wall, the sponsors refused to try to save the project (the opponents of the original project encouraged them to try). Instead, they sold the land for a large profit to a developer who build market-rate housing there.
If you were attempting to engage in problem-solving with sponsors who demonstrated they were not trustworthy, that held you in contempt, and whose analysis was little better than bumper-sticker slogans, how successful do you think you would be.