Proposed Palo Alto Housing Element Solution – Facts-Based Arguments
by Steve Raney, June 22, 2009 revision. Draft version first appeared April '08
It will be very challenging to update Palo Alto’s Comprehensive Plan and Housing Element to meet state Housing Allocation law, AB32, and SB375.
Housing Allocation: The State Housing and Community Development (HCD) Department requires regions to forecast future population growth. HCD approves each regional forecast and then requires regions to allocate the growth among individual cities. In their allocation, the Association of Bay Area Governments (ABAG) pursues goals such as minimizing traffic congestion, pollution, and global warming. ABAG is an organization that represents Bay Area city governments. Palo Alto is a member of ABAG. Cities such as Palo Alto are required by state law to update their Comprehensive Plans and Housing Elements to plan for the allocated future population growth.
State Assembly Bill 32 (AB 32), the California Global Warming Solutions Act of 2006, aims to reduce greenhouse gas (GHG) emissions to 1990 levels by 2020 - a reduction of approximately 30 percent. By 2050, the target reduction is 80 percent below 1990 levels.
State Senate Bill 375 (SB375) builds on AB32 by adding the nation's first law to control greenhouse gas emissions by curbing sprawl and linking land use to climate protection. The state’s press release states: “Californians need to rethink how we design our communities. SB 375 does this by providing emissions-reduction goals around which regions can plan - integrating disjointed planning activities and providing incentives for local governments and developers to follow new conscientiously-planned growth patterns. ARB (California state Air Resources Board) will also work with California's 18 metropolitan planning organizations to align their regional transportation, housing and land-use plans and prepare a ‘sustainable communities strategy’ to reduce the amount of vehicle miles traveled in their respective regions and demonstrate the region's ability to attain its greenhouse gas reduction targets. Spending less time on the road is the single-most powerful way for California to reduce its carbon footprint.”
If Palo Alto does not create a legally compliant Housing Element, then the situation may eventually degenerate to where Palo Alto loses control of local land use. A judge could “throw out” zoning and could approve any developer housing proposal, such as a 30-story condominium tower.
For a Comprehensive Plan Update that complies with these three laws, the best solution with the highest overall benefits and the fewest overall drawbacks should include Goals A-F below:
A. Comply with state law by meeting the 2007-2014 housing unit allocation: 2,860 housing units needed, with 891 already approved.
B. Preserve Palo Alto’s existing single family home residential neighborhoods. Stop approving major new auto-centered residential development in South Palo Alto
C. Stretch beyond best practices to minimize traffic/driving created by new residents. New residents should generate less than half of the VMT (vehicle miles traveled, a measure of total driving) that current residents generate. i) Intensify residential development near Caltrain stations. Reduce retail/recreational driving by putting more people within walking distance of CA Ave and University Ave activities. ii) Reduce commute driving by selecting new residents who will commute via green alternatives (Caltrain, bus, carpool, bike, etc.) and who will commute shorter distances. iii) Implement policies to encourage incoming 2-car families to transform into 1-car families. Optimize parking. iv) Taken together, these policies will minimize regional CO2 growth, protecting the climate. These policies will maximize sales tax receipts by capturing more shopping within the city, aiding the city budget. Should Palo Alto win a HSR station, these policies will maximize HSR ridership.
D. Ensure that new housing has a neutral or positive impact on city and PAUSD budgets. In pursuit of this fiscal objective, maximize new market rate senior housing.
E. Acknowledging that Palo Altans are compassionate, stretch beyond best practices to maximize affordable housing production within the allocation
F. Create an implementable plan that is deemed feasible by developers
For the Housing Element Update, these goals translate into the "ALPA Scenario" below. ALPA stands for Alliance for a Livable Palo Alto (http://alivablepaloalto.org/). Building 1969 dwelling units (DUs) with the proposed ALPA affordability mix will represent an incredible achievement, a significant stretch beyond best practices. Funding for very low and low income housing is in a state of crisis. Delivering 200 very low and 200 low income DUs will require the development of a new local funding source. Zero new single family homes and townhomes are envisioned in this green scenario.
Facts Supporting Specific Goals:
C.i) Walkable mixed used TOD results in 50% less miles driven.
For 3 to 5-story walkable mixed use development near transit in Portland, miles driven per person is less than half of average American driving. The area has the “convenience to walk to get a quart of milk.”
C) The vision for walkable mixed use residential near transit is part of the previously adopted July 2007 Palo Alto Comprehensive Plan Update:
“Transit-oriented Residential: Allows higher density residential dwellings in the University Avenue/Downtown and California Avenue commercial centers within a walkable distance, approximately 2,000 feet, of the City’s two multi-modal transit stations. The land use category is intended to generate residential densities that support substantial use of public transportation and especially the use of Caltrain. Individual project performance standards will be developed, including parking, to ensure that a significant portion of the residents will use alternative modes of transportation.”
C.ii) Traffic Reducing Housing Preference
For new apartments and condos, Traffic Reducing Housing Preference selects residents with fewer cars who will drive less. Two famous Palo Alto residents helped pioneer Traffic Reducing Housing Preference for Stanford West Apartments: State Senator Simitian and County Supervisor Kniss. Commute driving at Stanford West is a tiny fraction of the average Palo Alto resident. Traffic Reducing Housing Preference saves 3 tons of CO2 per home per year. Redwood City has recently pioneered this policy for the 800-condo market rate Peninsula Park project.
Without such housing preference, Palo Alto TOD dramatically underperforms compared to East Bay TOD. Housing in Palo Alto is so desirable that high driving commuters “crowd out” green commuters in the battle to reside next to Caltrain. Per Travel Characteristics of TOD in California (Caltrans funded research authored by Lund, Cervero, and Willson), residential TOD by East Bay BART stations produces 40% transit commute mode share (and 50% auto share). Residential TOD by South Bay Caltrain commuter rail stations produces only 17% transit mode share (and 80% auto share). Thus, South Bay TOD, while outperforming adjacent non-TOD (5% or less transit mode share), is still very auto-centered. Traffic Reducing Housing can leapfrog Palo Alto TOD commute market share beyond East Bay TOD. Further, Traffic Reducing Housing encourages all forms of green commuting, including biking and carpooling.
Given the frequency of job changes, folks often question whether green housing preference schemes work in the long run. It turns out that job duration and condo duration are closely matched, whereas the duration of single-family-home occupancy is longer than job duration. Hence, housing preferences work well for apartments and condos, but not for single family homes. See: http://www.cities21.org/workerHsngDetails.htm#duration . Restrictions are regularly applied to affordable housing to maintain policies as new residents move in. Covenants to maintain green preferences have not yet been applied to market rate condos, but there is no legal restriction on such covenants.
C.iii) Parking Optimization
Green parking policies include:
· Making carsharing services available
· “unbundling” residential parking charges from residential rent/homeowner fees.
· Adopting “parking maximums,” lowering the number of parking spaces provided per each new home.
D.i) New housing has a large, positive PAUSD budget impact
New 3 to 5 story TOD housing has a positive impact on school and city finances because:
· Thanks to Proposition 13, new residents pay THREE TIMES more property taxes per square foot than existing residents. Residential property taxes account for a big portion of PAUSD annual revenue.
· New condos generate large property taxes coupled with few students.
· New residents living within CA Ave and University Ave retail areas spend more taxable retail dollars within Palo Alto as they are less likely to drive to Mountain View or Menlo Park for shopping.
89% of the recent 17-year, 3,500 student increase in PAUSD enrollment comes from families replacing empty nesters in single family home neighborhoods. The approximately 2,000 new housing units (much of it low-student or senior housing) added from 1990-2007 had a small impact on school enrollment. See: http://www.cities21.org/HEFAQ.htm#Enrollment
New 3-story condos such as 800 High Street generate a small number of students per DU (dwelling unit). For 800 high street, the 60 units (including 9 affordable) produced only 6 students. See: http://www.cities21.org/HEFAQ.htm#Students
Different types of new housing have different fiscal impacts. New market rate senior housing has the largest positive impact on school and city finances. Senior housing generates substantial property tax (a major financial source for PAUSD) and no new students. As baby boomers age within Palo Alto, the demand for senior housing is expected to grow. New, dense, active-lifestyle senior housing makes sense for Palo Alto. For a taxonomy of housing project types, impact, and feasibility, please see: http://www.cities21.org/HEFAQ.htm#Taxonomy .
The PAUSD budget is detailed in http://www.cities21.org/HEFAQ.htm#Funding. 74% of PAUSD revenue comes from residential and commercial property taxes. 9% comes from the $493 residential and commercial parcel tax. 40 to 50% of Palo Alto property tax revenue goes to PAUSD.
Proposition 13 taxes new residents more than existing residents for the same house. For new condo residents (800 High, etc), new residents pay about THREE TIMES MORE property tax per market value of their home compared to existing single family home residents. See: http://www.cities21.org/Prop13analysis.xls
"Residential duration" means how long a family stays in one home. Residential duration for SFHs is far longer than residential duration for higher density condos. This means that condos turn over more rapidly than SFHs, and thus condo Prop 13 property tax “basis” is pulled back up to market rate much more frequently than SFHs. This further makes more dense housing pay for itself compared to low density housing.
D.ii) New housing has a large, positive city budget impact
A draft analysis has been created for SVLG entitled “Modeling the Economic Effects of New Residential Housing on Cities.” The research was conducted on a pro bono basis by McKinsey & Company. The analysis found that new medium density (34 DU/acre) housing has a net positive fiscal impact on city budgets, and Prop 13 property tax “imbalance” (new residents pay more property taxes than existing residents) was the main reason for this. The research methodology included 12 interviews with city officials from Cupertino, Palo Alto, San Jose, and Santa Clara.
E) Maximizing affordable housing production
When large Palo Alto housing projects are built, “inclusionary zoning” requires that 15% be affordable. This 15% methodology does not produce ABAG’s desired 50%+ affordable units.
E.i) SPUR’s (The San Francisco Planning and Urban Research Institute) Affordable by Design report explains one strategy to develop a higher percentage of affordable housing – without public subsidy. SPUR’s vision is for 5-story, 65’ tall, wood-frame construction over podium parking. For San Francisco, the ambitious plan is to split the DUs (dwelling units) as follows: 60% market rate, 40% moderate affordable at 133% or 150% of area median income (AMI). This is a re-definition of “moderate” to a pricier level than the traditional 120% AMI moderate definition, but it is also more realistic. The vision is for 800 square foot (sf) two-bedroom for-sale condos as workforce housing, priced at $450,000. Vigorous residential car trip reduction is a key part of making the economics work – less parking really matters. 5-story wood-frame construction requires fire code modification, as undertaken by San Diego and Seattle. SPUR also argues that maximum density zoning should be modified to encourage more, smaller DUs.
SPUR's design should end up being a bit shorter than Palo Alto's historic 6-story President Hotel Apartments on University at Cowper. See this vintage photo: http://www.paloaltohistory.com/resources/hotelpres1930s1-451x365.jpg
E.ii) In San Francisco, tiny new 250 square foot condos selling for $279,000 have 100% affordable DUs.
One way to stretch beyond best practices would be to create a new, local “compassionate housing” funding source. For example, this could be a bond measure. One councilmember suggested developing new funding for Palo Alto housing at the county level, but it would seem unlikely that the rest of the county has sympathy for Palo Alto’s plight.
Additional Facts Supporting the Goals
1. Population Growth.
As far as protecting the climate (abstaining from religious arguments about population), efforts by Councilmember Drekmeier and others to reduce population are laudable. Sierra Club’s John Holtzclaw states that current 6.8B world population is unsustainable and a reduction to 4.0B is required. All other things being held equal, a reduction to 4.0B population will dramatically reduce CO2 production.
Whether or not population reduction efforts succeed (in the second half of this century), current state and regional efforts to minimize CO2 growth should be enthusiastically supported. The Bay Area’s population is expected to continue to grow for many decades. Regional population growth is comprised of the difference between births/deaths and net migration. The Bay Area’s attractiveness is expected to generate large demand for in-migration. Within the Bay Area, Palo Alto is relatively more attractive than most other cities.
Even in a 2090 shrinking world population scenario, adding housing to Palo Alto will reduce CO2 by enabling long-distance commuters to move nearer to their jobs. This is because new housing remedies the VMT-maximizing effects of Palo Alto’s 50-year-long nation-leading jobs/housing imbalance.
2. Palo Alto’s historic, nation-leading jobs/housing imbalance
A 2006 study by Robert Cervero and Michael Duncan of the University of California, Berkeley, concludes that locating housing next to jobs is the most effective strategy in reducing vehicle mileage (and generation of carbon dioxide). Their conclusions are detailed in an article, "Which Reduces Vehicle Travel More: Jobs-Housing Balance or Retail-Housing Mixing?" in the Autumn 2006 Journal of the American Planning Association.
Palo Alto has arguably the largest mileage-increasing "jobs-housing imbalance" in the Bay Area, needing roughly 90,000 additional residents (added to the current 59,000 population) to "balance" Palo Alto's 87,000 jobs. (Numbers of Palo Alto jobs and residents taken from City of Palo Alto Community Profile, July 2005.)
A "good" jobs/housing balance is about one job to every two residents, as many residents do not work (retired, stay-at-home, too young). A "large" jobs/housing imbalance occurs when you have one or more jobs for every one resident, such as in Palo Alto, Emeryville and other "edge cities." Palo Alto has had a jobs-housing ratio of more than two jobs per household (as high as 2.4 jobs per household) since the 1960s due to its explosion of high-tech jobs and constriction on housing development after the big subdivision surge of the 1950s ended.
Weekly Editor Jay Thorwaldson started as a Palo Alto Times reporter in 1966, has covered ABAG, and has encyclopedic knowledge of historical Palo Alto land use decisions. Jay wrote a 1968 article on Palo Alto's jobs/housing imbalance, with 2.4 jobs for every household in those days. Jay’s take on Palo Alto’s current jobs/housing imbalance: “Well-intentioned and environmentally conscious Palo Alto has restricted housing to create a terrible environmental situation with long commutes wasting fuel. It’s an insoluble situation. Long commutes damage the social fabric and create lower quality of life. Workers are forced to commute from Manteca, etc. Palo Alto has a drawbridge mentality. Compounding the insolubility, objections raised by neighborhood associations are legitimate.”
3. The distorted US housing market
The housing market is broken. This market is hamstrung by popular but distorting policies including the mortgage interest deduction, Proposition 13, “drawbridge zoning, ” the subprime mortgage market, “free-ride negative economic externalities,” and “local government Tragedy of the Commons.” Without such distortions, Palo Alto land use would be denser and greener.
The US housing market is far from an efficiently functioning market. The housing market is highly regulated and poorly regulated. Hence, if the housing market operated efficiently, people would be able to make housing choices that they were more enthusiastic about. As of today, those choices are limited and lousy. Too often, folks pick the "least worst" housing option. No one likes picking a house with a two-hour commute; no one likes living in a sardine can. If the housing market was more efficient, the Bay Area would look different than what we see now.
With Proposition 13, "economically rational" homeowners fight all new proposed housing in their city to restrict supply. Restricted supply increases home value, and Prop 13 assures that countervailing property taxes do not increase at the same rate. Hence, Prop 13 is politically popular while being acknowledged by experts as mean-spirited and “bad policy.”
When a family selects a residential location that creates high mileage commutes, this creates a "negative economic externality" - the family creates negative traffic, particulate pollution, and greenhouse gas emissions, but does not pay for this impact. Instead, the impact is borne by society. This is another way in which the housing market is inefficient and results in a Bay Area that isn’t as nice as it could be.
When cities act on their own, they optimize land use based on local voter concerns. When an entire region is planned in this manner, the result is extremely inefficient human settlement patterns. It's really a tragedy of the commons, because city land use decisions made in each city's local interest harm other cities and harm the region as a whole. (See: http://en.wikipedia.org/wiki/Tragedy_of_the_commons ).
For more details, please see: http://www.cities21.org/HEFAQ.htm#Broken
4. The need to reduce driving to protect the climate.
Higher mpg cars (Prius, etc), clean energy, etc are good for the climate. Reducing VMT is also necessary to protect the climate, and has a larger impact than increasing automobile mpg.
CO2 from driving will continue to grow in CA, even as average mpg slowly rises (assuming a CAFE increase and continued high gas prices). The reason is that "vehicle miles traveled" (VMT) will increase faster than fuel economy increases. See: "Growing Cooler: The Evidence on Urban Development and Climate Change." This book and companion report represents a collaboration between Urban Land Institute, Smart Growth America, Center for Clean Air Policy, U. MD’s Reid Ewing, and the Bay Area’s own Jerry Walters (transportation consultant at Fehr and Peers). The report points to more compact development patterns, where jobs, housing, and other activities are closer together, as being an essential element in reducing global warming, as the proximity of these activities results in reduced driving, encouraging walking and biking, and facilitating sustainable public transit. Please see: http://www.smartgrowthamerica.org/gcindex.html for a two-page summary with a link to a 14-page executive summary.
James Howard Kunstler, author: The Long Emergency: "Driving a Prius might induce raptures of eco-moral superiority, but changing the zoning laws would produce a better outcome -- and that's just too hard."
U.S. suburban (In the Bay Area, suburban means anything that is not San Francisco, downtown San Jose or downtown Oakland) family energy consumption is too high, and more than half is from driving. See: http://www.cities21.org/HH_NRG_consumption.htm
State Senate Bill SB 375 builds on State Assembly Bill AB 32 (the California Global Warming Solutions Act of 2006) by adding the nation's first law to control greenhouse gas emissions by curbing sprawl and linking land use to climate protection. The state’s press release states: “Californians need to rethink how we design our communities. SB 375 does this by providing emissions-reduction goals around which regions can plan - integrating disjointed planning activities and providing incentives for local governments and developers to follow new conscientiously-planned growth patterns. ARB (California state Air Resources Board) will also work with California's 18 metropolitan planning organizations to align their regional transportation, housing and land-use plans and prepare a ‘sustainable communities strategy’ to reduce the amount of vehicle miles traveled in their respective regions and demonstrate the region's ability to attain its greenhouse gas reduction targets. Spending less time on the road is the single-most powerful way for California to reduce its carbon footprint.”
For more on this topic, see: http://www.cities21.org/HEFAQ.htm#Jobs .
5. Palo Alto is not “built out,” because many new housing units may be profitably added.
It appears possible to redevelop just a few TOD blocks into Palo Alto to meet the housing allocation.
The “Zibbibo Block” on University Avenue (430 Kipling Street, etc) takes up about two acres of land. Preserving the existing retail establishments on the block, and developing small condos (800 square feet on average via the SPUR affordable by design scheme) at 3.0 floor area ratio for the housing yields 324 new housing units.
6. “No New Net Trips”
One councilmember expressed an interest in having “no new net trips” in Palo Alto, IE grow and keep annual VMT flat. For climate protection, it can be argued that Palo Alto would be even better served by reducing VMT. Given that new residents will drive and hence will generate new VMT (albeit at a rate much lower than the average Palo Altan), one way to achieve this is to charge for parking all over Palo Alto. This sort of policy would be a very groundbreaking step for Palo Alto to take. Charging is one of the few low-cost policies that can produce a dramatic reduction in VMT. Such policies are very unpopular politically, so are difficult to implement.
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This document would benefit from review. Review by PAUSD's finance expert Bob Golton seems especially appropriate.