HomeMy WebLinkAbout10151974CITY
COUNCIL
MINUTES
ITEM
The Planning Commission, by a vote of 6
in favor, (one absent), advises that the
Commission has reviewed the Comprehensive:
Plan Impact Report and recommends the
planning options as recorded in its minutes
of August 14, 1974, and August 20, 1974
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10/15/74
CITY
of
?1Lo
t?LTo
Special Meeting
October 15, 1974
PAGE
4 4 6
October 1.', 1974
The City Council of the City of Palo Alto met on this date at 7:30 p.m.
in a continued special meeting to consider the Comprehensive Plan with
Mayor Sher presiding.
Present: Beahrs (left 9:35 p.m.), Berwald,
Clay (left 10:00 p.m.), Comstock
Henderson, Norton, Pearson, Rosenbaum,
Sher
Absent: None
he r:ieA ameiasiou. bIea vote of 6
in favor: `cane absent adviaea that the
Commissiot has r+eviewe d t e a ,. re etas ve
e
mo
to minutes
of
wont re;ded from L3/ Z317 10/74)
Mayor Sher opened the meeting by observing a moment's silence in meL'aory
of the young woman killed on the Stanford campus, Arils Perry.
Mayor Sher noted Councilman Rosenbaum had introduced an item at the
close of the meeting and asked him to continue. Rosenbaum said in the
framework of Option Set 1, it was the idea behind the transfer of develop-
ment rights as to establish some uniform density in a given area. It would
allow someone desiring to build something more dense on a given piece of
property to secure the 4evelopment rights from another piece of property
within that area in order to proceed with his development. His basic in-
tention was to try to find some way in which to preserve the existing
e;ngle family housing particularly in the area north of Lytton.
MOTION; Councilman Rosenbaum moved, seconded by Berwald, Option 1(h) to
include La the preparation of the draft Comprehensive Plan, a prevision
for transfer of development rights between and among residential properties
in the area bounded by Alms Street, San Francisquito Creek, Middlefield
Road and Lytton Avenue, and any other multi -family areas where appropriate.
Councilman Comstock expressed his understanding that it was intended in
that option that the Planning Commission will examine this kind of exchange
process, id the area described in the motion. Be emphasized 1) the basis
on which the exchange would be rude; that is, what is the general zoning
in the area. ;or example, if the area was generally zoned R-4, that pro-
vides one basis for exchange; if it were zoned R-2, that provides another
basis. 2) whatever that basis is, it should be looked at in the context
that en exchange of development rights, which would obviously be focused
in a localized area or several pieces of property, could, if accumulated
sufficiently, perhaps provide a development that tads going to be over-
powering or out of character with the area. He asked all concerned to
give careful consideration of the base ease in terms of overall average
density, and to expect that it weight be necessary to provide some limits
on how much gets focused in one area.
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Planning Commission Vice Chairwoman, Anne Steinberg.said it was a
new kind of concept to the Commission and they had discussed it only
briefly. She said they would study the poiate made by Mr. Comstock.
Planning Director Naphtali Knox said the area north of downtown had
to be looked at very carefully. The present mixture of large and small
buildings there was all right; but that the area could be bxi1t up to
one of their most dense zones. The limit in that R -5-L-9 is 49 units
per acre. This might look like some of the more dense three and four
story apartment neighborhoods such as in Los Angeles. It didn't seem
desirable to see the whole neighborhood transformed in that fashion.
Staff welcomed that kind of option which focused on the area and also
allowed them to look into transfer of development rights. He said
Mr. Comstock's question was aimed at two things, the basis of general
zoning or the underlying or overall density, and the shatter of preclu-
ding an overpowering building. They would have to look at the general
question of what is the optimal number of people or units in, say, the
north of downtown area. So they have to look ct the zones that are there
now and come up with some new notions of what the maxims limitations
would be. Secondly, they would have to look at localization or accumu-
lation to cake sure they didn't get an overpowering building. They would
have to set bulk limits. He felt it would be possible under the TDR
concept to limit, as in aey normal zone, the bulk that any single build-
ing could achieve.
Councilman Reahrs said he io !rid theconcept rather intriguing but had
questions, He feared the possibility of spotty development which might
develop from. the 1(h) proposal. He preferred the symetrical planning
presented by staff re this option. set. In an area of definite promise
of intensified use, where you wish to preserve something artistic merit,
he did not particularly feel the preservation of a single family resi-
dence, was an objective that he would generally support. Additionally,
the tax assessor will see problems in it. The possibility of maintain-
ing a single family residence use in a spotty situation, will hinge
See pg. 6 0 7 on the economics. For that reason, the concept is allusory in the final
analysis.
Councilwoman Pearson quoted from the 1(h) explanation, page 1, "overconcen-
tration of density on the transferee's site is prevented. through Planning
control which may include a percentage limitation on permissible density
increases". She felt that was the overconcentratian Mr. Comstock talked
about, and the spot zoning Mr. geahre mentioned. She said page 2, "the
transferee site must buy development rights from the bank," however, he's
under no compulsion to buy these rights. She thought it would be very bad
if one person in the area could be free to develop and another one, not.
She said page 3, pointed out that the person with the single family property,
once he had given up his rights, he would probably get a reduction it his
sssessaeut. This would be pure conjecture. She felt the County Assessor
should be asked whether he would be willing to go along with that. The
owner would be getting this reduction, presumably because he was retain-
ing his house as a single family residence. Just the opposite was stated
on the next page. She wondered once rights are transferred, if the single
family residence site owner would really remain with the lower assessed
value in a case sure a larger building were built on an adjoining site.
Councilman Aeahrs suggested sta.i f night work up some hypothetical cease
showing just what might happen to a given block with respect to valuations.
taxes, development, etc,
Vice Mayor Henderson questioned how it would be administered. It would
probably be an open market situation --- two people will deal to determine
the value of the development rights, and upon agreement, one would make
the payment for the rights; but still, there must be same administrative
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overlook to determine the degree that this could take place, and how much
of this kind of dealing can take place within an area. There would need
to be controls to prevent too much density et one spot and nothing at
another to the detriment of the first location. He listed the possibility
of the administrative features being all written into the zoning code.
Councilman Rosenbaum said those points would be helpful to staff, if they
felt it was practical in this area.
Councilman Berwald supported the study, •re 1 (h) . Before the concept
would be incorporated into the Comprehensive Plan there would be opportu-
nity to study it. He pointed out that in the R-5 zone, it's a little
different zone than R-2, 3, and 4 in that it says you are allowed 2, 3,
and 4 -family dwellings but only in new construction. It would be very
important that staff look at the older, larger buildings in those areas
to see that perhaps the density rights, or the property rights might be
transferred to or away from those older buildings. In other words, some
of them might be easily convertible into multiple family dwellings or
See pg. 6 0 7 perhaps not. There might have to be a regulation against that. In his
opinion, there was an acute distinction between the R-5 zone and the others.
He had always found it an anomoly that in that zone, you were restricted
to new construction and the other zonea are silent on that. The other
thing to be considered in the transfer of development rights in this area,
primarily, which is mostly R-4 and R -5-L-9, would be the concept of numbers
of bedrooms rather than tie numbers of dwelling units. The concept of
dwelling units per s4 is certainly a very inexact criteria or standard
for multi -family units and he would suggest when staff comes back with an
See pg. 6 0 7 impact report or drawing, that they take a look at the possibility, in
certain areas, using a standard of numbers of bedrooms rather than dweIi-
ing units.
Councilman Norton said he had difficulty with incorporating the concept
into the Comprehensive Plan without knowing a bit more about it, He
preferred, to see a motion that read to the effect that staff and Planning
Commission study the entire thing ante come back with a recommendation as
to whether or not it ought to be in the Plan.
Mr. Knox said his understanding of the process they were in was that all
of the options were that kind of guidance to the staff and they would, in
fact, study them in that way. He was reluctant to ask. Council to give them
too many instances of study alternatives. He pointed out that 1(h) becomes
an alternative to 1(b) . Option 1(b) was a readJustsent of densities in the
area north of downtown and also south of downtown and around the California.
Avenue business district. It would have lowered the densities at the edge
of the residential areas and raised the density closest to the commercial
areas. Th{s really was another way of looking at how to allow some modifi-
cation of densities. What it does is let the market shift the densities
rather than having the city overlay a more artificial envelope. They would
have to study, not only all of the questions raised but a host of legal
qucstiona, all of which will take considerable time. It might turn out that
1(h) could be more feasible and easier to administer and less troublesome
than I(b) which calls for a gradation of densities. He felt comfortable
with what vas being propo cd and staff thought it was an i.nteres;ti.ng con-
cept; they had talked with the Attorrey's office about it; they would like
to have a chance to take a look at it. He said it could develop that 1(b)
night be the perfect choice for California Avenue and 1(h) a good choice
for the north of downtown area. So t:bey could have both concepts in dif-
ferent parts of the city.
Mayor Sher said it's clear that if they adopt 1(h) in one area you wouldn't
adopt 1(b) but questioned why, at that point, they had to be tied together
as alternatives.
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10/15/74,1
Mr. Knox responded that 1(h) or (`b) were not limited. They had said
1(b) applied to California Avenue ind downtown because those were the
particular areas where they had the rules and conditions they set up.
Option 1(h) becomes even broader be .use it says "and any other multi-
family areas where appropriate" so ill multi -family areas are open for
investigation.
Assistant Planning Director Kennett, Schreiber felt Mr. Knox was correct
that the approaches in i(b) and (h) were basically two different processes.
As such, they eventually would tot want to get into a situation where both
processes were working in one location. Be said, the point that you might
choose one alternative on one location and a different one in another,
indicates need for flexibility to explore both (b) and (h), and ,judge it
area by area as well as the overall process.
Councilman Norton said the language, on its face, suggested something dif-
ferent from that; that is, as it's evolving, with the understanding between
staff and Council, they were not committing themselves to any area with either
1(b) or (h); whereas, the motion suggested they were committing the 1(h)
approach to the area described. He desired some language in the motion
that would indicate that the ultimate adoption of that policy will depend
upon the results of staff and Planning Commission studies and recommen-
dations. Councilman Norton suggested after the word "appropriate," add
a comma and add the following, "with the understanding that implementation
depends on Ccuncil adoption of staff and Planning Commission studies and
recommendations."
Councilman Rosenbaum who offered 1(h) and Councilman Berwald who seconded,
agreed to the rewording of the motion.
RESTATED MOTION: Rosenbaum moved, seconded by Berwald, to include in the
preparation of the draft Comprehensive Plan a provision for transfer of
development rights between and among residential propertfes in the area
bounded by Alma Street, San Francisquito Creek, Middlefield Road, Lytton
Avenue and any other multi -family areas where appropriate, with the under --
standing that implementation depends on Council adoption of staff and
Planning Commission recommendations.
Vice Mayor Henderson expreseed two points, that the addition of this word-
ing could apply to every option choice they had made so far; and secondly,
he would disagree that they had to choose between 1(b) and (h) as alter-
natives. There might have to be a choice in a given area, but he saw them
as two different approaches and both could appear in the General Plan with-
out being contradictory.
The motion passed unanimously.
Mr. Knox introduced Roberta Mundy, representative from Dr. Claude Gruen's
firm, who was present to answer questions,
Kenneth Schreiber gave staff and Planning Commission's presentation re
Sets 2 and 3:
Option sets. 2 and 3 focus on housing quality. Option set 2 deals with
housing rehabilitation and option set 3 covers code enforcement. The
transparency- being projected on the screen shows the Impact Report op-
tions and the Planning Commission recommendations for option seta 2 and 3,
The Planning Commission repo nus a combination of options 2 (b), (c)
ar.,d (d) . In other words, the Commission has endorsed the concept of a
housing rehabilitation program with the specific details of such a program
to be explored further. It should be noted that future research and rec-
ommendations would not be limited to the specific examples originally coa-
taiaed in options 2 (b) , (c) and (d) , but direct city involvement -- if
'Toot outright funding -- 1* explicitly contemplated.
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10/15/74
The second sentence of the Planning Commission's recommended option
states that. "Any rehabilitation loans sponsored by the city should be
tied to a need factor and rent limitation." The need factor was in-
cluded in an effort to focus avila?.'.v resources toward owners that have
a marked need for assistance. The rent limitation provision was included
at the suggestion of the Palo Alto Houaine Corporation. Rent limitation
is proposed because of concerns that rehabilitated units could bring sig-
nificantly higher rents, and thus a rehabilitation program without rent
limitations could result in reducing the number of housing units avail-
able to low and moderate incomes households. Agreement to rent limitation
provisions would be a prerequisite for receiving rehabilitation assistance.
The need factor and rent limitation portions of the proposed rehabilitation
concept would have to be researched and evaluated by staff along with other
facets of such a concept before any specific proposals would be submitted
for Commission review and recommendation to the Council,
The Chamber of Commerce has urged that, if the city enters the rehabilita-
tion field, it do so on the basis of option 2 (d) which would establish
a program of city -guaranteed rehabilitation loans, administered through
local banks. The Chamber is concerned that creation of a rehabilitation
program using city staff would create a bureaucracy that is not really
needed because of expertise available in local banks and savings and loans
institutions. The Chamber also recommends that before Palo Alto undertakes
any city --funded or city -guaranteed rehabilitation program, it place the
subject before the voters in a city-wide election. Comments submitted to
the Council by the University and Crescent Park Association on September
23rd parallel the position taken by the Chamber of Commerce.
The League of Women Voters endorsed option 2(b) and 2(c), if a rehabilita-
tion program is tied to a n. factor and directed toward helping persons
and families that are disadvantaged in the housing market.
The major impact of a rehabilitation program on the critical factors would
be to increase housing quality and enhance preservation of the visual
aspects of neighborhood character. A rehabilitation program without rent
limitations would result in an increase in income levels and reinforce the
trend toward a homogeneous upper -middle income community.
The staff recommends that the concept of city involvement in a housing
rehabilitation program he endorsed by the Council; however, there are a
number of funding and program alternatives to be researched, including
the possible use of community development block grants. The directive
to staff should be broad enough so that a uumber of recommendati.cna can
be brought to the Commission and the Council.
Recommended option 2 (e) focuses on 2 specific ordinance revisions. The
first ordinance revision would involve that part of the Uniform Building
Code which requires that "when additons, alterations or repairs of an
existing building or structure within any 12 -month period exceeds 50%
of the value of that building, the entire building shall be made to con-
form to the requirements for new buildings and structures". Some believe
that this provision discourages major repairs or improvements of older
structures. The second ordinance revision relates to the City's permit
process, specifically the elimination of specialized permit fees. Often
times, these permit fees can be quite expensive and can be a deterrent
to rehabilitation work, Option 2 (e) would have a very limited impact
on the critical factors, but could lead a;o eome increase in rehabilitation
and thus to some i..eprove ant in housing quality and neighborhocd character.
Based en ordinance review and research undertaken by the staff in develop
-
Lag the impact Report, the staff endorses the recommended option 2 (e) with
the understanding that review of ordinances and recommended revisions will
be limited to the two specific items just noted.
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Option set 3 focuses on code enforcement. There seems to be nearly
unanimous backing for option 3 (a) which would continue the present
level of code enforcement. Staff concurs with the Commission's recom-
mendation endorsing option 3 (a).
Option 3 (c) as proposed in the Impact Report would establish a fund
to buy, raze, or improve deteriorated residential properties. The annual
dollar amount of this fund would be established during preparation of
specific proposals to carry out this concept. The Planning Commission
tabled this matter pending City Council considerations of the Palo Alto
Housing Corporation's proposal for a subcorporation. The Palo Alto
Housing Corporation submitted a letter to the City Council on September
19th, which recommended reinstating option 3 (c) as originally worded.
The Housing Corporation believes that there has been some misunderstand-
ing and confusion between: this option and the subcorporation proposal.
The Housing Corporation envisions its subcorporation as having a much
wider scope of activities than noted in option 3 (c), A non-profit
organization such as the proposed subcorporation might be the logical
one to administer the fund proposed in 3 (c), but the Housing Corporation
believes that option 3 (c) should be included no matter who administers
the fund. The corporation also proposed an Option 4 (g) that would
"Establish a non-profit organization whose principal goal is to assist
the prevision and preservation of low -moderate housing."
The major impact of option 3 (c) on the critical factors would be to
increase housing quality and neighborhood character. The fund could
also result in an increase in income levels unless the improvement of
deteriorate i properties, or new construction on property where buildings
were razed, included lo:: and moderate income units.
In view of the action taken by the Council on September 30 to support,
in principle, the "subcorporation" proposal, staff recommends Council
adoption of option 3 (c) for inclusion in the housing element of the
draft Comprehensive Plan. Please note that option 3 (c) does not nec-
essarily suggest a city fund to accomplish the rehabilitation or raz-
ing of deteriorated properties. Other sources, most notably the com-
munity development block grant funds, w -?11 be available for this pur-
pose.
Planning Commission Vice Chairwoman, Arne Steinberg said the Commission
supports some kind of city commitment to rehabilitation. It was felt
that the three options 2(b,c,d) should all be fully explored. They felt
some flexibility in the options was needed, particularly in the light
of possible funding from the Community Development Act. Loins spon-
sored by the city should be tied to need studies limited to some fixed
income figure. But elso loans should be extended to those who would
agree to a rent limitation on property when it has been rehabilitated.
These recommendations are made ,from one of the policies and resolutions
4725 which reeds, "Palo Alto declares that the primary goal for our re-
habilitation programs in the City of Palo Alto should be to meet the needs
of those persona and families disadvantaged in the housing market."
In regards to Option set 3, when the Commission discussed this set
of options, 3 (c) was linked to the Housing Corporation Subcorpo►razion
proposU. This proposal had not been presented to the Commission or -
at that time, to the Council Committee and the details were not avail-
able. This option was therefore tabled until the Commission had mo.;e
i.-.formation about it.
kr. Dan Williams, 2450 West Bayshore, said he was speaking in behalf of
the Mid -Peninsula Citizens for Fair Housing, an organization for which
he is President. Essentially, what they would like to do is offer the
organization's endorsement of the Planning Commission's recommendation
4 5 1
10/15/;4
and concur with the statement Mrs. Steinberg has made. He said they are
a bit worried about a situation in which the options adopted in the Com-
prehensive Plan may limit themselves in terms of what can realistically
be accomplished by the city in this moment in time. It's their under-
standing that the Comprehensive Plan is a document that will set the
course for a period of from 10 to 20 years. Inevitably, Palo Alto will
be drawn into the need to predict future decisions of state and federal
governments. 'Phis is a difficult thing to do, but he did not want to
see Palo Alto fall into the trap of expediency by assuming that today's
policies will continue into the definite future for state and national
legislative bodies. With reepect to housing, there are predictions that
can be made with relative certainty. At ;one state level, three different
bills providing for a state housing agency and state funding for moderate
income housing passed both houses of the legislature this year. Only the
action of the Governor prevented thaw from becoming law. Both major party
candidates for Governor now have indicated support for this legislation.
Therefore, it can be predicted the state financiel assistance to housing
will be available early in the 10 to 20 year planning period. On the
national level there is a long, in fact, a 30 year history of assistance
for housing for ley income people. It has never been long enough and
large enough to fill the need but until the last two years there were
programs available for iepiezentation, some of those in which the city
participated. It is altogether realistic to include consideration of
supply of both low and moderate income housing in Palo Alto's 10 to 20
year planning. Financing by some means should be anticipated from both
etste and federal sources. To get low income housing, may also require
use of city reserves. Some options may be desirable just because they
do postpone, although not prohibit, development until tools can be found
to implement solutions to some of our more critical problems. Mid Pen-
insula Citizens for Fair Housing urge tie Council to consider the options
related to housing, especially sets 2 and 4 in light of possible future
action by the state and national governments, and to plan for the housing
needs of the population with a full mix of incomes, ages, races and life
styles. It can best be done by keeping the policies adopted flexible in
concept so that they can be applied to a range of future circumstances.
He said options recommended by the Planning Commission did this quite well
end should not be made unduly specific. He reminded Council of his earlier
recommendation which was to adopt the options as sent to them by the Plan-
ning Commission and to direct the staff to begin the ardour task of design-
ing means of accomplishing these options.
Mr. Paau]. Puech, Land for People, said Land for People wanted to express
its support for options 2 (b,c,d and e). However, they would like to add
an aa.Ymendmant to 2(b,c,d) which wild read: "Any rehabilitation loans spon-
sored by the City should be tied to a need factor and rent limitation."
They would also add: " eed amortize any attended rent increases over a
10 year period which may be necessary because of rehabilitation costs."
The idea being that the landlord, even though he gets -s low interest loan,
may after a year and a half, simply say that there would be a rent increase.
He said he believed that any kind of rehabilitation that's going to be done
would ba made to sat a certain period of years, usually seven to 10 to 12
years, and he hoped that Council would see that these people should have a
limatation put on their kind of rent until an amortized period would be
forthcoming,
Helene Wheeler, 3b2 Diablo fioert, League of Women Voters of Palo Alto,
said as Mr. Schreiber mentioned in his opening remarks, the League has
been recommending the inclusion of a need factor and rent .limitations in
the option seta dealing with rehabilitation. They are pleased to set the
Planning Commission did recommend that to Council. They support these
options with the understanding that the (establishment of city programs such
as outlined in options (b) and (c) does not preclude encouraging the private
sector, in these areas, and that is outlined in 2(d) and they support re-
habilitation efforts as recommended in option 2(e).
4 5 2.
1O/15/►4
See pg.
Councilman Clay said quality housing for low/moderate income people
was the thrust of option sets 2 and 3. The Housing Corporation has
said that option 3 (c) does not interfere with establishment of the
Subcorporation. He said if they carried on with the development of
plans for rehabilitation by rennovating homes for low/moderate income
persons in this eacalated fashion, he thought they were doing a dis-
service to the whole act of developing housing for low/moderate income
6 0 7 peraone. Further, the Horsing Corporation says that with the establiees-
ment of a Subcorporation, they feel these things don't interfere with
that, He took exeption to that because what Council has approved is
a concept of the Subcorporation--developing housing for low/moderate
income persons without putting many detailed restrictions on then.
He would much prefer to see a pine that encompasses rehabilitation,
renovating of hones, buying homes, managing rent of homes, managing
even the below market but not low income units. He would also like to
think this plan, if implemented, :eight be implemented by the same entity,
the Subcorporation from the Housing Corporation. He found it difficult to
support recommendations which appear to him to be piecemeal acts toward
supporting low/moderate income housing. He was very much in support of
low/moderate income housing development. He wan in favor of proposition
15 to repeal Article 3A. He did not think that they were going to get
what those who support low/moderate income housing Would like to have
because of the way they were going about it and the way the recommenda-
tions are presented to them. He noted they had the word "explore" again,
which he took exception to. They had already given approval to having
tte Housing Corporation go cn with its act, with a $10 million capital
base provided it comes up with the right plan. He was not ready to support
this until he saw what the Housing Corporation .ame back with.
Councilman: Bers.'ald said that was a very interesting approach. He wondered
if there was a middle ground which was how he looked at 2 (b,c,d) . That
was if they would separate out the latter part, "Any rehabilitation loans
sponsored by the City ahould be tied to a need factor and rent limitation."
He said that is redundavt, for the reason Mr. Clay mentioned, and perhaps
the exploration should be dose with the Mousing Corporation. He agreed that
the word ought to be "accept" the concept of some city participation in guar-
anteeing housing rehabilitation loans or working with private institutions to
do it and not tie the city's heads or the Housing Corporation's hands or private
financing institutions' hands by adding that last part. He said, if you look
at the economics of the situation, the reason for rehabilitation was to not
only help those who need the loan to rehabilitate their home, but to help ims-
prove the neighborhood, regardless of the income of the person. If a person
has an amount of income above what some arbitrary City official thinks it
ehou1d be and the hose is deteriorating and needs repairing, and there are
some other circumstances other than actual income, he didn't see anything wrong
with granting some kind of assistance to improve the neighborhood. He said
in the cane of Viet Nam veterans, for example, who get 41/2 per cent Cal Vet
loans, there wasn't any restriction that be knew of on their iacoaae. The idea
was to provide housing to improve neighborhoods. He didn't agree entirely
with )r. Clay because if they passed 2(b,c,d), there was no restriction on
the staff to work with the Rousing Corporation. He thought they should have,
as a part of the motion, the option that was included in the Palo Also Board
of Aesitore' letter, October 1, page 2. They had a very exciting and interest-
ing suggestion to pct regarding participation of the banks, and administra-
tion of the loans. I.aatl.y, he would be very opposed to any program that sets
up city staff or Housing Corporation to administer the actual loans because
those sibould be administered by a private financial institution.
Councilman Beahrs said he agreed with Mr. Berwald's last point. The city
should not be in the loan business. He suggested the state and federal gov-
ernments will want to put their dollars where it would buy the most housing
which would count the city out. He agreed with (e), but he didn't give
serious consideration to 2(b1 and (c).
453
10/15/34
MOTION: Coun:;ilman Berwald moved, seconded by Comstock, 2(b,c,d)
as set out by the Planning Commission recommendation to explore further
the concept of city -funded or city -guaranteed housing rehabilitation
loans as outlined in option 2 (b), (c), and (d):
2 (b) Provide a moderate level of city -funded rehabilitation
loans ($5000,000 annually) for housing improvements.
2 (c) Fund a measurably larger amount for housing improve-
ment loans ($2,000,000).
2 (d) Establish a program of city -guaranteed rehabilitation
loans administered through local. banks. (It will first
be necessary to determine the feasibility and likely
funding level of this approach.)
AMENDMENT: Councilman Berwald moved, seconded by Beahrs, the last sentence,
beginning with the word "Any" and ending with "limitation".
Mr. Berwald elaborated that he would not consider rent limitations under
any circustances. At some point in time, he would like to debate the Land
for people position. He felt by using that lat+t sentence, they would be
further limiting the innovativeness of the Planning staff. He assumed
"need factor" referred to financial seed factor, not need factor of the con-
dition of the. home and perhaps it should be tied to rent limitation. He
felt staff and the Housing Corporation, with consultation with financial
lending institutions and economists, could come back and make that position
but he didn't want to include it as a limitation in the motion.
6 0 7 Cice Mayor Henderson said he would t.upport rent limitation on any use of
city funds for rehabilitation loans. City money shouldn't be involved and
leave it open for the owner to increase his rent to whatever figure he
wanted. He also had thoughts on the need factor; need factor for whom --
the owner? He would put extra words in to include, "owners of properties
that would have potential tenants of low/moderate income."
SUBSTITUTE MOTION: Vice Mayor Henderson moved, seconded by Pearson, to
support the concept of city -funded or city -guaranteed lousing rehabili-
tation loans, any such loans being contingent upon rent limitation and a
need factor applied either to the property owner ox potential tenants.
At thiai point, Mayor Sher asked Marilyn Norek, Senior Assistant City Attorney,
the order the suotiona (main motion, amendment, and substitute motion) should
be handled. She responded that the substitute motion would be in order and
would take precedence over the matiou to amend. Mayor Sher said he under-
stood then that the aubetitute was for the entire motion and that would make
the amendment moot.
Vice Mayor Henderson said in reference to "potential tenants," he was refer-
ring to the property itself being property that has been, and should continue
to be, ,Tented to low, low middle, low moderate, and below market income persons
in an attempt to say there should be this kind of a factor involved, if it does
not apply to the owner himself.
Councilman Comstock asked the purpose of the substitute motion as opposed to
the: purpose of the Commission recommendation. He thought the Commission seemed
to be asking that they continue studying two or three possibilities. As he
usnderseood the substitute motion, it eliminated those specific alternatives
and talked of a More general case.
Vice Mayor Henderson responded that 2 (b,c) both speak to rehabilitation loans,
but differing amounts. Option 2 (d) says "establish a program of city -guaran-
teed rehabilitation." He didn't think they needed to specify the edgllera.in
the motion. They were saying they wanted a city -funded rehabilitation loan
program, the dollars to be determined later and they support 1(d), a city -guaran-
teed rehabilit:atiou loan.
4 5 4
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Councilman Berwald felt there was a misunderstanding. He said that when
he moved 2 (b,c,d), he assumed the minutes would show the motion as the
exact wording of the Planning Commission recommendation. He much preferred
that to any abbreviation of the wording made by anyone. That was his intent.
By only adding certain words, you would be leaving out words, "administered
through local banks," which he thought was a very important option, the
staff ought to study. Therefore, he thought the original motion, whether
or not they approved the amendment, was the Superior one.
Councilman Heahrs insisted, if they were inclined to subsidize the problem,
it should only be by a vote of this policy by the people of Palo Alto.
See pg. 6 0 7 Revenue bonds or a general obligation bonds to the people would accomplish
it, but he didn't think the substitute lotion was realistic and didn't
support the original motion entirely.
Councilman Norton felt Vice Mayor Henderson's rewording of the Commission's
recommendation didn't substantially change it. He would tend to stay with
the original wording as a matter of principle. He preferred the original,
iu that it was somewhat less committal. He did not think they could real-
istically "support" it until they had more information. He also preferred
the original version in that it specifically alludes to 2(b); (c), and (d)
as such. It's quite clear then what the intent is -- unlike the substitute
which would require someone to read the minutes of the meeting almost to
understand the context in which that was made. Finally; he didn't think
the further embellishment on the definition of "need factor" added anything;
the Planning Commission recommendation include F> both owners end tenants as
people whose "need" will be taken into account,
Councilman Rosenbaum felt the embellishment re "need factor" tended to clarify
that it was for the potential tenant, or owner. On the other hand, he said,
the first sentence of the Planning Commission recommendation did seem to con-
tain all the elements to satisfy everyone. He suggest Vice Mayor Henderson
consider changing the substitute motion to include the f.rst sentence by the
Planning Commission plus his embellishment.
Vice Mayor Henderson said he looked at Impact Report Option 2 (b) and 2(e)
as alternatives.
Mx. Knox responded that he was correct. They are alternatives. The idea was
that one or the other would be selected The Impact Report discussed the
nature of the impact of either one. They concluded that even a $500,000
contribution would be significant in rehabilitating housing. Several things
should be stressed with Option Sets 1 through 4. He said when they opened
their discussion of Option Set 1, they said that Option Set 1 related to
quantity of housing; 2 and 3 related to preservation of housing quality;
4 related to composition of the ccmmunity in teals of income level, age,
family size, proportion of home owners and renters. Staff felt it was in
Option Set 4 that they get to persons of low/moderate income". In the
discussions of rehebili.tation, the Planning Commission wanted some kind of
city commitment to rehabilitation. He said staff stressed that there were
particular areas of the city, in which if they do not receive rehabilitation
Assistance, they will lose their housing quality and deteriorate. The
Commission and public streamed that there are particular groups of people
who need rehabilitation and assistance. In staff's previous recommendations
they supported certain options and they hadn't said anything about 2 (b),
(c) and (d) but had give background information. One of the reasons they
found it difficult to embrace 2(b), (c) and (d) was that their effort was
aimed at areas of the city that needed rehabilitation aad that was not
picked up et all by the Commission in forwarding the item to Council. He
stressed they should think of rehabilitation and code enforcement in thee*
two sets as being quite separate and apart from assistance to people of loaf
moderate iucomes. He explained that Council could then decide after they
determined what commitment there is to rehabilitation program, to what extent
they want to tie that to either area or groups of peoopla.
Vice Mayor Henderson said he wanted to make a commitment to the rehabil-
itation program. He didn't want to say it had to be either $500,000 or
$2 million annually. He didn't know what the amount would be but he was
willing to make a commitment to a program in which they would determine
dollar amounts later. He explained the reason he left out "administered
through local banks" was that he felt that was too limiting -- what about
savings and loans, non-profit corporation created by Palo Alto Housing
Corporation He said he would assume cite -guaranteed was obviously re-
ferring to the private sector. He had not intended to throw out that
concept, but to make it broader.
Councilwoman Pearson wished to hear from Mrs. Steinberg as to why the
Planning Commission did choose (b) and (c) and didn't select (d). Mrs.
Steinberg's response was that they actually said all three because they
felt they needed more information on that and could not commit themselves
to a specified amount of money. The difference in the two sums was quite
great and they canted the latitude. Councilwoman Pearson said she would
support it because she was interested in rehabilitation in the City of
Palo Alto, rot strictly in Fire one 7 but in all areas as needed. She
tt aught they should put in some words that spoke of the "need factor for
owners and persons who need rent limitations in order for them to live in
certain places"
Councilman Norton said if the substitute failed and if the "need factor"
should be further refined; then he would finally move to add in parenthesis
after the phrase "need factor", "(owners and tenants) .
Councilman Clay commented on the different thrusts expressed by staff and
Commission. He said Mr. Knox warted to look at this without identifying
low/moderate income housing per se, and the Planning Commission and Vice
Mayor Henderson's motion had low/moderate income housing as part of the
recommendation.
Mr. Knox clarified that staff did not necessarily have low/moderate income
housing in mind as the only rehabilitation consideration and they had talked
abort areas of the community that needed rehabilitation. He said the Com-
mission, on the other hand, stressed groups of people in need of the rehabil-
itation assistance, and if city funds were going to be utilized, then that
assistance ought to go to those people where there was a demonstrated need
for the funds and who could not obtain loans in the private market. He thought
the commitment that could be made was one of city involvement, but not nec-
easarily city funding, because there were other possibilities for funding.
He referred to Mrs. Steinberg's opening statement about city commitment to
rehabilitation but he didn't think it needed to be city funds.
Councilman Clay's concern was not so much who provided the funds, although
it was a consideration, rather to look at as many parameters as possible at
one time regarding low/moderate income housing. When the Housing Corporation
comes back with their proposal, there would be an estimate of the number of
unite that might be created through their purchasing of units. He felt they
might also come back with some mechanism for holding first and second deeds
of trust related to rehabilitation. He was not pleased with how much out of
context they were taking the whole subject of low/moderate income housing.
Mayor Sher was glad to hear fir. Schreiber emphasize that the option was
basically not a low/moderate income housing proposal but was a proposal for
housing rehabilitation. He thought they housing -element of the Pion should
specify that housing rehabilitation was desirable and it should be encouraged.
It should note that the encouragement: would probably have to include some fora
of city involvement or at least encouragement. He thought it should then
review varioua incentives to rehabilitation and the disincentives to deterio-
ration that the city can provide. The disincentives might mean just an increase
in the city's effort to monitor deterioration or it might mean stepping up
eoa
4 5 6
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code enforcement which they would talk about under Option Set 3.
The incentives to rehabilitation might mean city assistance to those
who want and need it. He supposed city assistance could mean an office
that informs applicants, advises them, and directs them to banks ready
to make the loan, it could mean the city would actually make the loan
using, for example. Community Development Block Grants obtained from
federal government fur the specific purpose. The directive to the staff
should be broad enough so that a number of recommendations can be brought
back to the Commission and to the Council. He said until they had more
to go on, "city funded" or "city guaranteed" were unnecessary to the
spirit of the Option 2 (b,c,d); that it should be broader working than
that, He stated his opinion that if there were any substantial infusion
of city funds into a rehabilitations loan program that a vote of the people
wculd be advisable; past history demonstrated that proposals for city funded
rehabilitation programs are going to go to a vote of the people anyway. He
didn't feel the sane way about the use of moneys they might be able to ob-
tain under federal programs. He understood there would be a federal allo-
cation of some $350,000 a year for rehabilitation and other purposes under
the Community Development Program beginning early 1975; so, with respect to
those funds, he did not feel the same way about putting that to the vote of
the people.
The substitute motion failed on the following vote:
AYES: Henderson and Pearson
z;OES: Beahrss, gerwald, Clay, Comstock, Norton,
Rosenbaum, Sher
(Councilman Beahre left at 9:35 p.m. and did not return)
SUBSTITUTE MOTION: Mayor Sher moved, seconded by Norton, to continue
consideration of city involvement in a housing rehabilitation program and
include the following: 1) alternative programs and funding sources to be
cited and analyzed in the recommended housing element; 2) granting of
rehabilitation loans, if recommended, to be tied to a need factor (applied
to either property owners or prospective tenants) and to rent limitations;
and 3) to the extent that a recommended rehabilitation program will require
significant use of city funds, approval of the program to be placed before
the voters in a citywide electiou.
Councilwoman Pearson said it seemed to her there were only two parts to
Mr, Sher's question. Number 3 had to do with putting the proposition to a
vote which would be after it was in the General Plan.
Councilman Norton asked Mayor Sher to make a change in 2, to add, after the -
word "loans," "(direct or guaranteed)".
Mayor Sher agreed. He asked Councilman Norton whether he meant city guar-
anteed and Colirxcil.maan Norton said "city guaranteed" but no direct city
money. Mayor Sher said under 2 you might have direct loans by the bank,
the city eight not be involved at all. He fait that wave part of the pro-
gzs* as well es the need factor and rent limitations ought to be a feature
of the looms.
Vice Mayor Henderson s.sid the words, "Continue consideration" did not crake
e policy statement. "Significant use of city funds", in his thinking, required
a definition as to when they would go to the voters -- at $10,000, $100,000
or a million --- and perhaps should not be gone into at that point. lMaayor.
Sher's response to the first point vas that "Continue consideration" seemed
stronger than "explore further" which was the Henning Coms`issioa recommen-
dation.
4 5 7
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Councilman Berwald asked the Mayor if his motion in no way specifically
excluded consideration of 2(b), (c) and (d), to which the Mayor said it
included those. Councilman Berwald continued that he would be opposed to
rent limitation but assumed if there were no significant city funds, it
would be difficult to get private lenders to lend with rent limitations.
Councilman Clay asked if the intent, in part, was to make it as broad as
possible, to explore all the possible alternatives for rehabilitation
program$; and the intent in part 3 involved the substantial infusion of
city funds into the program. The original rehabilitation program that
went to the Finance Committee called for large sums from the city to
underwrite the long program.
Councilman Comstock said if rehabilitation activity takes place through
the workings of the private sector, that's going to go on and there's no
need or possibility or reason to talk about the city's being involved in
that. He understood they were talking about some mechanism for funding
at seething other than the market rate. He eaised the issue of federal
government grants being passed through the city to the community, that
becomes Palo Alto money, unless they set up a separate corporation. Another
alternative to funding, would be if the city guaranteed loans through banks,
the costs and pcssible loss rates, the city would have to help stand good
for. He questioned using the word "significant". He referred to the letter
from the Housing Corporation. in this regard they would add a new Option 4(g)
as well as reinstating 3(c); so 2(b,c,d) seemed to him, to be a separate
and independent matter from their proposal.
AXE DHEN1: Councilwoman Pearson moved, seconded by Henderson, an amendment
to the substitute motien for number 3 as follows: Upon determination that
a rehabilitation program might require only city tax generated funds, and
upon approval of a specific rehabilitation program by the City Council,
approval of the program would be placed before the voters in a citywide
election.
Councilman Rosenbaum didn't feel that Councilwoman Pearson's amendment
improved the situation very much because other city expenditures didn't
require a vote so he questioned why housing mould require it. There was
a large majority support of Proposition 15 to eliminate voting on public
haueirg projects.
Councils Norton said it was his understanding that Mayor Sher's original
subeitute motion excluded public vote where they would be merely participating
in existing or federal or state housing programs. B. suggested, rather than
the Pearson amendment, that they add after the old language, "city funds",
"beyond any city funds necessary to participate in federal or state housing
programs as they may exist from time to time". Councilman Norton said there
could be a situation rare, under one or both state and federal housing pro-
grama, they would say they would provide 80 per cent if city would match with
20 per cent or some similar matching concept; he assumed Mayor Sher didn't
intend a public election to participate in that. Mayor Sher felt Council-
woman Pearson's aeudaent made it clear they were talking about was a "city
funded program". He wouldn't limit it to tax generated because there were
other nays of generating city funds to finance the program. He didn't have
in mind the kind of progrsan where they applied to the federal government under
a specific program desigeed for rehabilitation.
Councilman Norton said he would want the word "tax" deleted because there was
no way to trace mousy in the general fund to taxes as distinguished from
utility revenue, for example.
Mr. Duckstsd of the Palo Alto Housing Corporation answered questions by
Councilman Clay that they were looking at rehabilitation, new consteueelome
and many things in the way of providing something to satisfy the housing
4 5 8
10/15/74
needs of the city of Palo Alto. They are talking about general
obligation bonds, revenue bonds and many other sources of funding.
At that point, they had had four meetings since the Council directed
them to work on housing with ehe assistance of city staff. He responded
they could get involved in rehabilitation and were desirous of doing so.
New construction and anything else was secondary. They stated in their
letter to Council, that 3(c), 2(b,c,d) and 4 (g) were all related and they
didn't view them as separable. He said this proposal case in the middle
of all this deliberation but they see a direct link among and between
all of the fecets.
Councilman Clay said in looking at Options 2(b) and (c), $50,000 or
$2 million, respectively, for housing improvement loans, that may be moot
if the Housing Subcorporation decides that it's going to go its route with
revenue bonds. Mr. Duckstad said that was correct.
Cheri Charles, Palo Alto Planning Department, made the point that the
money that they were talking of in terms of the Housing Corporation pro-
posal would be used only to rehabilitate those structures that the Rousing
Corporation would own The Options 2 (b,c,d) are much wider in that they
would be available to any individual owners within whatever standards you
set up according to need, etc., within the city.
The Pearson amendment to the third part of the substitute motion failed
on the following vote:
AYES: Comstock, Henderson, Pearson, Sher
NOES: Berwald, Clay, Norton, Rosenbaum,
ABSENT; Bcahra
Councilman Rosenbaum then said rather than using the Language "continue
consideration". he preferred "support the concept" and asked Mayor Sher
if he would accept that in his substitute motion.
Mayor Sher accepted that and the second, Mr. Norton agreed.
Councul.man Rosenbaum then asked that the preamble and the three parts
be voted on individually and Mayor Sher said that would be followed by
a look at the final form of the total motion and a vote on it.
SUBSTITUTE MOTION RESTATED: Mayor Sher moved, seconded by Norton, the
preamble to support the concept of City involvement in a housing rehabil-
itation program.
The preamble passed on the following vote:
AYES: Berwald, Clay, Henderson, Norton, Pearson
Rosenbaum, Sher
NOES: Comstock
ABSENT: Beahra
1) Alternative program end fwiding sources to be cited and analyzed
in the recommended howling element;
Ibex 1 of the Substitute Motion passed an the following vote:
AYES: Berwald, Clay, Henderson, Dorton, Pearson
Rosenbaum, Sher
NOES: Comstock
ABSENT: Mehra
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2) Granting of rehabilitation loans (direct or city -guaranteed), if
recommended, to be tied to a need factor (applied to either property
owners or prospective tenants) and to rent limitations; and
Number 2 of the substitute motion passed on the following vote:
AYES: Clay, Henderson, Norton, Pearson
Rosenbaum, Sher
NOES: Berwald, Comstock
ABSENT: Beahrs
3) To the extent that a recommended rehabilitation program will require
significant use of city funds, approval of the program to be placed before
the voters in a citywide election.
AMENDMENT: Councilman Norton moved, seconded by Clay that after the words
"city funds" add the words "beyond those necessary to participate in federal
or state assisted housing progr.ama."
The amendment passed on the following vote:
AYES: Berwald, Clay, Comstock, Henderson, Norton
Rosenbaum, Sher
NOES: None
ABSENT: Beahrs
Number 3 of the substitute amendment, as am.nded, failed o:: the following vote:
AYES: Clay, Morton, Sher
NOES: Berwa1d, Comtock, Henderson, Pearson, Rosenbaum
ABSENT: Beaahrs
Councilman Berwald then asked if a person voted "No", is be disqualified
from bringing up 3) for recaneideration at a meeting at which there would
be a full Council? Marilyn Norek, Senior Meistent City Attorney, responded
that only a person who voted on the ;prevailing aide could move for reconaid-
eretion. Mayor Sher asked if that "prevailing aide" referree to that partic-
ular point on the whole motion? Ms. Norek said, given that number 3 failed,
the prevailing side would be the people who voted "No", they could move for
reconsideration at some later point.
Councilmen Berwald said that although he voted for Number 3 of the substitute
MOtion, he would like the record to show he changed his vote to "no for
parliamentary reasons.
The substitute motion, consisting o: the preamble, 1) and 2) failed on the
following vote:
AYES: Berwald, Clay, Rosenbaum, Sher
NOES: Comstock, Henderson, Norton, Pearson
ABSENT: Beehrs
4 l• 0
10/15/74
The Berwald amendment, to the original motion to delete the last sentence
of the Planning Commission recommendation on 2 (b, c, d) failed on the
following vote:
AYES: Berwald, Clay
NOES: Comstock, Henderson, Norton, Pearson,
Rosenbaum, Sher
ABSENT: Beahrs
AMENDMENT TO ORIGINAL MOTION: Councilman Rosenbaum moved, seconded by
Berwald, to add after "need factor`, "(owner and tenant)".
The amendment passed on the following vote:
AYES: Berwald, Clay, Comstock, Henderson, Norton,
Pearson, Rosenbaum, Sher
NOES: None
ABSENT: Beahrs
The original notion, as amended, passed on the following vote:
AYES: Berwald, Comstock, Henderson, Norton,
Pearson, Rosenbaum, Sher
NOES: Clay
ABSENT: Beahrs
MOTION: Councilman Berwald, seconded by Comstock, moved 2 (e) as recom-
mended by Planning Commission: "Revise ordinances to eliminate sections
that discourage rehabilitation. . . and add incentives to encourage reha-
bilitation."
Councilman Rosenbaum responded Mr. Peach's suggestion relating to amor-
tizing rent increases. He wanted Mr. Puech to know that in the Fire Zone I
deliberations, this was exactly the sort of thing they had in mind, even to
the point of 20 years, rent could be raised by an amount equal to that re-
quired to amortise the loan They had not gone far on it at this point,
but that was the sort of thinking they were engaged in.
The motion passed on the following vote:
AYES: lervald, Clay, Comstock, Henderson, Norton,
Pearson, Rosenbaum Sher
NOES: None
ABSENT: Beaters
Councilman Berwald said he'd like to sae the 0ptlone include the suggestion
made by the Palo Alto Board of Realtors, page 2 of their letter of October 1, 1
Council recessed from 10:00 p.m. to 10:15 p.m.(Councilman Clay left at 10:00 p.
and did not return.)
Mayor Sher said Option Set 3 HOUSING (CODE ENFORCEME?IT) was before the
Council for consideretion.
4 6 1
10/15/74
Vice Mayor Henderson said he, personally, had been debating between 3(a)
and (b), because he felt eventually they would have to upgrade their
code enforcement but he wasn't willing to do that until they had the kind
of program such as rehab programs that will guarantee protection to those
who have been priced out of the market. He couldn't accept 3(a) exactly
as presented, "Continue the present level of code enforcement." The
staff does say, at present, code enforcement is carried out on request
basis. The continuing present level of cede enforcement is nearly equiv-
alent to not interfering in the normal processes of deterioration and
rehabilitation. He didn't want to limit them to the present level of
code enforcement.
MOTION: Vice Mayor Henderson moved, seconded by Pearson, to accept the
Planning Cc fission recommendation 3 (a), adding "at least" after "Continue",
to read: Continue at least the present level of codeenforcement."
The motion passed on the following vote:
AYES: Berwaid, Comstock, Henderson, Norton
Pearson, Rosenbaum, Sher
NOES: None
ABSENT: Clay, Beahrs
Vice Mayor Henderson said the Planning Commission recommendation 3(c),
had evoked some confusion. Mrany people had been reading into that one,
the Palo Alto Housing Corporation's new pEoposed Subcorporation, and in
fact, the report on page 37 mentioned that specifically. That had been
suggested for, and better suited to fall under, the Option Set 4. Mean-
while, he saw no need for Option 3(c) because the Subcorporation would
be designed to do those things. They already had funds for rehabilitation
for land banking and for other purposes. He didn't feel they should create
dozens of different funds. If the Housing Corporation Subcorporation did
not pass, they would have the opportunity= to come back to this.
Mayor Sher directed their attention to Option Set 4.
Mr. Knox displayed Santa Clara County Planning staff slides to assist
everyone in better understanding the extremely unusualand undesirable
situation in the housing market today. He said staff saw this several
weeks ago and it suede a number of things clearer, even to those who are
professional planners. First, there is a severe olump in the housing
market in Santa Clara County. Figure 1 presents a picture of dwelling
unit building permits granted during the last mine years and an estimate
of the number of units that will have been permitted by the end of 1974.
One of the County Planning Department's concerns is that a sufficient
mount of housing must be built to meet the needs of the expanding pop-
ulation in the county. A rough estimate puts the county neede for new
dwelling units at about 17;000 per year. Because there are some low-
volume years, the County is falling short of that level. There are
true lows indicated in the current year, and in 1966 and a slight low
in 1970. A look at the. national housing; activity shows that what is true
for the county is true for the nation at large. 1966 and 1974 are extremely
low volume years at the national level, as well as 1970. Explanations for
the three national slumps, and for the 1966 and 1974 Santa Clara County
slump are found in the interest rate curve home buyers must pay. Shown
also is the prime rate, the rate that banks charge the most well-to-do and
credit worthy corporations. These are the rates in which builders and
land developers loans are based although the rates actually charged builders
are much higher. Dwelling units allowed by building permits for periods
November to April are shown, and it can be noted, for this period, the
1973'74 low is just as deep and severe as the historical low of 196647.
4 6 2
10/15/74
In each year of the building slump, both sets of interest rates reached
a peak. In seeking causes, a look into the matter reveals that each
slump has something in common with the other two. In all of them, the
Federal Reserve Board was trying to control inflation, either to prevent
it, as in 1966, or to bring it under control, as in 1970 and 1974. To
do so, the Federal restricted the growth and the money supply, severely
squeezing the amount of credit available to the national economy. This
hit the housing industry first and harder than any other industry. While
Federal Reserve policies, in trying to control inflation explained the
slxcmps in building activity, something else has happened to the cost of
hoxe ownerships since the late 1960's. The cost of home ownership is
going up much faster than other costs of living. First, it should be
noted that the 1969 high is the peak of about 15 years of continual
improvement in the living qualities of the average home. That is, more
rooms, bigger rooms, more bathrooms, bigger garages, and on lots really
less than 6,000 square feet in size. The 1970'71 loss, represents a sharp
drop in quality of the average units sold and a sharp decrease in land use
per dwelling wits, in an attempt to make the average unit sold available
to a larger part, of all families.
The whopping 1972-74 increase represents both the dollar infatior and com-
parative increase in the real costs of housing available. Buyers are pur-
chasing decreasing proportions of the lower quality housing offered. So
the market rsponse show up as a direct increase in the median price. In
the 21 years from January 1972 until June 1974, the median price of houses
sold in the county jumped from $24,600 to $37,500, that's in the entire
county. That's an increase of S4 per cent. Causes of the increase are:
1) Inflation in land costs, which in recent years, has been 25 per cent
per year. 2) Inflation in material costs, which have been -exceeding
20 per cent per year. 3) A sharp rise in carrying costs, that is, builders
expenses for interest, insurance, and taxes due to high interest rates,
and due to uncertainty and delays in getting building materials when they
are needed. 4) Rising labor costs with unions trying to keep salaries and
cages up s:ith the increase in the cost of living.
The fifth figure on the chart compares the level of various interest rates
affecting the home building industry. The costs of using money or interest
rates are basic and are worth looking at again. in regard to home loans
ac 6 per cent for 30 years, a horse buyer pays for his home a little over
twice, At 94 per cent for 30 years, a borrower repays the value of his
home loans three times. At 11 per cent where the rates are now, he repays
three and a half times. On the builders side, there is the credit crunch.
A builder now page about twice in real interest rates what he pays in periods
when the money is available. To set this, compare real constuction loan
ranee in early 1972 to such rates now in the third quarter of 1974. Today's
interest rates are the highest in history. inflation is offered as a cause
for the current towering levels but it is interesting to note that the U.S.
economy has endured several periods of comparable inflation when interest
rates never approached their present levels. Before 1969, the prime rate
had never been higher than 7 per cent. It reached that level in 1920 and
1921 following a four-year period of inflation when prices climbed more
than three times as fast as in the last four years.
Home ownership is rapidly claiming a larger share of each family's real
incense. Until the 1969-70 slump, lenders felt thathome loan payments
should not exceed 224 per cent of the main bread winner's income. Today,
they accept a full qu.srter of both spouses monthly income.
Figure seven, on the chart, while it is based on greater Los Angeles ex-
perience, shows what is happening to the overall prospects of owning a
home of quality and size comparable to the average were in the mid -1960's.
If the average family could afford the average 1966 home, every bar on the
graph would reach the 50 per cent level. ,as you can see, at today's prices
for housing, anad at today's interest raete, only one family tin six could afford
se
463
10/15/74
the average 1966 home. The goal set in the 1950's of the average family
owning its own home, is falling increasingly out of reach. Santa Clara
County has one of the nation's highest levels of personal income, ranking
twenty-fifth nationally, in the level of median family income. While most
Santa Clara County families own their own hoaxes at present, a little better
than one family in five can afford the average 1966 home. That concludes
this presentation which was prepared by the County. The County experts tell
us that as bs0 as the situation is in the County as a whole, it is at its
worst and most extreme condition in Palo Alto."
Assistant Planning Director Kenneth Schreiber gave the staff presentation,
as presented and outlined in City Manager Report 572:4 dated October 17, 1974.
Planning Commission vice Chairwoman Anne Steinberg gave a presentation re
Option Set 4. She said two years ago, the joint cities -county housing
element was reviewed at great length by the Palo Alto Planning Commission,
the Human Relations Commission, and the Palo Alto Housing Corporation, and
the Council Policy and Procedures Committee, all of which supported and
recommended they adoption of its basic goals and principles. The City Council
adopted it as Council Resolution #4577 -- an interim housing policy. She
continued that one of the goals to facilitate the provision of safe, sanitary
adequate housing to accommodate persons and families disadvanueeed in tlia:
housing market. Last year, Council adopted Resolution 0'4725, based on find-
ings by the Planning Staff and the Council --appointed Housing Advisory Cocm-
ar ttee. Again, extensively reviewed by the Commission and the Palo Alto
Housing Corporation. The tvo resolutions together were declared to con-
stitute an interim housing plan for the city. She said the time has come
when the word "interim', should be dropped and the Housing Element of the
Comprehensive Plan should be adopted. The Planning Commission's recommen-
dations on Option Set 4 are seen as an important part of that Housing Element
or policy. Many people in this city have spent hundreds of hours worktng
to establish the housing goals which are supported in those two resolutions.
This is the time for the Council to reaffirm its commitment to those goals.
She stated that when the Commission refers to low/moderate income unite, it
is not referring to "below market price housing" which can mean 25% below
$60,000. It means subsidized housing for the peor, the elderly, the minor-
ities, the single women heads of household, and families with children who
cannot afford $50,000 for a condominium. They are not talking about housing
for many thousands of people, but are talking about Palo Alto providing its
fair share of low/moderate income housing. She said she knows it is difficult
to implement such housing programa now. But ate also knows how successful
they are -- Stevenson House, Colozedo Park, Palo Alto Gardens, etc., and
soon to be open Lytton Gardens, which ham received terrific support from this
Council. The Commission members are confident that federal and state sub-
sidies will be available soon. The housing plan adopted should be flexible
enough to include such programs. She said specific recommendations, with
regard to 4 (b) and (c), seen to have the greatest potential for achievi
a mix of age, income, etc., which is a goal of the city housing policy.
The Commission recoup the principle of a percentage of low/moderate
income usaita in all new buildings but feels that actual percentages need
more study. The options might be used in combinations such as 20 per cent
of all new buildings at 25 per cent below market rates. Federal and state
subsidy programs may require definitions of rentale tied to income limits.
More flexible guidelines are needed.
With regard to 4(d), they approve this concept of density for owners but it
would apply only in selected areal where it would not cause a major impact
on the sxiating neighborhood; 4(e), the Palo Alto Housing Corporation has
auggaested that block grants and revenue sharing funds might be used in some
of these programs; 4(f), the tend bank program has already been adopted as
city policy. The Commission agreed with the Rousing Corporation that it
should be part of the housing savant of the Comprehensive Plan.
464
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Kr. Paul Puech said Land for People is with the understanding that
the options listed under: section 4 will afford the reople a need;
i.e., the minorities, women, and single parents, some housing relief.
They believe, however, the following may strengthen the options: 1) Chrnge
the wording of 4(b,d) "require a percentage", to, "require 20 to 40 per
cent of low/moderate income housing units in all new buildings; 2) Reword
4(d) to say "Provide a density bonus such that the new density will not
exceed 20 per cent above the denaiity already zoned in selected areas where
the environment will not be adversely affected."
He said they believe a clause such as that would be L portsnt because the
actual 2 to 1 ratio could increase the density by three timers. For example,
if a parcel was zoned for 10 units, a building contractor could go into
this parcel and say, I'm going to build 10 low income units. Using this
exception, this option, it's his understanding that 30 units then could
be built on that same parcel. So they request that some kind of upper
limit be established on it. Sow thing like 20 or 25 per cent. He con-
cluded by saying Land for People gives support for both 4(e) and 4(f)
as written."
K0TI0h: Councils Comstock .'owed, seconded by Norton, adjournment until
7:30 p.m., Tuesday, October 22, 1974, for the purpose of further discussion
of the Comprehensive Plan.
The motion passed on the following vote:
AYES: Eerwald, Comstock, Henderson, Norton,
Pearson, Rosenbaum, Sher
NOES: None
ABSENT: Beahrs, Clay
Adjournment
The special meeting of October 15, 1974, edjourned at 11:00 p.m.
ATTEST: APPROVED:
Mayor x
(7,4
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