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Home My WebLink AboutStaff Report 13830 City of Palo Alto (ID # 13830) City Council Staff Report Report Type: Information Reports Meeting Date: 3/21/2022 City of Palo Alto Page 1 Summary Title: Condominium Conversion Report Title: Rental Residential Vacancy Rate Determination for Three Plus Dwelling Units for Calendar Year 2021 From: City Manager Lead Department: Planning and Development Services Recommendation: This is an informational report and City Council action is not required. Executive Summary: This staff report transmits the biannual reporting of the vacancy rates of three or more residential rental units for December 2021. The vacancy rate is 1.13%. When the vacancy rate is less than the 3% threshold, applications to convert residential rental units to ownership units through the subdivision process are not eligible for consideration. Background: Planning staff prepares the Residential Vacancy Rate Determination Report twice a year to meet the requirements of Palo Alto Municipal Code Section 21.40.040, Determination of Vacancy Rate and Surplus. The Section 21.40.0401 states the following: “In April and November of each year, the director of planning and community environment shall determine from the city utility meter records the vacancy rate and the vacancy surplus, if any, within the city limits. New market-priced rental units available to the general public, for which a certificate of use and occupancy has been issued since the last vacancy survey, shall be added on a unit-for-unit basis either to reduce the vacancy deficiency or to increase the vacancy surplus”. 1 Municipal Code Chapter 21.40: https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-19994 City of Palo Alto Page 2 All conversions involving a change in the type of ownership of three or more rental units are subject to the provisions of this chapter. Vacancy surplus in this section of the Municipal Code is defined as the number of rental units being offered for rent or lease in excess of the 3% vacancy rate. No application for consideration of a tentative or preliminary parcel map for a subdivision created from a conversion may be filed with the city unless there is a vacancy surplus of 3% or more as of the most recent determination pursuant to Section 21.40.040. The Planning and Development Services Department has records of tracking the three-plus units’ rental vacancy rate since 2002. Historically, the vacancy rate varied from 1.2% to 1.9% except for the December 2020 reporting2. Discussion: The purpose of this reporting is to seek a reasonable balance of rental and ownership housing in the city in a variety of individual choices of tenure, type, price, and location of housing. It is also to protect the supply of multi-family rental housing stock in the city for low- and moderate- income families, and to reduce and avoid displacement of tenants particularly seniors and families. Staff prepares this report using various data sources. As per the directions provided in Municipal Code Section 21.40.040, staff uses the City of Palo Alto’s utility meter records to access total number of “active” multi-family apartments. Bureau of the Census American Community Survey 2010 data is used as a baseline for the total rental stock data in Palo Alto. Changes (addition or demolition) to the total rental dwelling unit stock is tracked by staff biannually using City of Palo Alto’s Accela data to generate the vacancy rate. As noted above, staff typically prepares a report biannually. But for midyear 2021, staff did not complete this reporting. In 2021, a data reconcilation effort was initiated by Planning and Development Services Department staff to increase the accuracy of the database. Staff from Utilities, Information Technology (IT), and Planning & Development Services (PDS) collaborated to ‘join,’ relate, and refine the Utilities account database to the Geographic Information System (GIS) database system. In the report produced in March of 2021 for the calendar year 2020, the data reconciliation work was still in progress and the generated data was less accurate. Since then, further refinement and quality control in the data set was completed leading to a cleaner and dependable data set. Updated Utilities Database 2 See updated database discussion below for details on the 2020 discrepancy in numbers. City of Palo Alto Page 3 In November 2020, the City’s Utility Department upgraded its old data recording system (i.e. BI). This major system upgrade was necessary to accommodate data storage and software issues. For this upgrade, some data reconciliation and refinements were made to the old data recording system, enabling staff to take advantage of data points previously unavailable - resulting in a more precise dataset relative to the previous year's reporting. The system upgrade permitted address reconciliation between the Utility accounts database and the City’s GIS address database. This significant cross-department work effort created a link between certain attributes or data points in the City’s GIS and the Utility account database. This ‘linkage’ facilitated a more accurate unit count focused on rental multifamily utility accounts instead of all multifamily accounts, which includes ownership/condominium type and rental multifamily utility accounts. The collaboration successfully identified most Utility accounts associated with 3+ rental units; for various reasons, not all accounts could be identified (e.g. GIS address may not exactly match Utility account addresses on corner lots or address formatting discrepancies between GIS address and Utility account databases). Staff will continue to research discrepancies on a case-by-case basis to further enhance both datasets. During this effort, staff also recognized that a number of 3+ rental housing unit utility accounts have one utility meter for all rental units (e.g. 657 Everett Middlefield Rd) or individual unit accounts that were always billed or invoiced to the property manager or owner regardless if the unit is occupied or vacant (e.g. senior housing apartment units). Some 3+ rental housing units’ individual utility accounts also have been ‘inactive’ or have not had a utility bill for some time. It is difficult to determine whether the unit associated with the account is vacant or is no longer available to rent; in other words, ‘taken off the rental market’ altogether. These variations between the GIS and Utility account datasets help clarify the discrepancy between the estimated number of 3+ rental housing units (~8,057) and the number of ‘identified’ active Utility accounts in 3+ rental housing (~5,050). Latest Vacancy Rate For the December 2021 data reporting cycle, the multifamily rental vacancy number is 1.13% percent (based on reconciled data source). This number is significantly lower than previous years’ reporting but is considered more accurate than the December 2020 reporting cycle as discussed in the preceding paragraphs. Table 1: Average Annual Rental Vacancy Rates Year Estimated Housing Units Estimated Vacancy Rate (yearly average) Estimated Vacant Units 2015 7,901 1.22% 92 2016 7,912 1.45% 118 2017 7,928 1.58% 131 City of Palo Alto Page 4 2018 7,928 1.52% 132 2019 7,931 1.83% 141 2020 8,057 2.8% 226 2021 8,057 1.13% 57 Source: City of Palo Alto Planning and Development Services Department Policy Implications: This report is prepared as a requirement for Municipal Code 21.40.040. Resource Impact: Planning staff prepare this report biannually and there are no resource impacts. Timeline: This informational memo is prepared twice a year for Planning division staff use. The next report will be prepared in July/August 2022.