Palo Alto has far far too many jobs for the size of the city, probably because a good portion of the city is Stanford's job rich Research Park. We need to amortize office zoning where it makes sense to replace it with zoning for housing.

While ABAG may be projecting huge growth, here's what Doug Kuczynski, a demographer at state's Department of Finance said recently:

“The Bay Area is slowing in growth. We don't see a point in time in the future where that's going to increase dramatically, It's kind of the new norm for California."

No company I talk to plans to keep growing here. Rather, they are looking at employees working remotely from less-congested communities.

Office vacancies were widespread even before the pandemic.

So who is behind ABAG's gigantic projections of growth? Some people say it's land owners who want huge extra profits by convincing local governments to let them build more on their properties.

I've even heard it's Steve Levy himself. Is that possible?

@mjh

What you suggest could help if 1) it is legal rezoning and not tied up in court and 2) the housing zoning is credible and feasible---meaning someone would actually be able to make a proposal that pencils out.

Other opportunities might better focus on retail lands that are no longer profitable with the shift to online shopping.

@ABAG is

It looks like you did not read my blog. The last line is

"The HCD determination was not based on the ABAG job and population growth forecast. If it had been, the target likely would have been 100,000--150,000 housing units higher."

HCD actually did use the lower DOF population projection and not the ABAG forecast that was developed by staff after my work was done.

And the ABAG forecast that you rant at works out to 0.6% job growth per year versus the 3.0% annual growth before COVID.

Covid19 has taught us that density kills, and it's doubtful we'll ever be able to get rid of this virus, as Americans are too immature, self centered and selfish to do what it takes to eliminate the spread of the virus. The last thing Palo Alto and the Bay Area need is a population increase. It would literally be deadly. Working from home is already the new norm, there is no gong back to the the office model, and new additional housing is a totally anachronistic idea, highly unnecessary and extremely dangerous.

Perhaps it is time for another citizen's initiative for a second moratorium to further restrict office growth rather than allow commercial developers to keep digging our jobs-housing hole ever deeper. If there is currently less demand for office space this would be the time to do so and an opportunity to actually begin making a dent in Palo Alto's jobs-housing imbalance.

When the city divied up the zoning map thirty years ago it was with the traditional assumption that there would be one office worker per 250 square foot. Using that calculation, the division between commercial to residential zoning appeared reasonable at the time. However, that calculation went out with the dodo.

For years older offices have been updated to accommodate up to triple or quadruple the number of employees the buildings were originally designed to hold, with the original amount of parking remaining unchanged. New office builds are designed to hold triple or quadruple the number of employees per 250 sq ft., but the original ratio of 250 sq ft per employee is still the standard used to calculate the number of parking spaces required. All of which vastly increases the productivity of the space and thus the dollar amount commercial landlords can lease their buildings for.

Perhaps it is no coincidence that serving on the council has been so popular with commercial real estate attorneys and others who indirectly benefit from approving dense and profitable commercial real estate development at the expense of encouraging less profitable residential development that would actually improve the jobs housing imbalance

In addition, Prop 13 contains sweetheart deals with loopholes for transferring ownership of commercial property without triggering new property tax assessments, as occurs with residential property sales. Which adds to the profitability of and incentivizes commercial real estate development. As a result, while 1975 Palo Alto's revenue from commercial property was fairly evenly divided between commercial and residential real estate, it has steadily decreased to 25% today, a number that continues to go down year on year.

Regarding "penciling out" I have yet to be convinced that a developer would admit that a residential property would "pencil out" if the council can be persuaded that only a commercial development will "pencil out" given that this would be in the developer's best interest.

Steve, The share of the 441,176 new housing coming to Palo Alto and the other cities of Silicon Valley will be overwhelming given we have the highest housing costs in the country. Where do these numbers come from? From an aggressive jobs based model that targets job-growth in jobs-rich priority development areas. You mention that some of the new housing units are for 'catch-up'. But that merely reflects the fact that ABAG completely missed the concentration of jobs in Silicon Valley over the last decade: 3.3 jobs for every new employed resident in Silicon Valley; 6 jobs for every new employed resident in Palo Alto/Mt View/Menlo Park. Have these huge imbalances being taken into account by ABAG--despite government codes that require them to address "intra-regional jobs-housing imbalnces" they did not. In fact, without discussion they decreed in December that they would not look at limiting their local jobs projections and in May that COVID would not affect underlying job growth. Public discussion that included any of this data? Zero. And you push for zoning to meet these housing needs without any discussion of a better job distribution. What kind of planning is that?

Greg Schmid makes excellent points about the employment numbers. Let's also remember that big tech's CONTRACTORS now outnumber full-time employees for whom they'd have to pay benefits. For decades the same Big Tech that's been funding the YIMBY party and pushing the ABAG fairy tales has been opposing raising contractor pay to living wages of !00K, preferring to destroy the host communities with pack-and-stack UNDER-parked developments.

Further, big tech like Uber/Lyft continue to push the "gig" economy that further underpays workers and makes housing less affordable while getting communities like Palo Alto to PAY the Lyft/Uber commuting expenses of the commuters over-running us while defending it as for the lower-income workers!

Whose pocket are they in? Not residents.

Will any of the above change while they keep pushing for more and more unaffordable market rate housing?? Of course not.

Wonderful how they keep shifting all the burdens away from the big developers and big tech and onto RESIDENTS who have to bear the costs and inconvenience of this ridiculous density push.

Don't confuse housing density with overcrowded living conditions!

Just a quick correction to @mauricio's repetition of the obviously and demonstrably misinformed (albeit oft-repeated) conclusion that "Covid19 has taught us that density kills."

Here are just a couple of *many* (Google them yourselves) items on that topic:

Density Unrelated to COVID-19 Infection Rates, Experts Find
Web Link

Surprising study: Urban density doesn't cause more COVID-19 infections, even promotes lower death rates
Web Link

I will respond to the comments on the RHNA, jobs and housing in a bit.

Two posters have presented different views on the impact of density and that discussion is over now in this blog. Please stay focused on the RHNA discussion and solutions.

The RHNA is state law and thinking it is a stupid law is posters' right but is simply going to get Palo Alto sued and lose.

Today Mountain View, which has also experienced job growth, approved a 300 unit housing project with some BMR units. The BMR units could be added and the project go forward because the whole project penciled out.

HCD will have no trouble figuring out which cities are making a good faith effort to comply with state law and housing goals.

More later

Our country is being decimated by a virus we don't even understand and which may be mutating now into deadly and untreatable forms. We will probably never go back to the work office model and most work will be done in a mobile form from distance. Even discussing housing projects now makes about as much sense as planning a cocktail party on the Titanic while it is rapidly sinking. Stop it, please just stop it.

This is a blog to explain the Bay Area RHNA, answer questions and hear solutions.

The RHNA is based on state law and we need to deal with it.

HCD factored in a decrease in required housing to take account of COVID lasting a while. HCD also in their two main methodology choices took the choice that resulted in a lower housing requirement.

Also HCD did NOT base the RHNA on anything to do with the ABAB growth forecast.

There is plenty of opportunity for posters to write in the main TS their thoughts on the pandemic and COVID and density but this is not the place.

(Portion deleted) Anon I appreciate your civil response but I am deleting all comments about density and COVID beyond the two viewpoints already expressed.

Back on topic: You responded to "ABAG etc." regarding the ABAG projections, but, not this part: "No company I talk to plans to keep growing here. Rather, they are looking at employees working remotely from less-congested communities."

Now that big tech has been forced to all-at-once *everyone* has had to allow much more remote working, is there any reason to think that they won't keep doing that? There are so many people living East of Altamont now that don't want to commute in here. If management doesn't force them to, they'll happily keep telecommuting from Modesto.

Anon,

Large companies have major expansions underway in Menlo Park, Mountain View, Sunnyvale and very large expansion plans in San Jose not to mention Oakland and Fremont.

It is also true that some companies have moved and some workers (this is all speculation) may work from home though all the ones I know working from home (many of my friends) have no plans to move.

The RHNA goals and related state and regional policies are to greatly expand the kind of housing that will be more affordable to the region's low and moderate income residents. At the regional level the places that are expecting future tech job growth are the same cities (like Mountain View, Fremont and San Jose) that are moving to add housing.

Since we do not know how long the pandemic will last and how companies and workers will react in the future, we are each sharing our perspective. Thanks for sharing yours.

My letter to the PTC and council

Dear Chair Templeton and Commissioners,

I am a 50 year resident of Palo Alto with an office in PA since 1969 but today I write in my role with the Center for Continuing Study of the California Economy.

In that role I served on the HCD review committee as they were translating state law into the regional housing needs determination process. I have had ongoing conversations and emails with HCD staff in charge of the RHNA. I also was under contract to the Southern California Association of Governments (SCAG) as they developed their RHNA application and in their appeal process.

In June 2020 I presented at SCAG's demographic workshop on the potential impact of COVID on their long-term growth forecast. I was a consultant to ABAG through early November 2019 on their Plan Bay Area 2050 growth forecast and understand the methodology and assumptions underlying their forecasts.

Four Recommendations for PTC, Council and Staff

Invite HCD to come and explain their criteria for reviewing Housing Elements prepared for the new RHNA cycle and their legal authority in reviewing these and project determinations with regard to good faith efforts to meet housing goals.
Invite ABAG (and participate in the upcoming public engagement opportunities) to understand the goals and strategies of the Blueprint/Plan Bay Area 2050 with regard to housing and transportation.
Invite [email protected],the Terner Center and nonprofit and private developers to understand how housing projects can pencil out and the role of inclusionary zoning %s in project feasibility.
Consider tonights and the above discussions as inputs into the development of the City's updated Housing Element that we will be working to develop in compliance with HCD guidelines.
Discussion of the staff memo with regard to the regional and Palo Alto RHNA allocations

RHNA Methodology

State legislation required HCD to include factors to reduce overcrowding and the number of cost burdened household in their RHNA housing needs determination methodology in addition to moving toward a normal level of vacant housing. These legislatively mandated additions to the RHNA methodology attempt to alleviate the hardship to residents caused by the shortage of housing built and the large job growth that has occurred since the cycle 5 RHNA housing needs determination was made 8 years ago.The staff report includes the HCD determination letter to ABAG elaborating on this process.

It is this inclusion of those two state mandated goals that caused the increase in the Bay Area and Southern California RHNA goals. It is NOT because HCD is factoring in higher future growth rates than previously projected. The HCD determination letter sets forth the basis for HCD's RHNA determination. You can also find memoranda from MTC/ABAG staff on their websites on the determination process.

HCD made two choices in developing the Bay Area RHNA that resulted in a LOWER RHNA allocation. The first choice (probably a fair move) was to reverse what they did for SCAG and compare the Bay Area to comparable regions not the nation in the allocation to reduce overcrowding and the number of cost-burdened households. A comparison to national averages would have resulted in higher RHNA allocations.

The second choice was to use the Department of Finance (DOF) population projections for 2030 instead of those consistent with the ABAG growth forecast, which were 400,000 higher in 2030.

HCD did NOT use the ABAG growth forecast for jobs as part of their determination but there has been regional and local discussion as if that did happen.

For your information I have included data about the current ABAG growth forecast though it was not used in the HCD RHNA determination.

The high job growth forecast adds 1 million jobs between 2019 and 2050 for average growth of just over 30,000 jobs per year or an annual growth rate of 0.7%. Growth for 2015-2019 by comparison was more than double in numbers and more than three times the annual growth rate. In Plan Bay Area 2040 job growth of 700,000 was forecast for 2015-2040. In Plan Bay Area 2050 700,000 added jobs are projected between 2019 and 2040 based on success in reducing the relative gap in housing prices between the Bay Area and competition regions though housing costs grow over time in all regions and Bay Area housing costs remain higher than elsewhere.

For the RHNA end year of 2030 the ABAG population forecast is the same in PBA 2050 as in PBA 2040 despite the higher job forecast.

Palo Alto RHNA Allocation

As the staff reported the final allocation methodology has not been adopted. I encourage commissioners to listen to the RHNA allocation committee hearings.

The staff memo shows a variety of allocation factors considered by the committee some resulting in a 135% increase in the PA allocation over the cycle 5 goal and some resulting in a higher or lower increase.

However, the committee discussions are clear that the two criteria that push Palo Alto's allocation upward -- Access to High Opportunity Areas and Jobs-Housing Balance -- will dominate the allocation methodology as shown in the committee charts shown in the staff report.

With regard to the impact of COVID the near term future is uncertain and depends on our efforts to control the virus spread. But in all the research I did for SCAG the prevailing opinion is that these severe economic and human challenges could remain as long as 2023, but income, job growth and unemployment levels will be close to the long-term trends after that.

Below is the latest (6/24/20) UCLA state forecast.

“While the answer to the alphabet question is simply that we don't know, given our assumption about the trajectory of the pandemic, we expect the California recovery to look very much like the U.S. It will be slower in the leisure and hospitality and retail sectors due to the disproportionate reliance on international tourism, and slower in transportation and warehousing due to the expected continuation of the trade war with China, but faster in business, scientific and technical services and in the information sector due to the demand for new technologies for the new way we are working and socializing.

The unemployment rate for the 2nd quarter of this year is expected to be 14.6%, and it is expected to decline the balance of 2021. For the entire years 2020, 2021, and 2022 we expect average unemployment rates of 10.5%, 8.2%, and 6.8% respectively. Our forecast for 2020, 2021, and 2022 is for total employment growth rates to be -8.6%, 3.6%, and 3.0%. Non-farm payroll jobs are expected to fall by 9.3% in 2020 and to grow at 0.4% and 6.6% in the following two years. Real personal income growth is forecast to be -0.9%, 1.4%, and 2.2% in 2020, 2021, and 2022. In spite of the recession, the continued demand for a limited housing stock coupled with low-interest rates leads to a forecast of a relatively rapid return of homebuilding."

This is among the most cautious of the forecasts I reviewed for SCAG and even so sometime in 2023 the economic impacts at the macro level are expected to end.

Finally, check with HCD but my understanding is that they already made an adjustment (downward) for the short-term impacts of COVID on the RHNA.

Stephen Levy

It has been explained to me by the PA Online staff that it is the blogger's discretion which comments to keep and which to delete.
That is fine with me. I will let the blogger blog with himself and on whatever conditions he would like.

Why keep the Research Park? What benefit does it bring? Why not de-annex it?

@Stephen Levy - The biggest problem I see with the RHNA numbers is that 60% of the housing units need to be deed restricted to insure BMR rents go the intended population. The need for 60% is real but that's am unrealistic goal. You mentioned a recent project in Mountain View including BMR units, it was 15% of rental units and 10% of condo units far from the 60% RHNA goal. If the state is truly serious about holding cities accountable to these numbers, the state really needs to help us figure out how to build and finance these 60%...

Curmudgeon,

what is your thinking re de annexing the Research Park

here is what will happen

1) the city will lose property and sales taxes

2) control will revert to the county that will certainly allow development

3) the traffic will be the same as the physical location is the same

what benefit do you see

SRB,

You are correct that major funding is needed to support housing for low income residents. Some can come through market rate housing and mixed use projects but much will need direct subsidy.

State and local bonds will be needed. The region is developing a financing plan of taxes, fees, donations of land and other measures but it is a real problem

For more middle income residents, smaller units (e.g. ADUs) and cost reducing measures can make some market rate housing types affordable but it is also a challenge.

I agree that the state can help us figure this out and help fund the need

@Stephen Levy - I would rephrase your last sentence as "The State MUST help us figure this out and MUST help fund the need" if it wants to force that unrealistic 60% mandate on cities.

re: ADUs ,

I'm all for ADUs but unless they are deed restricted how can you guarantee they'll be consistently BMR and consistently going to the target population ?

If you allow a non-deed restricted ADU to count towards the 60% goal, why not count any market rate unit towards it and why have the 60% BMR to start with?

SRB,

The 60% goal includes both low and very low income targets but also moderate income targets.

Most moderate income units are deed restricted or BMR.

Palo Alto itself has a program that allows credit for units targeted at low moderate income residents.

The state criteria is affordability not just BMR.

It is also true that the low income units will require subsidy and be deed restricted.

And the goal is for other funding besides state funding as I said above. Some cities already have local housing bonds. New local and regional funding will be important also.

We were supposed to add 300 housing units a year by our own planning goals. How is that working out so far? Not even close!
We shouldn't get our knickers bunched up over a request from a group that apparently lives in a different world, a fantasy world of their own. And don't vote for any council candidate who says we can do it and that they will make it happen.

What a Scam, Plenty op space to Build in Atherton where there is only one house per acre..
Look at all the room to building the Central Valley area, no need to cram it down out throats here.
At what point will there be total saturation? according to them, Never, KEEP Building, Just Like Sarah Winchester(Nuts).

Gale and Gus,

The housing goals are set using factors adopted by the elected state legislature, which has also given HCD broad powers of enforcement.

You are free to disagree with state housing policy but do understand if the council follows your wishes we will get sued and lose.

It is certainly not a scam.

Gale if you want to accuse the state legislature of living in a fantasy world, go for it but do realize there are consequences.

The impact of the pandemic on commercial and retail demand for space provides an opportunity for reasoning to housing and make better use of our land.