How would SB 50 impact Menlo Park?

Across California, Senate Bill 50, a proposed law that would require cities to relax height, density and parking restrictions in areas that have a lot of jobs and reliable public transit, is sparking controversy, especially in affluent suburban areas that prize low-density, single-family residential neighborhoods.

The bill moved forward on April 2 following a 9-1-1 vote by the state’s Senate Housing Committee, which is led by the bill’s author, state Sen. Scott Wiener (D-San Francisco). The legislation is now headed for a hearing in the Senate Governance and Finance Committee “in the coming weeks,” according to a press release on Wiener’s website.

That committee also voted to advance Senate Bill 4, which would relax parking requirements within a half-mile of rail or ferry service based on a city’s population, and increase height limits in cities with 50,000 or more residents. The bill also has an “inclusionary housing” provision to require below-market-rate housing.

But how might such legislation actually shape housing growth in Menlo Park?

Researchers with the University of California at Berkeley’s Urban Displacement Project and the Terner Center for Housing Innovation answered that very question in a new report titled, “Upzoning under SB 50: The Influence of Local Conditions on the Potential for New Supply.”

The report evaluates the impact of the proposed legislation on four different kinds of neighborhoods: high density and low income, low density and high income, low density and low income and low density and diverse residents.

The area within a half-mile of Menlo Park’s Caltrain station was picked by the researchers to represent neighborhoods across the state that are in areas that have low building density and high incomes among residents. It’s also considered a “high opportunity” area, where there is a low poverty and unemployment rate and good access to jobs, according to the report.

Through their queries, the researchers point out that the neighborhood surrounding the Menlo Park Caltrain station and neighborhoods like it have a number of factors at play that would make SB 50 particularly impactful in town, if it is enacted.

Researchers raised and responded to several questions, comparing Menlo Park to the other communities selected: Oakland’s Fruitvale neighborhood and the Boyle Heights and Silver Lake neighborhoods in Los Angeles.

Q: How much land could actually be rezoned for more housing growth under SB 50?

A: This depends, but about 60 percent of the area covering a half-mile radius around the Menlo Park Caltrain station permits residential development, while 19 percent of the area does not permit residential use and 21 percent is considered part of the street network.

Q: How big are the land parcels, and are they available?

A: Of the neighborhoods analyzed, the area around the Menlo Park Caltrain station had the greatest number of large parcels, with more than half of the land in the neighborhood taken up by parcels that are bigger than 20,000 square feet, meaning it has more potential than areas with small parcel sizes for taller, denser residential buildings to be constructed. According to the researchers, a five-story apartment building should be built on a lot between 7,500 and 18,000 square feet as a minimum, while parcels up to 5,000 square feet could accommodate up to 12 units.

The neighborhood around the Menlo Park Caltrain station has about 8 million square feet of “unbuilt” space on underutilized parcels, far more than any of the other neighborhoods studied, but the report notes that some parcels are unlikely to be developed, such as the areas of the city that are home to a monastery and a religious retreat center.

In addition, the potential to build housing on underutilized land is hampered by additional zoning regulations, the researchers said. For instance, zoning states that housing units have to be set back 20 feet from the front and rear of a property, and 5 to 12 feet on the sides. Proposed buildings are also regulated based on how much shade they cast on other properties, which further limits their height or the square footage in the upper stories. These restrictions add up.

Without those extra zoning requirements, the researchers explained, a 5,000-square-foot parcel could yield a 12,500 square-foot building with 13 700-square-foot units instead of a 4,700-square-foot building with five units of the same size – more than twice as much housing.

Q: What about the El Camino Real/Downtown Specific Plan?

A: According to the researchers, it’s not clear yet how SB 50 would fit in with cities’ “specific plans,” such as Menlo Park’s El Camino Real/Downtown Specific Plan. The specific plan, which covers much of the same area that’s evaluated in the SB 50 report, created zoning allowances and underwent an extensive environmental review process before approval. Now, as long as developers build within the limits of that plan, they can skip the most extensive and uncertain parts of that environmental review.

“Where a specific plan is in place, developers may choose to use the specific plan’s guidelines instead of SB 50, even if the upzoning would allow more units on the property,” the report states. So far, about 72 percent of the total new 680 housing units the plan permits have already received entitlements, according to Menlo Park city staff.

What profits are possible?

A: The report concluded that, under SB 50, developers would be far more likely to profit from building apartments near the Caltrain station in Menlo Park than in Oakland’s Fruitvale neighborhood.

Researchers presented a side-by-side comparison evaluating what could be built on a 5,000-square-foot lot in the area around Menlo Park’s Caltrain station and Oakland’s Fruitvale neighborhood under SB 50.

Assuming developers planned to build a four-story building with 12, roughly 800-square-foot apartments at both locations, researchers calculated that the Menlo Park apartment building would be nearly four times more profitable, even factoring in the much higher land costs.

Construction costs are fairly similar between the two areas, while the rent that can be generated in Menlo Park is substantially more — $3,546 a month compared with $2,775 in Oakland, the report claims.

The researchers also factored in how the projects would “pencil out” – to borrow a term developers use to determine if a project is profitable enough to satisfy investors and be feasible – if a requirement for inclusionary housing were included. In this instance, that “inclusionary housing” policy would require a developer to rent 20 percent of the units at below market rate for low-income tenants.

They found that the profit margin would narrow somewhat for the Menlo Park developer, falling from 41 percent if full-market-rate rent was charged at all units to 28 percent. In the case of the Fruitvale project, though, researchers found that the inclusionary housing requirement would render the project infeasible, pushing the project from about a 12 percent profit to a 6 percent loss.

The report concludes that SB 50 shows “significant promise” to help convert vacant or underutilized parcels into housing, but added that concerns that such legislation would lead to the “Manhattan-ization” of neighborhoods are “also likely overstated.”

Cities that resist new housing “could still limit new developments by imposing other restrictions by what is built on a lot, or ensuring that land in transit-eligible areas is zoned for non-residential uses only,” the report continued. The researchers also suggest that lawmakers avoid a one-size-fits-all approach when it comes to establishing inclusionary housing requirements.

Criticism

After reviewing the report, Menlo Park Mayor Ray Mueller told The Almanac he saw some limitations in the study.

“My biggest criticism is that it glosses over the needs of special districts,” he said. “Local control is important to address the intricacies of local needs when it comes to funding services specific to each municipality and preserving the unique character of one city versus another.”

He argues that differences in how school districts are funded from one jurisdiction to another were not taken into account in the study, as well as the ability cities have to negotiate with developers for provisions that preserve “quality of life” factors, like funding for schools, fire and emergency response services and park facilities.

He said he’s not coming from an “anti-housing” perspective: Menlo Park added the second-highest number of housing units per capita in the state just a couple of years ago. (This was after the city had decades of severely stunted housing growth and had to settle a lawsuit because it hadn’t updated its “housing element” or citywide plan to decide where to build more housing for many years.)

“I think the study is a great example of some of the problems with SB 50 in that it tries to treat very different cities all with the same type of zoning,” he said. “A one-size-fits-all proposition puts us in a precarious situation where we will be unable to negotiate for specific needs.”

Access the report online here.

What do you think about SB 50? Email Almanac reporter Kate Bradshaw at kbradshaw@almanacnews.com.

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