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Guest Opinion: Why not try ideas that work?

Former city commissioner seeks better plans to increase supply of housing, improve transportation

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Ever wonder why little progress has been made on housing in the last few years? Our Comprehensive Plan has a goal to build 300 housing units per year. That's 3,000 housing units over the next 10 years. How do we get there?

The short answer is we need approaches that work financially and at scale. We'll never get to 3,000 units one, two or even 10 at a time. Without proper tools to analyze costs, we'll continue to chase enthusiasms that barely work and don't scale.

The first housing enthusiasm I saw four years ago on the Planning and Transportation Commission was accessory dwelling units (ADUs). Promoted as a tool to create affordable housing, they're an incredibly inefficient way to build. Why? Because even small units have a kitchen, a bath, windows, doors and site prep including expensive utility trenching.

All this adds up and is compounded by first-time developers (homeowners) with no expertise and no access to financing except home equity loans. The problem is less about city fees and more about no experience with the design and building process.

The upshot: ADU production is hard to scale. (The city reports 31 ADUs built in three years.) While ADUs may be attractive as in-law/caretaker units, home offices or Airbnbs, we have no evidence that new ADUs are being rented as affordable units.

One fix: We could include ADUs in a city-financed affordable housing program and see how many people are willing to build rent-restricted units.

Next enthusiasm: Downtown Housing Incentives. Some people had a theory that density limits and parking standards were the problem. We increased density and reduced parking standards in the downtown district. The response from housing developers? Crickets. Why? Because the City Council removed the downtown office cap, and at $10/feet, tech office space is still more profitable than housing.

For those who believe building height is the answer, developers talk about a "U-curve" for building costs relative to height. Cost per unit goes down until a certain point and then goes up again as the building code requires more complex construction.

Our current 50-foot height limit is not at the bottom of the U-curve, but neither is 150 feet. Multifamily developers report that four floors of wood construction above a two-floor concrete podium yields the lowest cost per unit. That's roughly 70 feet.

As for parking, it's true that parking spaces cost money, but we need to ensure neighborhoods near Downtown and California Avenue don't become de facto parking lots for under-parked buildings. Additional height for residential buildings with ground floor retail and inclusionary below-market-rate units is a direction we should explore in districts that are not adjacent to existing low-rise residential.

It's vital that we identify prime redevelopment districts if we want to meet our Comp Plan goals. Through districts, the city can run time-consuming state-mandated processes like California Environmental Quality Act (CEQA) reviews just once. We can plan and pay for impacts in districts. We need to quickly identify which districts have parcels and developers that are ready, willing and able to act at scale, and move aggressively to prioritize development in those districts.

The San Francisco Planning Commission reports that 75% of the city's new housing units are in the SOMA and Downtown districts. Their big successes are large buildings on large lots in repurposed commercial and industrial districts while San Francisco's traditional residential districts have produced very few units.

In the Palo Alto context, our opportunities are North Ventura/Fry's, Stanford Research Park and the San Antonio corridor. Nothing will happen in Ventura until the major property owner, Sobrato, decides what it's willing to do, and nothing will happen in the Research Park except what Stanford agrees to do. That leaves San Antonio, close to the Googleplex and the San Antonio Caltrain station, as an opportunity.

The most difficult nut to crack is transportation. Big Tech employers are spread around the region far from public transit: Oracle in Redwood City, Facebook in Menlo Park, Google in Mountain View, Apple in Cupertino, Netflix in Los Gatos and Cisco in North San Jose.

Individuals in the Bay Area have responded by owning more cars and driving more. Caltrain's best idea to fund its service-upgraded "Vision 2040" is with a regressive regional sales tax.

Bottom line is we need to develop financially feasible policies to mitigate Big Tech regional impacts and make sure the businesses pay their way. Each tech company benefits from having other tech companies nearby (22% productivity gain in Silicon Valley, according to a recent National Bureau of Economic Research study authored by Enrico Moretti, a UC Berkeley economist). Local governments are left with limited tools to recover impact costs.

It's easy for Big Tech to support regional sales taxes when their software and services are exempt from sales tax. More importantly, Big Tech needs to pay its fair share of regional growth costs, estimated to exceed $100 billion just for transportation and housing. Locally, funding for grade separation of the railroad tracks and affordable housing are urgent needs. A serious business tax is a modest step forward.

None of this addresses Bay Area construction costs that are now the highest in the country, driven by the demand for Big Tech office construction. Nor does it address Sacramento's addiction to Big Tech income tax revenue that doesn't return to our region.

Here's hoping our council gets more focused on financial feasibility, less caught up in NIMBY-shaming, and tasks the Planning and Transportation Commission and planning staff to focus on financially feasible initiatives rather than ratify enthusiasms that don't work.

Asher Waldfogel is a Palo Alto resident, tech serial entrepreneur and former member of both the Utilities Advisory and Planning and Transportation commissions. He can be reached at asher@ideasthatwork.ai.

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Comments

36 people like this
Posted by merry
a resident of Palo Alto Hills
on Jan 17, 2020 at 8:10 am

there is a reason we have cars, they take us to where we want to go and when we want to go Public transit doesn’t.


40 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 17, 2020 at 9:04 am

Yes. This hits all the right points -- the economic realities of different types of development, the importance of transportation, the priorities for development locations, and the need for balance between tech company benefits and costs. It would be a huge improvement over current policy.


28 people like this
Posted by Sense
a resident of Greenmeadow
on Jan 17, 2020 at 10:08 am

This makes a lot of sense to me. Thank you Asher.


8 people like this
Posted by Reality Check
a resident of University South
on Jan 17, 2020 at 10:19 am

[Post removed.]


32 people like this
Posted by Novelera
a resident of Midtown
on Jan 17, 2020 at 11:39 am

Wow! I can't remember when I've read such a clear and succinct article and with sensible prescriptions for what ails us.


24 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Jan 17, 2020 at 11:58 am

The point that we really need to address is not housing, but transportation.

I was speaking with someone a while back who lives in Gilroy, works in Mountain View and drives each day. She works near San Antonio station and lives near the Gilroy station. Why does she drive then I asked? She answered for two reasons, the first is cost, her fare is more than gas since she works somewhere with free parking and secondly she has little or no choice of trains. The schedule is fixed and does not seem to be able to change.

This is just a ludicrous situation.

Firstly, there has to be an economic way of reducing those commute fares. Why is it cheaper to drive? How can we make transportation more competitive?

Secondly, with Caltrain electrifying and the promise of more frequent trains, San Jose will still be the southernmost point of an efficient service. Why is this? Why are Caltrain not being forced by government action to improve rail service further south?

Innovative solutions have to be worked out.

Even if a commuter can use public transport for a couple of days each week, it would make a difference to them and to us. Off peak the trains are running at lower capacity passengerwise. It costs the same to run a train full as partially full presumably, so having reduced off peak fares may help. Also reduce or abolish parking fees at Caltrain stations after 3.00 pm to help evening usage.

When people go jobhunting it is not always considered a perk to find their job comes with a free parking space? Why is that? Shouldn't being able to park outside the office each day be a perk? As a perk, should there be ways to tax that perk so that the revenue collected could be used to offset public transport costs.

I am of the opinion that giving people free anything is open to abuse. Someone who gets a free public transport voucher will abuse it because it costs them nothing. On the other hand, if that voucher costs them something then it will be of value and more likely to be well used.

If I was a young thirtysomething starting out with a young family, I would not want to live in a high rise anything in a crowded area such as Palo Alto (unless perhaps I was raised here). Instead I would want somewhere with a yard for children to play, and space to park a couple of cars. Living in Gilroy (or Tracy, or Half Moon Bay) would be much more appealing.

Can we do a much better job of improving transportation rather than always expecting more housing to solve the problems our high employment area (meaning the whole of the Bay Area and not just Palo Alto) has created.



13 people like this
Posted by The problem with nay-sayers...
a resident of Crescent Park
on Jan 17, 2020 at 12:34 pm

Here's the thing, often its difficult to imagine a different scenario when you are entrenched in the solutions of our past. As a property developer myself, I know there is tremendous animosity in Palo Alto towards my kind and frankly, it doesn't bother me too much. People hate what they don't understand and while I don't have the time or the patience to spend a half-day refuting this article, I will provide a few tidbits that poke enough holes in Asher's analysis that all of you online readers who waste your time on Palo Alto Online's decrepit forum can think twice about its credibility.

First, the highest costs associated with residential development in the Bay Area are related to the cost of land, not construction. Yes, Asher, it is more expensive to build today than it was 10 years ago but the inflation there is minuscule compared to the appreciation in the cost of land over the same period. Why is this important? Because the added capacity that is at the heart of the promise of ADU's is due in large part to the fact that there are no land costs associated with the development of these additional units of housing.

How frequently do we in Crescent Park see an email from a neighbor in our neighborhood email CPNA that asks if anyone knows of rental available for so and so who is here for whatever period of time and needs something affordable and close to Stanford? If I had an ADU I would absolutely reply to my neighbor and say I have a space that I wouldn't mind renting for a reasonable and affordable rate to this so and so you know. And I don't think I'm alone. And before you ask me where that so and so is going to park, the answer is on the street - which is almost entirely unparked in the majority of Crescent Park.

Look the point here is that residents of Palo Alto are exceptionally capable of reinvesting in their real property. Our previous ADU rules were overbearing (deed restrictions?) and confusing - that's why in large part the State stepped in. I have had so many different conversations with people who are interested in ADU's locally and the change sought by ADU proponents will take time. The pipeline of construction is not immediate.

The next issue is that of the height limit. Why oh why dear Asher is it always extremes with you. 50 feet or 150 feet? The 50-foot height requirement is so ridiculous. Most residential development now is spec'd with 9-10 foot tall interior spaces (top of floor to bottom of ceiling). At best 50 feet downtown (where retail is required on the ground floor) would result in 3 maybe 4 stories once you build out even higher retail ceiling heights and rooftop mechanical equipment. But take a look at the residential buildings that are taller in our downtown and ask yourself about the vacancy. Are they having a hard time filling the space? Of course, not, Is the demand through the roof? Yes. Would any of those property owners prefer to own a 3-4 story commercial buildings (under our current zoning) instead? DEFINATELY NOT.

Yes, commercial rents are high. No question about it. But if the height limit was raised ONLY FOR RESIDENTIAL BUILDINGS then property owners managing old office space would have something real to evaluate. Maybe building a 7-9 story residential building is now worth the torture of the Palo Alto process. This type of residential development is happening all over Redwood City - so what gives there? Its not less expensive to build in Redwood City is it? No. The difference is the height restrictions and the parking restrictions and lastly the municipal process.

The irony is that all of the strategies which you have written off take time and commitment. And yet all the fear you perpetuate with your Embarcadero Institute [portion removed] is about how every little change is going to destroy our neighborhoods overnight. It is a lopsided approach that has made your seemingly earnest attempts at dialogue suspect.

We need our residents to embrace flexibility. As someone who I know well and respect immensely once said, when your house is on fire, you do whatever it takes to put it out. The extent to which you believe the house is on fire may differ from me but the reluctance to explore flexibility is overwhelming. Even if we lifted the height to 100 feet for 3 years - as is clearly visible from the ADU experiment, the change won't come overnight. At best, maybe 2-3 property owners would be able to take advantage of it.

But it's so much easier, as you have demonstrated, to just argue that it won't work and it won't help and it won't solve the problem. I see that sort of reluctance all the time - change is scary. And fear can immobilize us. This is why I think your time on the Commission was up. We need patient, brave and resilient community members to work on these issues with open minds and open ears. There are residential builders like myself who live in this community. I would love to build another residential project downtown where the walkability scores are high, the transportation options are robust and the amenities are exciting. Problem is, the municipality isn't willing to let us build the sort of residential buildings that make sense. Last question - what are you going to do about it?


24 people like this
Posted by Infrastructure
a resident of Mountain View
on Jan 17, 2020 at 12:55 pm

@problem with...there are many who don’t have any problem with development EXCEPT for the complete and utter lack of infrastructure improvements to go along with it! During the drought we couldn’t flush toilets, water our plants. Our roads and traffic are already over-saturated.

And now you’re pushing more development; of course you are, you just want to make your $ but have no solution for these problems. The question is what are YOU going to do about it?


22 people like this
Posted by Dan
a resident of Midtown
on Jan 17, 2020 at 12:56 pm

Building an ADU on property you live at and renting it out (not short term AirBnB) is either stupid + greedy or you are not paying any attention to the raft of rent control and renter protection laws getting passed. Who wants to deal with a tenant that they can't easily get rid of, living in their back yard? Expecting this to make ANY measurable dent in rental housing stock shortage is laughable given the pile of restrictions that are continually being added to landlords' responsibilities.


23 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 17, 2020 at 2:05 pm

@Naysayer

As someone who’s spent my whole career thinking about what’s next in technology markets, it’s hard to assess your arguments because you don’t say what you want and why it will work. I was completely flexible about development standards on the PTC with the exception of parking standards. Why? Because I’ve actually looked at local and regional vehicle ownership and VMT data and the trends are up, not down. My experience is a trend has to start before it has any chance to go viral. Vehicle ownership has everything to do with job sprawl around the region and high incomes. Higher car ownership is not ideal, but who do you pick to invest $100B in regional transit?

More importantly, you’re confirming my points. We’ve spent a lot of time on ideas that don’t work. Maybe there’s an ADU that creates affordable housing. Show us real cost numbers for a repeatable ADU that can rent for $1,000 or even $1,500 per month with an IRR for the homeowner who finances it on a home equity loan. Maybe 70 feet is the right height, but until we can look at real financial models it’s hard to know for sure. We spent a lot of time on density bonuses, and you’re saying they’re the wrong thing. We agree.

The way forward is for developers like you to come forward with open financial models so the city can set development standards that work. Isn’t it better to share and get something rather than whine and get nothing?

Unfortunately with all the legal battles over performance-based concessions (like keeping grocery markets open), the city needs to rely on hard standards (like units built and deed restrictions) rather than soft standards (like ongoing TMA sponsorship).


25 people like this
Posted by Resident
a resident of Duveneck/St. Francis
on Jan 17, 2020 at 2:23 pm

Asher, thanks for the sensible thinking. Maybe Mayor Fine can take you on as an adviser. Sentiment and ideology are good for politics, bad for actually getting things done - we need practical approaches driven by data and dollars. We spend a lot of time on ideas that don't work or don't matter, which crowds out much chance of working on things that might. Step 1 to improvement is always to identify the low/negative value stuff and stop doing it. This piece is a helpful step in that direction.


7 people like this
Posted by commonsense
a resident of Charleston Gardens
on Jan 17, 2020 at 2:38 pm

@naysayer,
The highest cost of development in the bay area is land? While land is very expensive around here, construction on multifamily developments is at least 4-5x the cost of land. Your credibility went out the window in the second paragraph.

Waldfogel,
I'm so sick of hearing we can't build ourselves out of this problem (as in build enough units.) That is the only way! If a million more housing units were available tomorrow, rents would keep going up? Guess again. The only logical way to do this increasing the height limit. You are somewhat correct that at some height, depending on the lot size, there are diminishing returns but to say after 70' it's a total loss is ridiculous. Do you really think 100 story apartment builds are built to lose money. The 50' height limit is just plain dumb. What's the problem with 100'? Views? Give me a break! We know why people come to silicon valley and it's not the views.


19 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 17, 2020 at 5:07 pm

@Commonsense

Thanks for the comment. The solution always depends on what problem you’re trying to solve and in what time frame. Of course we have the technology to build 1000 foot high buildings. Happens all the time, but they aren’t affordable and ironically they’re usually marketed for their views. (I’d love to see some civil engineering studies just looking at feasibility and cost with our sea-level soil conditions)

But more importantly, what time frame do you think is important? What’s your approach to address this year, next year, five years from now and 25 years from now? The entire Bay Area built 32,692 housing units in 2018. At that pace your million units will take over 30 years. That’s with the regional construction industry running full-tilt. I suppose if we put a 10 year moratorium on office development we could double the housing pace, but would that make you happier?

That’s why I’m suggesting we focus on policy ideas that work. We can 10X our housing production if we copy San Francisco’s SOMA district model. Let’s figure out where we can do that. The list of possible places in Palo Alto is short and I mention three possibilities in the guest editorial. Let’s get good numbers so we don’t waste time on projects that don’t pencil. Don’t forget that if we upzone a few parcels to 100 stories (or even 10 stories) it’s a huge windfall to the landowners, and we might want to negotiate some public benefits in exchange.


22 people like this
Posted by Don't be EVIL companies
a resident of Another Palo Alto neighborhood
on Jan 17, 2020 at 6:10 pm

"Each tech company benefits from having other tech companies nearby (22% productivity gain in Silicon Valley, according to a recent National Bureau of Economic Research study authored by Enrico Moretti, a UC Berkeley economist)."

Still making shallow arguments to avoid dealing with the demand side of the problem, I see. The above makes a specious argument for density, kind of like a product's claims that it works "faster" or "better" (how much faster? compared to what?) How many tech companies nearby are necessary for benefits? Suburban Silicon Valley that birthed successful companies like Apple, Google, Facebook, and HP? And what of the harms that too much density does to the region?

We should be protecting quality of life, not destroying it, because that's a primary factor that attracted the businesses here in the first place, despite the outrageous costs. Tech companies can have other nearby tech companies if we get real and make two or three Silicon Valleys, dealing with the actual cause of the problems here, the demand side.

Facts show that densifying in an in-demand place is only going to make things worse, ratcheting up costs and displacing existing residents. It ruined San Francisco. Arguing that we just need to try harder to do density another way is reprehensible in the face of the evidence already before us.

We are still not dealing with the issue of the office development being too much for the infrastructure here. It's chilling to have someone compare us to San Francisco, assuming this place should be SF mini me.

We should instead be taking a more holistic systems look at the area, since this is not a Harry Potter book and we can't just conjure transportation arteries from nowhere for both daily life and safety. Job centers are important,and this is a state with a worsening fire danger, earthquake and other dangers, prone to drought -- we really would benefit from investing in redundant job centers.

Companies can get the benefits they get here, but also get more affordable housing, if only we stop letting them steamroll over once-economically-diverse communities, and focus on doubling or tripling the number of job centers. Public investments to make the other places desirable along with tightening, not loosening, of constraints here to make moving to those places attractive until they have their own gravity, too, is the only thing that will truly yield benefits to all stakeholders.

People take cars because they value their time, by the way. Hong Kong has the best public transit in the world with among the highest usage in the world, but average commute times are as high as Los Angeles. The people who don't take transit are the wealthiest, because they can pay to guard their time. In a place like Silicon Valley, the time of ordinary tech workers is also a valuable commodity, so clogging the arteries and overbuilding will only be a bad thing with no viable solution -- except to multiply the number of desirable job centers as an escape valve to what's happening here.

Tech companies can benefit from being around other tech companies without making things so concentrated that they start hurting communities, the environment, and create economic conditions that destroy upward mobility for ordinary unskilled and traditionally lower-paid workers. Cities used to be a good deal for the ordinary workers (who will always be necessary for the care and feeding of the oblivious, selfish tech class), but no more.

Read analyses of MIT economist David Autor - cities are no longer good places for middle-skill workers because of the tech transformation AND because of the concentration of companies and density.

Silicon Valley became what it became as mostly a suburb that didn't need density. Arguments that somehow they need to keep concentrating here are shallow at best, oblivious to damage being done to communities. The easiest thing to do in the face of the problems is to multiply the number of job centers, not densify. Stockton, for example, has lots of low-cost housing, existing infrastructure, and it wants a UC to give young people from there opportunity, as well as to attract job creators. Investing in building up Stockton or other promising cities around the state, and incentivizing clusters of companies to move is ultimately the best answer.


22 people like this
Posted by Don't be EVIL Companies
a resident of Another Palo Alto neighborhood
on Jan 17, 2020 at 6:22 pm

@ no sense,
"That is the only way! If a million more housing units were available tomorrow, rents would keep going up? "

If the people in the units created more demand, yes, as in, Hong Kong. Duh. They've been using that tired and deceptively oversimplified argument that ignores the demand side to turn Hong Kong into what it is today, and guess what? It's not affordable. The building allows job creators to continue to concentrate. Are you not aware of the companies thinking they can treat Silicon Valley like some kind of clown car of infinite capacity for tech workers?

The solution is to address the demand side of the equation. Period. San Francisco is evidence enough that densifying only accelerates costs and displacements of ordinary people when the job creators continue to cluster. The tall buildings of SF were built under this crisis mentality to the point that the development has created warnings of serious risks. Which we haven't heeded anymore than Katrina before the Hurricanes. Public safety officials are already warning that the existing density creates surety of loss of life in foreseeable disasters. Companies won't stop in their self-centered, selfish actions, but governments shouldn't just bend over and do whatever they want, particularly when the companies aren't paying the local bills. You can have too much of a good thing.


13 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 17, 2020 at 7:10 pm

@ Don't be EVIL

The Moretti study is the best quantification we have of the tech company clustering benefit. 22% is not insignificant: that's Google's entire operating income (22.94% in CY2018) and most of Apple's operating income (24.57% in FY19). We know what it's worth to the companies to be close together.

We also know the region needs at least $100B of investment in transit and housing to accommodate Big Tech growth. If these two companies paid 5% sales tax to the region on their $397B of revenue, we'd have $19.85B per year to work with and solve the impacts. Instead they're blaming cities for not solving their demand-induced housing problems and they're lobbying to delegate transit spending to a sales tax they don't pay.

We don't want to be anti-growth/anti-change. We just want Big Tech to help pay for their impacts.


15 people like this
Posted by Don't be EVIL Companies
a resident of Another Palo Alto neighborhood
on Jan 17, 2020 at 7:25 pm

@Asher W.
You are still skirting the issue and digging down on a point that means nothing, just an attempt to use a statistic to justify bad policy.

How much clustering is necessary to get a benefit? Infinity? If clustering is so great, wouldn't that mean that more clusters is better than fewer? It certainly would be for national security, regional SAFETY, and for the companies, if what you claim is true.

And just because something possibly benefits Apple and Google, does it make it okay for them to steamroller over existing communities and destroy hundreds of thousands of vibrant and diverse lives? My clustering my family at the home of Sergei Brin, including not paying for it, would be GREAT for all of us, but does that make it okay?

And if clustering is the important factor, clustering can happen anywhere, without destroying the lives of the workers who are not at the top. The Autor work is the best I have seen on how the tech clustering economies have destroyed economic opportunity for middle and low-skill workers. The companies have wholesale displaced people of color from the entire region, destroyed the vibrant diversity of San Francisco, and created a tremendous amount of unnecessary pollution. We didn't used to have skies that more resembled LA's than ours even when SV was plenty prosperous.

Not to mention that the study doesn't mention the loss of individual productivity and quality of life because of the commute times resulting from the overcrowding.

[Portion removed.]


14 people like this
Posted by Don't be EVIL Companies
a resident of Another Palo Alto neighborhood
on Jan 17, 2020 at 7:30 pm

@AW,
"We don't want to be anti-growth/anti-change. "

Oh? The Royal WE? How is being smart instead of stupid, selfish, and destructive necessarily "anti" anything?

If we're talking a developing child, "we" would be pro growth. If we're talking a destructive metastacizing cancer, we would be antigrowth. You are trying to create a framing in which to cast anyone not covered by your royal WE as by definition bad. Who does that? People who have no leg to stand on with their ideas.

WE should be smarter, more holistic, and more civic-minded in how we change. Your ideas push for quite the opposite.


16 people like this
Posted by Robert Neff
a resident of South of Midtown
on Jan 17, 2020 at 9:33 pm

Thank you for posting this guest opinion. I think Palo Alto needs to figure out how to create a lot more housing instead of office space, or even hotel rooms.


19 people like this
Posted by RunAsherRun
a resident of Charleston Gardens
on Jan 18, 2020 at 8:25 am

We need people like Asher on CounciL. Please consider running. We need thoughtful clear thinkers with solutions and the ability to work together. Ineffective members like Tanaka who has passed nothing in four years need to go.


6 people like this
Posted by Bill
a resident of Mountain View
on Jan 18, 2020 at 4:18 pm

The author left off a prime redevelopment area with ZERO NIMBY concerns: The light industrial neighborhood of East Embarcadero.

With MountainView building modern cities of the future in North Shoreline and the MV sections of Moffett, Palo Alto could create its own on East Embarcadero... easily connected by bike to jobs.

The key is don’t tiptoe into either height or density... we need substantive numbers.


18 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 18, 2020 at 4:48 pm

Followups to just a few of the interesting comments above. I'll have to skip a lot of good ones because otherwise this post would be way too long.

About building our way out of the shortage: It appears that many housing projects today are barely (if at all) profitable. I'm reminded of these reports (Web Link, Web Link) on projects in downtown San Jose. Some midrise (7-story) projects are feasible, but low-rise and high-rise mostly aren't viable.

If somehow we could produce enough housing to force rents to drop, then fewer projects would be profitable, and developers would stop building new ones. So I suspect we can't build enough market-rate housing to bring prices down significantly. Apparently John Sobrato agrees: “It’s always going to be a very expensive place to live,” Sobrato said. “We’re not going to be able to reduce the price of housing down to where it’s going to be affordable for the majority of middle income people.” (Web Link)

About building tall: Those high-rise San Jose projects I mentioned above aren't being held back by height limits, but they're still not financially viable. So what about the tall buildings in Redwood City? I took a quick look at news reports from last year for projects there. Here are the top few I found. Broadway Plaza: 1400 residents, 1720 jobs. Sequoia Station (17 stories): 1200 residents, 8000 jobs (at 200 sq ft per employee). Main & El Camino: 600 residents, 2750 employees. You can see the pattern here -- all these projects are mixed-use developments that increase the jobs/housing imbalance. This is exactly the scenario that the four pro-growth Council members are pushing us toward, by eliminating the downtown office cap and declaring downtown a priority growth area.

About solutions: All of these suggestions have been made before (and many in the comments above). Linking office demand to housing supply is essential, and there are lots of ways to do it. Some examples: Head taxes used to subsidize BMR housing; zoning that requires jobs/housing balance in mixed-use developments; incentives for tech companies to provide land or below-market financing for housing; rezoning industrial areas to limit office development and allow dense housing closer to jobs (I still haven't given up on Stanford Research Park, but there are other opportunities, too).

It's been a while since I read Moretti's work, and at the time I didn't find it compelling, but I'll reread it. However, in the long run, I think it's clearly nuts to put all our eggs in one hyper-expensive, earthquake-prone, sea-level-threatened, terrorism-target basket. It makes all the sense in the world to provide incentives to develop new areas of concentration, and where possible, to link them to our area with high-speed transportation. As described in O'Mara's "Cities of Knowledge", Silicon Valley exists in large part because of post-WWII strategy along those lines.


7 people like this
Posted by george drysdale
a resident of Professorville
on Jan 19, 2020 at 11:38 am

If you want to get rich in Silicon Valley get sand and aggregate (concrete here concrete there) into Silicon Valley at a reasonable price. If you can you'd be doing better than 90% of tech companies. The price has exploded as sand mining continues to destroy the environment. The the main cause is like in other Latin countries like California: governmental corruption. Chairman Chui of San Francisco and his ten year plan for development in California queered all investment into for profit apartment house development. Rent control is hated by "money" because it creates the horror of uncertainty. Rent control in California has a guaranteed lock as the best lesson plan in basic economics.

George Drysdale and the "can do" ethos of capitlism


6 people like this
Posted by Annette
a resident of College Terrace
on Jan 21, 2020 at 11:51 am

If Allen Akin, Asher Waldfogel, Crescent Park's "The problem with nay-sayers" and Resident were to sit down together to hammer out housing policy the City of Palo Alto would end up with housing proposals that reflected a range of opinions, relevant experience, reason, and practicality.

I realize the person from Crescent Park is a developer, but like it or not, that is a perspective that needs to be represented b/c there's not a single solution that can be proposed that won't involve developers. Tinkerbell isn't going to sprinkle fairy dust over our fair city and magically get us out of this messy corner. Clear and honest thinking might.


17 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 22, 2020 at 7:25 am

@Annette - your suggestion makes a lot of sense. Believe it or not, the PTC never held a study session to frame questions like "What is the housing crisis?" (chronic or acute, market, affordable, singles, family, senior, how many units over what time period to turn the dial, what's the price elasticity in each price range), "What are the future trends on transportation and mobility?" (vehicle ownership trends, trip trends, last-mile trends), "What are workplace trends?" (tech/non-tech, private company financing trends, workers/ft, remote work, location premiums), "What is the experience of developers in Palo Alto" (custom and spec houses, multifamily, office. Are we easier/harder the same as other jurisdictions? Who benefits from our processes - is it just meant to protect a few developers and architects who "understand" how to work here?)

In my experience if you can't frame up the problem in a more sophisticated way than "We need more housing", "Cars are going away", "Companies want to be here" and "development is hard" then you won't solve any of the problems. Which is where we are.

We've had a functional pro-growth Council majority for four years now, and they're still blaming others that their ideas aren't producing any results.


4 people like this
Posted by george drysdale
a resident of Professorville
on Jan 22, 2020 at 10:38 am

Having group discussions doesn't get you very far unless you're putting up the money to develop "affordable housing". This is because very much in California government is the problem. Take AB50 for instance. AB50 is ridiculous. Put high density housing where you're not supposed to remove rent controlled apartment houses? What a beautiful development. Also who will end up getting these new very expensive to develop rental units? Apartment houses have an economic life of 40 years. They wear out like us humans. San Francisco politicians who now infect the state Capitol see the world through getting elected to their rent controlled city were virtually none of the rent controlled units are occupied by poor people. Rent control: the most studied subject in economics. Chairman Chui reputed to be Mao tse-tungs love child has his great leap forward of universal rent control for the state of California. This is not partisan, it is basic economics.

George Drysdale social studies teacher


14 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Jan 22, 2020 at 10:45 am

<I'm so sick of hearing we can't build ourselves out of this problem (as in build enough units.) That is the only way! If a million more housing units were available tomorrow, rents would keep going up? Guess again. The only logical way to do this increasing the height limit. >

Guess what Einstein, Hong Kong and London, as well as many other in-demand cities have tried exactly what you are suggesting, and they, unlike Palo Alto, have world class public transit systems, and it had actually made housing more expensive and less affordable, and yes, rents kept going up, only at a falser rate, while quality of life:traffic, gridlock, air pollution, noise pollution, crime , have increased.


12 people like this
Posted by Resident
a resident of Another Palo Alto neighborhood
on Jan 22, 2020 at 11:04 am

Asher. Thank you for your most recent comment. I would like to say I am shocked about the fact that no sensible questioning has been done, but unfortunately it doesn't surprise me that there have never been basic questions asked, discussed or answered.

To follow the logic of the "build more housing" brigade, then every person who lives in Palo Alto is expected to work in Palo Alto. That of course is not the case. People choose to live in Palo Alto for many reasons and of course people change jobs a lot more often than they change homes.

This whole debate is putting the cart before the horse. It is also refusing to look at other alternatives. Innovation comes when other options are considered. Sometimes these alternative ideas work and sometimes they don't. But not trying a third approach will never work unless they are thrashed about a bit and tried.

Here in Silicon Valley we are making technology the rest of the world is using but we are not able to use it here. That is mind boggling to those who live elsewhere in the world. We do not have apps for paying for parking, finding parking, but we might be the first to get a driverless vehicles deliver our Amazon purchase.

The point I am trying to make is that without people looking at our problems from a different angle, putting out different ideas, trying something that has potential and be ready to adjust or tweak when necessary, we will never come up with anything other than a two way argument on this. Palo Alto spent big bucks on Ross Road but can't build a bike bridge over 101 in less than 10 years (maybe more I have lost count).

We need people who are not politicians or developers coming up with innovations. We need to stop looking at things from a two dimensional point of view. We need to let the engineers come up with their bright ideas.

Thanks for starting the ball rolling.


6 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 22, 2020 at 2:31 pm

I thank Asher Waldfogel for initiating a discussion that attracts some rational discussion.

>> "tech office space is still more profitable than housing" -- is there some way this can be fixed? With cubicles shrinking, and allocated per-person space standards shrinking drastically, the number of employees can double even without adding *any* new office space. This is a sudden, unplanned change (from a city planning standpoint) that has drastically impacted the transportation.

>> Each tech company benefits from having other tech companies nearby (22% productivity gain in Silicon Valley, according to a recent National Bureau of Economic Research study authored by Enrico Moretti, a UC Berkeley economist).

We all need to understand this much more precisely. How much of the benefit is due to the common labor (ahem "talent") pool, how much is due to manufacturing benefits (e.g. having parts from a supplier down the road), how much is due to "social" issues -- the ability to have lunchtime in-person meetings, etc., and what are the other factors? It is important to understand why, for example, the various people I know/have know who live(d) on the other side of Altamont Pass, have (had) to commute over here somewhere when they don't want to.


2 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 22, 2020 at 2:36 pm

>> I thank Asher Waldfogel for initiating a discussion that attracts some rational discussion.

Oops. Last minute edit fail.

"Thank you for initiating a rational discussion."


Like this comment
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 22, 2020 at 3:33 pm

>> Each tech company benefits from having other tech companies nearby (22% productivity gain in Silicon Valley, according to a recent National Bureau of Economic Research study authored by Enrico Moretti, a UC Berkeley economist)

Which study is this? Working paper "26270" or another one?


4 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 22, 2020 at 5:13 pm

@Anon - yes on the paper.

How to fix the office/housing financial imbalance is a longer discussion that needs a community process to explore:

1. Impact fees or business license taxes that absorb some fraction of the clustering productivity benefit. In selling products with soft-cost benefits I've found you can price in about 25% of the benefit. But I can't say today whether the right metric is relative to revenue, earnings, payroll, or market cap.

2. Land use policies. Some people have argued for what are called "form codes" and let the market determine the highest and best use. When one use is 2X, 5X, even 10X more valuable financially than the market will shift all its resources to that use. Our acceptable use tables for the Downtown and Cal Ave district have never included tech office and software development. Tech development was supposed to go in the Research Park. We've never updated the Muni Codes, but a sentence on software development got slipped into the Comprehensive Plan update at the last minute. We had a downtown office cap, but this Council repealed it just as we came close to reaching the cap.

3. Housing Bonuses. We could explore density and other bonuses for retail and residential use. The PTC actually recommended that approach when looking at the Affordable Housing Overlay ordinance.

The bigger question is to look comprehensively at the various districts and decide what we want them to do. Downtown used to provide more retail service for adjacent neighborhoods. Is that vision sustainable? Arguably the place where retail still works is in districts like Downtown PA. The Comprehensive Plan should have tackled this issue, but instead the CAC process let the narratives diverge from the tables. We need to go back and reconcile the two.


4 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 22, 2020 at 5:55 pm

Re Moretti's paper: On scanning it again I remember some of the things that I thought were questionable the last time I read it.

The 22% figure is a prediction of the productivity increase *measured in terms of number of patents filed* of the real Silicon Valley compared to *a hypothetical average-size cluster of similar technology-sector inventors*.

Are patent filings a good proxy for innovation or economic value? Debatable. IBM filed more than four times as many patents as Apple in 2018. No Silicon Valley company made it into the top four; only two made it into the top 10.

Does comparison to an average-size cluster make sense statistically? Probably not. I'd bet good money that the distribution function for technology area sizes is nowhere near normal, so using any measure of central tendency as a basis of comparison is likely to be bogus. I'd also bet that there are critical-mass effects that kick in at way smaller cluster sizes than today's Silicon Valley, which is how today's Silicon Valley evolved in the first place (and how Seattle and Austin are evolving now).

So, yeah, take that 22% with a VERY LARGE grain of salt.


7 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 23, 2020 at 8:11 am

@Allen - not sure it's worth debating the methodology here. Looking at two other proxies for how companies value their Bay Area presence: average tech salary is 27% higher in the Bay Area than Denver and Chicago, and 20% higher than Austin or Boston. Quick search on office rents suggests Austin "A" space renting for 1/4 the Bay Area.

Point is that companies believe there's some incremental value to a Bay Area presence. We need a good study to price that and a policy response to collect some fraction to pay for impact. If it turns out big tech is causing $100B of impact without producing commensurate value, that's not sustainable.


2 people like this
Posted by C
a resident of Palo Alto High School
on Jan 23, 2020 at 9:06 am

"Caltrain's best idea to fund its service-upgraded "Vision 2040" is with a regressive regional sales tax."

Well, what else are they going to suggest? Caltrain receives little state subsidy: electrification funding as part of HSR is a welcome change, but limited in scope and one-off. It looks like <6m from the state/feds their budget here Web Link -- perhaps our local reps could do more to secure transportation funding from the State given how much revenue Silicon Valley provides the state via income taxes.

San Mateo, SF, and Santa Clara Counties put in ~$19m in 2018. That sounds impressive until you realize that's at least $10m LESS funding than Caltrain was given from member agencies in 2006-2015, not adjusted for inflation. Since the counties have been cutting (!) funding to Caltrain as of late, I'm not sure why they would propose a parcel tax / increased contribution by member agencies as that looks like such changes would be unsuccessful anwyay.


6 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 23, 2020 at 9:21 am

@Asher: It's important to understand the methodology if we want to use the results quantitatively, or if we're relying on a claim of causality that's based on it. Having refreshed my memory of the study, I don't believe that the 22% figure is meaningful, so I won't quote it in the future. But you're right, there's little point in going into more detail here.

Popular wisdom at one time was that a key advantage for California was the prohibition of non-compete agreements. Since high-tech skills and knowledge are mostly transferable, that allows the formation of local labor pools that companies can hire from and fire into at will. Odds are good that someone has tested this hypothesis, but I don't remember reading a report on it.

I agree with your last paragraph, though I need to think more about where I would place emphasis. I suspect it's easy to come up with estimates of incremental value (you mentioned salary, for example), but it's harder to get consensus on measures of impact, because the measures you choose predetermine the policy changes to some extent.


4 people like this
Posted by Annette
a resident of College Terrace
on Jan 23, 2020 at 6:02 pm

Allen Akin and Asher Waldfogel: if Crescent Park's "The problem with nay-sayers" and Resident would be willing to let just the two of you know their names, would you consider forming a Working Group to hammer out policy that you present to the City?

New minds are far more likely to advance proposals that will move us forward on housing. And I think this city is full of people who will be more open to (and trusting of) ideas that emanate from someplace other than City Hall. Staff and CC have had YEARS to at least make a good showing on this. Instead we have more commercial development that increases demand and exacerbates infrastructure deficiencies, negligible progress on improving circulation and transportation, and inexplicable acceptance of costly errors (e.g. President Hotel and the College Terrace PC). I think you all can do much better. What's to lose?


1 person likes this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 24, 2020 at 8:09 am

@Annette - of course


2 people like this
Posted by Annette
a resident of College Terrace
on Jan 24, 2020 at 8:59 am

@Asher - thank you. I will be hoping this happens.

If politicians could move us in the right direction we would have been moving in that direction for several years now. Self-serving legislation is not the answer. I figure the answer will be multi-faceted, that it will hurt some, and that it will involve de-escalating the demand side of the equation for some period of time.

Good luck.


2 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Jan 24, 2020 at 10:10 am

Posted by Asher Waldfogel, a resident of Old Palo Alto

>> Point is that companies believe there's some incremental value to a Bay Area presence. We need a good study to price that and a policy response to collect some fraction to pay for impact. If it turns out big tech is causing $100B of impact without producing commensurate value, that's not sustainable.

The problem that I have with this is that there is no scalable end-point. Does all software development on the planet have to end up in one giant skyscraper located somewhere, just so that the developers can hop from job to job every couple of months-to-years? I think there are massive social and political problems by this ever-concentrating cluster of "talent". Is there an almost-as-efficient alternative?


12 people like this
Posted by mauricio
a resident of Embarcadero Oaks/Leland
on Jan 24, 2020 at 10:18 am

If companies believe there's an incremental value to Bay Area pretense, why should Bay Area residents care, and why should they make it easy for those companies to stay, when they take so much more than they contribute, and when their stay keeps diminishing the livability of Bay Area residents?

As long as politicians who advance the companies agendas instead of representing residents keep getting elected, this vicious trend of deteriorating quality of life and companies taking advantage of the public has built, maintained and scarified for will continue.


4 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 24, 2020 at 10:49 am

@Annette: Yes, with some reservations.

I think getting a small group together is a great idea. I know I'd learn a lot from it, and I hope the same would be true for others. It would sure help make wider discussions more realistic.

Politically, it's more complicated. In Palo Alto, City Staff is the group that has to take action in order to improve things. My experience is that Staff always has its own priorities, and residents' preferences don't have much influence on those. But guidance from Council does have an effect. So ultimately, the possibility of progress boils down to the political problem of who gets elected to Council.

I skimmed the recent Staff Report on the housing work plan. There are a lot of good suggestions there already, but not enough Staff resources to act on all of them. Council could re-direct the available Staff to more effective strategies, if it has the will to do so. Lack of good ideas doesn't seem to be the main problem.


11 people like this
Posted by Annette
a resident of College Terrace
on Jan 24, 2020 at 11:36 am

@Allen, I've no reason to doubt you and certainly do not challenge your reservations. But, one way or the other, push is going to come to shove. Why not be the "shover" instead of the "shoved upon"? Politicians are poised to shove unsustainable density into certain communities statewide, ignoring all sorts of legitimate concerns, including public safety. Densification requires increased infrastructure. Fundamental to this is utilities. As is, the biggest utility in northern California is a failing enterprise. Should we expect PG&E to perform better b/c there's higher demand on services?

Palo Alto is on the SB50 "must grow" list largely b/c our local politicians cozied up to developers and voted YES!YES! on more commercial development than we can handle, making Palo Alto too jobs rich. And now these same politicians want saturated communities like ours to build more. At least this time they are wanting housing. But it is not the level of housing that is so sorely needed. The days when that would pencil out for a developer in PA disappeared a long time ago. Someone called for converting commercial to housing. That makes more sense to me than adding new development. And there are all sorts of voices saying that we should build more near transit. That makes sense too, but it is predicated on actually having adequate transit. First things first.

I'd love to see a few smart people outline some plans that will work and present those to CC and the public. It is the public that is going to pay the price of and absorb the impacts of future development. It seems to be okay for Weiner and Fine and Newsome to say "hey, cities, you haven't done your job so we are going to do it for you" so why can't smart, capable people in this community say, "hey, city, you haven't done your job so here's how to get that job done and keep the State at bay"?

What would CC or Staff do, say no? And how is that any different than what is happening anyway? I think the public is ready for workable ideas, less talk and more action.


10 people like this
Posted by Allen Akin
a resident of Professorville
on Jan 24, 2020 at 2:42 pm

@Annette: It's not so much a question of whether to shove, but where and how.

I think you're completely right about the requirement for infrastructure and about the bad decisions of the past.

The "build near transit" phenomenon is more complicated. It clearly won't improve conditions on the Peninsula -- origins and destinations are too spread out for Caltrain or VTA to work, so adding more people just adds more traffic, and building in the most-expensive places doesn't bring housing prices down. Palo Alto is one of the best examples in the Bay Area for how locality doesn't work; we have more than three times as many jobs here as working residents, yet almost three quarters of our working residents have jobs outside the City.

I've read suggestions that Wiener is using SB50 to offload San Francisco's housing shortage to the cities on the Peninsula. Makes sense, because that's a model in which Caltrain can actually be effective. If it's true, applying pressure locally won't have any effect. It's got to be applied in San Francisco or at the State level.


17 people like this
Posted by Annette
a resident of College Terrace
on Jan 24, 2020 at 4:07 pm

So, Palo Alto not only has to solve its own housing shortage, Palo Alto must also help San Francisco solve its housing shortage? Where does this end?

And why is Fine such an acolyte of Weiner given the mess that San Francisco is? It wouldn't take much for Palo Alto to buckle under the weight of the same problems that currently beset San Francisco.

It's hard to accept that we have a mayor who wants that for his hometown. Maybe the answer is that he doesn't like Palo Alto as much as he likes what SB50 will deliver: political gain.


10 people like this
Posted by Asher Waldfogel
a resident of Old Palo Alto
on Jan 25, 2020 at 9:49 am

Bay Area population and housing growth isn't quite the story that Weiner paints with SB50. San Francisco's population grew 4% from 775,357 people in 1950 to 805,235 in 2010. Palo Alto grew 159% from 25,475 in 1950 to 64,403 in 2010. San Jose grew 10X from 95,280 in 1950 to an astonishing 945,942 in 2010. For reference the Bay Area grew 166% from 2,681,322 in 1950 to 7,150,739 in 2010. (source: MTA)

SF was 29% of the region in 1950 and is down to 11.2%. If they’d remained at 29% they’d be over 2 Million today.

SF in 2018 added a total of 2,579 units (.65%) including 645 affordable units. 11 out of 15 planning districts produced 100 or fewer units. Only two districts: downtown SF and SOMA were responsible for nearly 75% of the total units. 87% of the units are in buildings with 20 or more units. And SF's ADU program produced 4 units in detached houses. (source: SF Planning Department)

Locally we can meet the goals in our Comprehensive Plan, but only if we focus on districts. We need to think like SOMA. Get too ambitious, like Bayview or Treasure Island and we get delayed. Too small and there's just no way to get the units.

The data is pretty clear and effective organizations make progress by benchmarking success, not by doubling down on failure.


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