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Facebook expansion could exacerbate housing issues, report says


Facebook's expansion – a project that would add two office buildings and a hotel, totaling more than a million square feet – is unlikely to have a direct impact on the housing crisis in East Palo Alto and Belle Haven, but it could yield an indirect impact, a new report says.

Last year, when Facebook launched its talks with the community as it made plans to build new offices and a hotel in eastern Menlo Park and bring in 6,550 new employees, residents of East Palo Alto asked that Facebook consider doing a study on how such a large influx of workers would affect housing in their community and in Belle Haven, a neighborhood in eastern Menlo Park near Facebook headquarters.

Facebook agreed to pay for the optional study, which was conducted by consultants Keyser Marston Associates, and as of Thursday, June 23, the results are in.

Direct impact

The analysis found that although there are 7,475 employees who work at Facebook's Menlo Park campus, only 28 live in East Palo Alto and 18 live in Belle Haven.

If 6,550 new employees were added, under the same ratio, the number of people expected to move to the area would add up to about 21 housing units in East Palo Alto and 10 housing units in Belle Haven. That represents about 0.3 percent of all of East Palo Alto's housing stock and 0.7 percent of all of Menlo Park's housing stock.

With an added 1,380 housing units planned or under construction to be built in Menlo Park, and 106 to 108 planned or under construction in East Palo Alto, the study says, there should be enough housing to accommodate those demands without displacing anybody already living in these communities.

The report states, "Given the locations where Facebook's workforce chooses to live (only 4.2 percent in Menlo Park), the likelihood for direct displacement from the project is low."

Facebook also plans to stop giving relocation bonuses of $10,000 or more to people who move to the neighborhoods of Belle Haven, East Palo Alto and North Fair Oaks, beginning in July, according to the report. The company reportedly gives some employees relocation bonuses of $10,000 or more for moving within 10 miles of the campus.

Other cities partially or entirely within 10 miles of the campus are Foster City, Redwood City, Palo Alto, Mountain View, Sunnyvale, Union City and Fremont. Of those cities, Mountain View currently contains the highest proportion, about 10 percent, of Facebook employees.

Indirect impact

Other ways of measuring the complex relationship between jobs and housing, however, aren't so easily quantifiable.

"Job growth," the report says, "especially high income job growth, exerts upward pressure on prices and rents throughout the region."

East Palo Alto and eastern Menlo Park for many years were considered more affordable than other locations on the Midpeninsula. From 2011 to 2015, however, home prices increased about 130 percent in both communities, as measured by square-footage. Now they're within 10 to 15 percent of the San Mateo County average, and are more expensive than other areas typically considered "affordable" in the San Francisco Bay Area, the analysis says.

While this can be good news for homeowners, it can spell trouble for renters – who occupy 62 percent and 54 percent of the households in East Palo Alto and Belle Haven, respectively. When home values go up so dramatically, owners who rent those homes out may be more likely to sell the home to other buyers and evict the current tenants, the report says.

Rents in both locations have gone up, too. From 2011 to 2015, the average asking rent for a one-bedroom apartment increased by 89 percent in East Palo Alto, compared with 53 percent across San Mateo County.

The consultants disclosed that this data was not perfect, however. The database the consultants used, RealFacts, did not capture data for Belle Haven, and had only one data point for East Palo Alto, which was of the Woodlawn Apartments. From 2011 to 2015, these apartments changed ownership and large rent increases took place under unique circumstances.

In Belle Haven, many homeowners also struggle to keep up. Some 66 percent of Belle Haven residents who are homeowners are considered "burdened" by their mortgage, meaning they spend more than 35 percent of their income on housing. That rate is more than twice what's reported across San Mateo County.

Other factors

The report also named other potential factors that may shape the jobs and housing dynamics of the area, but consultants were unable to quantify what the impacts would be.

● Perhaps having a big-name company affects market perceptions of what housing is worth.

● Perhaps more Facebook employees will want to move to the area as they become more established in the area. Many Facebook employees are new, the report pointed out, and things could change if they stay with the company long-term. (Recent reporting by The Information indicates that the daily commute of 30-plus miles through grinding traffic from San Francisco is wearing on Facebook employees – and though it's been said they're lobbying Mr. Zuckerberg for a San Francisco office, the company doesn't appear to be moving to the city anytime soon.)

● Perhaps more employees will want to move close if Facebook builds employee housing. If Menlo Park's general plan update is passed as it has been proposed later this year, zoning changes east of U.S. 101 would allow up to 4,500 housing units to be built, 3,500 of which could be on Facebook's property, the report says. If some of those units were designated as employee housing, and employees move closer, "longer-term neighborhood change" could result. Perhaps that's a euphemism for gentrification.

● The report also didn't include the number of people who work at Facebook as contract employees. According to a May 2015 Facebook press release, those contract employees have an hourly minimum wage of $15, but less has been reported about where these workers are living, or where they can afford to live.

Housing Commission

The Menlo Park Housing Commission will meet Wednesday, June 29, to talk about what Facebook should be required to contribute to the city's below-market-rate fund in exchange for being allowed to build its proposed expansion project.

According to the staff report, Facebook could have several options:

1. Pay an in-lieu fee of about $6.3 million to the city's Below Market Rate fund.

2. Build 20 below-market-rate units off-site (under current zoning, building housing in the M-2 area isn't allowed, though that would change if the proposed changes to the city's general plan are approved later this year.)

3. Pay some of the in-lieu fee and build some of the below-market-rate units.

Read the Housing Commission meeting agenda, attend the Wednesday meeting, which begins at 5:30 p.m. in the Menlo Park City Hall/Administration Building (701 Laurel St.), or watch the meeting online.

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4 people like this
Posted by nancyh
a resident of Menlo Park: The Willows
on Jun 26, 2016 at 3:11 pm

20 below rate housing units??? Really!! Am I the only one who thinks having Facebook in our town is ridiculous! It is an entirely too big entity for such a small area and I mean just the peninsula. Build their own housing likens to a company town of days gone by. What if Facebook folds. What happens to the housing they own?? The impact on the affordable housing in East Menlo will certainly affect our service workers who are an integral part of the quality of life here. Where will the people that work in restaurants, retail stores, housekeeping, nurses, teachers, law enforcement officers, the people who live in this area that don't make $100,000+, go?? The traffic is horrendous already. Some sanity has to come to our City officials. Please consider the people that voted you in. What is the long term consequences of your decisions. What of public transportation?? I see half empty "white" buses trudging through the same traffic we all endure. Before this project moves forward, a commitment for money for BART, CALTrain must come from Facebook. Since the average price for a home in Menlo Park is well over $1,000,000 with mortgages looking at $5000+, workers will need to come from less expensive areas. Mr. Zuckerberg, if you really wanted to leave a legacy for the community you have moved into, please help us get a BART line to your company and into the surrounding cities.

2 people like this
Posted by Apple
a resident of Atherton: other
on Jun 26, 2016 at 4:33 pm


Facebook is funding the Caltrain Dumbarton extension study that would stop next to their HQ. The extension would alleviate area traffic. It's unlikely BART will ever come to Menlo Park because it would overlap with Caltrain.

There's going to be a ton of apartments opening up in downtown Redwood City and on Haven Ave near Facebook. That should help the housing situation.

Like this comment
Posted by homeward bound
a resident of Menlo Park: other
on Jun 26, 2016 at 7:04 pm

traffic is legit awful these days, and when all this construction gets filled up it will indeed be absolutely horrid

2 people like this
Posted by Nancyh
a resident of Menlo Park: The Willows
on Jun 27, 2016 at 5:03 pm

Paying for a study is not paying to build it. That will fall on tax payers if funding could really ever be found and years to get approvals and more years that build it. As for the new apartments, that would be great if the rents are affordable. Market rate rents are around $1800+ for a new one bedroom apartment. That means that a tenant needs to make $60,000+ to qualify.

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