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 email@example.com.