HomeMy WebLinkAboutStaff Report 14772
City of Palo Alto (ID # 14772)
City Council Staff Report
Report Type: Action Items Meeting Date: 11/28/2022
City of Palo Alto Page 1
Summary Title: Draft Housing Element
Title: Review of, and Direction to Staff to Submit, the Draft 2023 -31 Housing
Element, as Modified, to the State Department of Housing and Community
Development for its 90-Day Review. The Planning and Transportation
Commission Will Participate in a Joint Meeting With the City Council to
Discuss the Draft Housing Element. Environmental Review: This Action is not
a Project in Accordance With the CEQA Guidelines.
From: City Manager
Lead Department: Planning and Development Services
Recommendation:
Staff recommends the City Council take the following actions:
1. Conduct a joint meeting with the Planning and Transportation Commission to receive
public and PTC comments on the public review draft 2023-31 Housing Element;
2. Review and provide direction to staff to incorporate changes to the public review draft
Housing Element as specified in Attachment A; and,
3. Direct staff to submit a revised draft Housing Element to the California Department of
Housing and Community Development.
Executive Summary:
The City has prepared the draft Housing Element document1 and made it available for a 30-day
public review starting on November 7, 2022 (closes December 7, 2022). The primary purpose of
this meeting is to collect comments on the draft document from the public, the Planning &
Transportation Commission (PTC), and City Council. Toward this effort, the City conducted a
Community Meeting on November 16, 2022, to provide the community a forum to provide
comments and receive a basic overview of the draft Housing Element document.
1 www.paloaltohousingelement.com
City of Palo Alto Page 2
Based on the comments received and an ongoing review of housing element comment letters
to other jurisdictions, staff will evaluate and revise the draft document including additional
housing element programs or modifications prior to State Housing and Community
Development (HCD) review. Staff requests the PTC and Council review and endorse these
anticipated changes shown in Attachment A. Depending on public comments, additional
programs or implementing objectives may be added following Council review, however, staff
will not make any substantive policy changes without prior Council authorization.
Staff plans on submitting the draft Housing Element to HCD for its initial 90-day review by the
end of December 2022.
Background:
The Housing Element is the City’s plan to provide housing for its current and future residents
and is the only element of the City’s Comprehensive Plan (Comp Plan) that requires certification
by the State. The Housing Element covers a period of eight years; the City is currently in the 5th
Cycle of Housing Elements that cover the years between 2015 and 2023. The 6th Cycle will cover
eight years between 2023 and 2031. The deadline to adopt a compliant Housing Element for
the 6th Cycle Housing Element is January 31, 2023. For reference, please click here2 for a copy of
the 5th Cycle Housing Element.
Draft Housing Element Document
The draft of the 2023-2031 Housing Element document is available to review on the project
website (see footnote #1).
Two significant components of the Housing Element update include identifying sufficient sites
to meet the City’s Regional Housing Needs Allocation (RHNA) of 6,086 units and creating goals,
policies, and programs to spur housing development for all segments of the community. Both
the PTC and City Council have previously reviewed and endorsed the housing element sites and
programs.3 Concurrently, staff has been preparing other components of the draft Housing
Element.
The draft Housing Element contains the following chapters:
1. Executive Summary
2. Introduction
3. Housing Needs
2 https://paloaltohousingelement.com/wp-content/uploads/2021/04/Certified-15-23-Housing-Element.pdf
3 Note: There have been minor changes to some of the Programs, Implementing Objectives and Timelines, some
rewording to improve readability and some reformatting since the Council’s last review; none of the changes were
substantive or modify previously endorsed policy guidance.
City of Palo Alto Page 3
a. Reviews the housing needs of the City including affordability and physical
conditions.
4. Housing Resources
a. Identifies sites to meet the City’s RHNA and provides the rationale for the
selection of the sites.
5. Housing Constraints
a. Analyzes governmental and non-governmental constraints or barriers that may
hinder housing production.
6. Housing Plan (includes Housing Element programs)
a. Describes the programs developed to address the issues identified in the
previous chapters (i.e., needs, resources, and constraints).
Additionally, Appendix C contains the City’s analysis of Affirmatively Furthering Fair Housing
(AFFH). AFFH is a new State requirement that mandates each jurisdiction take meaningful
actions to further fair housing to overcome patterns of segregation and foster inclusive
communities free from barriers that restrict access to opportunity based on protected
characteristics. The Housing Element, including the sites inventory and programs, must be
reviewed through the filter of AFFH requirements.
As noted in Attachment A, staff anticipates some additional refinement to the AFFH chapter
based on recent comment letters to other jurisdictions in the Bay Area. Moreover, staff has
learned that matrix summarizing HCD’s requirements compared to the City’s programs and
implementing objectives may facilitate HCD review; staff will attempt to prepare this
information and incorporate it into the HCD draft before submittal.
Review Process and Public Comment Requirements
The City has been consistently receiving public comments during the entire update process
since May 2021. The public has been actively participating in over 20 Housing Element public
meetings, submitting written comments, and meeting directly with staff. However, the 30-day
public review period, running November 7 – December 7, 2022, is one of the formal State
required public comment opportunities. The 30-day public review is required prior to the City
submitting the draft Housing Element to HCD for their 90-day review.
HCD Review Process Next Steps
Below are the next steps of the Housing Element Update process, with a brief description of
each step.
1. Public Participation Requirements/30-day Comment Period
Prior to the submittal of the Housing Element draft to HCD, the local government must
make the draft available for public comment for 30 days and if any comments were
City of Palo Alto Page 4
received, take at least 10 business days to consider public comments. Staff will review
the public comments and include a description of how the City processed the comments
with the submittal of the draft Housing Element to HCD.
2. Submit Draft to HCD for Review/90-day Review Period
HCD will review the City’s draft against all the requirements needed for compliance.
After the 90-day review, the City will receive a letter from HCD detailing any changes or
revisions HCD believes are needed for the draft to substantially comply with state law.
During these 90 days, staff will be in conversation with its HCD reviewer and available as
appropriate to respond to questions to help facilitate review. However, it is typical for
jurisdictions to receive multi-paged comment letters from HCD outlining their draft’s
deficiencies.
3. Revise Draft Housing Element per HCD Comments; City May Choose to Adopt or
Resubmit to HCD.
After receiving HCD’s comment letter on its draft Housing Element, staff will prepare a
revised document for PTC review and recommendation to the City Council; and
ultimately Council direction. At this point, the City may choose to either (1) submit the
additional revisions as a draft for review by HCD, or (2) adopt the Housing Element with
or without changes. In the event the City elects to adopt a Housing Element without all
changes suggested by HCD, the City must adopt written findings explaining why it
believes the Housing Element substantially complies with state law despite HCD’s
findings to the contrary.
4. Submit Revised Draft/Adopted Housing Element to HCD.
In the event the City chooses to submit a revised draft to HCD prior to adoption, it must
first post the draft revision on its website and email a link to all individuals and
organizations that have previously requested notices relating to the housing element
at least seven days prior to submission. Subsequent HCD reviews will take up to 60 days.
If the revisions address and meet all the comments in the HCD review letter, HCD may
issue a “substantial compliance” letter to the jurisdiction stating that if the jurisdiction
adopts the Housing Element as outlined in the responses, the Housing Element
substantially complies with the State Housing Element requirements. However,
generally, because of the new requirements, many jurisdictions have not received
certification after the second review. Because of this, HCD recommends that
jurisdictions plan on a potential 3rd review. Thus, certification could be delayed even
further.
City of Palo Alto Page 5
If the City instead adopts its Housing Element (with or without changes), it must submit
the adopted document to HCD for review. HCD may take 90 days to review the adopted
Housing Element and may issue findings regarding further changes it believes are
needed to substantially comply with state law. The City would then have no more than
30 days to provide a response.
Discussion:
This section highlights the current understanding of the types of comments HCD has been
providing jurisdictions, what additional programs are needed, and how the City can respond to
HCD comments. Additionally, a summary is provided of other required tasks to complete in the
Housing Element update process and the implications of a non-compliant Housing Element. The
items described below paint a more complete picture of things to consider or be aware of as
the Housing Element update moves into the next phase of work.
HCD Comments
The public review draft of the Housing Element has been prepared with the Working Group,
PTC, City Council, and community input based on HCD and State requirements. Due to the
number of new requirements approved by the State since 2015, this Housing Element update is
much more technical and complex than previous Housing Elements. This directly translates into
making Housing Element certification much more onerous to obtain, as southern California
jurisdictions are experiencing. The deadline for southern California jurisdictions to have a
compliant Housing Element was October 15, 2021. As of October 25, 2022, of the 89
jurisdictions in Los Angeles County, 54 jurisdictions are out of compliance (61%). Although
Association of Bay Area Governments (ABAG) jurisdictions have learned much from the
experience of their southern California counterparts, it is anticipated that ABAG jurisdictions
will have the same experience with HCD review.
As mentioned, many of the HCD comments other jurisdictions received have focused on the
new State requirements. In May 2022, ABAG performed a review of 33 HCD comment letters to
jurisdictions in Sacramento and Southern California regions. They determined that many
assumptions made in previous Housing Elements will not be possible this cycle. In addition, by
surveying the 33 letters, ABAG identified the following five Housing Element components that
had the most comments (with the percentage of letters that contained comment of each area):
1. AFFH (94%)
2. Public Participation (67%)
3. Sites Inventory (94%)
4. Government Constraints (58%)
5. Policies and Programs (55%)
City of Palo Alto Page 6
Clearly, AFFH and sites inventory were the highest areas of focus for HCD. A copy of the ABAG
letter is available online.4
Recently, some Bay Area jurisdictions have received their initial HCD comment letters. In
September 2022, ABAG did a review of those letters. ABAG summarized HCD comments for
those Bay Area jurisdictions, which were similar to the southern California comments. These
comments included:
1. Greater AFFH review
2. More public outreach
3. More documentation for sites inventory
A copy of the September 2022 ABAG analysis is available online.5
Additional Housing Element Programs
Based on the review of the HCD letters, for the public review draft preparation, staff has
continued to focus further on those most commented areas noted above. Staff has continually
refined the sites inventory to identify the most suitable and available sites per HCD guidance
while providing additional information and analysis. The public also continues to scrutinize the
sites inventory, and staff considers each request and makes revisions when appropriate. While
staff has endeavored to prepare a thorough AFFH discussion and associated programs, staff is
certain that HCD will still comment on the draft AFFH section. During the 30-day review of the
draft Housing Element, staff is continuing to review other HCD comment letters to address
AFFH “gaps” in the programs. As noted in Attachment A, staff endeavors to facilitate HCD
review of the City AFFH programs by including a summary matrix that has been helpful for
other jurisdictions. If completed in time, and with the Council’s consent, staff will include it with
the draft Housing Element submitted to HCD.
In addition to AFFH revisions, staff has determined that some additional programs need to be
included in the draft Housing Element. These programs, also reflected in Attachment A, will be
inserted in the Housing Element prior to HCD submittal. Some of those programs include:
• Lot Consolidation Incentives
o Because of the small size of many City parcels, it limits development and has
been identified as a constraint. Therefore, a program to increase lot sizes needs
to be included.
• Objective Design Standards for SOFA (South of Forest Coordinated Area)
4 ABAG Summary of Housing Element Review Letters: https://abag.ca.gov/sites/default/files/documents/2022-
05/Summary_of_Housing_Element_Review_Letters_V6.pdf
5 https://abag.ca.gov/sites/default/files/documents/2022-10/Summary-of-Housing-Element-Review-Letters-in-
Bay-Area-9-22.pdf
City of Palo Alto Page 7
o Objective design standards facilitate housing production by streamlining the
approval process. In June 2022 the City Council converted the context-based
design criteria in the zoning code to objective standards. Development standards
for SOFA is not included in the zoning code and require an amendment to the
SOFA coordinated area plan.
• Annual Amendment of the Municipal Code to Comply with State Law
o This is a proposed program where the City will complete regular code
amendments to comply new or updated State laws. An example is the Accessory
Dwelling Unit ordinance update that incorporates ADU legislation from
September 2022, scheduled for Council review December 12, 2022.
Also, depending on comments from the public and HCD, the staff may also include additional
implementing objectives for each of the programs.
City’s Response to HCD’s Initial Comments
When HCD provides formal comments on the draft Housing Element after its initial 90-day
review, those formal comments are intended to provide direction to the jurisdiction to achieve
compliance with State Housing Element law. As noted above, the City may choose at this
juncture to submit additional revisions for HCD as drafts or to adopt its Housing Element with
or without changes. In the event the City chooses to adopt, it may need to make written
findings explaining why it believes the document substantially complies with state law. HCD will
then review the adopted Housing Element and may opine that additional changes are necessary
to bring it into substantial compliance with state law. The City would then have no more than
30 days to respond to these findings. Staff would continue to work with HCD following adoption
and may prepare revisions to the Housing Element for the Council to adopt.
Other Key Tasks to Complete
In addition to the review of the draft Housing Element document and getting that submitted to
HCD, work continues on the related municipal code amendments, Comprehensive Plan (Comp
Plan) amendments, and the environmental review. These tasks require focused attention and
have separate process review requirements that will run parallel to the review of the Housing
Element document.
Zoning Code and Comprehensive Plan Consistency
As part of the Housing Element update process, staff will review the Comp Plan and Zoning
Code to determine what amendments are needed to ensure consistency throughout all three
documents. Some zoning code changes will need to be implemented as part of the Housing
Element update; below are some examples:
A. Allow residential uses in the General Manufacturing (GM) zone
B. Upzone the density of certain parcels listed in the site inventory to meet the City’s RHNA
City of Palo Alto Page 8
C. Revise the Housing Incentive Program (HIP) to apply to other zones and locations, in
addition to commercial zones in locations currently stated in the ordinance
Staff is in the process of identifying what amendments are needed for the Comp Plan.
Environmental Analysis
Concurrent with the development of the draft Housing Element, environmental review for the
Housing Element and associated Comprehensive Plan and code changes is under way; a scoping
meeting was held on October 13, 2022. Staff continues to engage its consultant to determine
the most appropriate path forward, which will rely in part on the City’s certified comprehensive
plan environmental impact report.
Consequences for Non-Compliant Housing Elements
As discussed above, state law requires jurisdictions to submit draft and adopted Housing
Elements to HCD for review. Although HCD is required to make a determination regarding
whether a Housing Element substantially complies with state law, in the event of a
disagreement between a jurisdiction and HCD regarding substantial compliance, the issue is
ultimately left to the courts to decide.
The potential consequences of a court determination of non-compliance are severe. Litigation
may be brought by any interested party (Gov. Code 65587(b)) or the office of the Attorney
General (Gov. Code 65585). If a court finds that the jurisdiction’s Housing Element is
inadequate, it must include one or more of the following remedies in its order:
• Suspension of the jurisdiction’s authority to issue building permits or related permits
while permits are outstanding for housing projects;
• Suspension of the jurisdiction’s authority to grant zoning changes, variances, and
map approvals;
• Mandated approval of residential housing projects (Gov. Code 65755).
Essentially, until the jurisdiction adopts a compliant Housing Element, a court is empowered –
and to some extent required – to halt all development activity in the jurisdiction other than
permits for housing projects.
In addition, recent legislation expanded the authority of the Office of the Attorney General to
enforce housing element law. In suits brought by the Office of the Attorney General, a court is
required to impose fines on jurisdictions that consistently refuse to adopt a compliant Housing
Element. The fines range from a minimum of $10,000 per month, up to $600,000 per month. If
a jurisdiction has not adopted a compliant Housing Element within 18 months following a court
order, the court may appoint a receiver to take all governmental actions necessary to bring the
jurisdiction’s Housing Element into compliance (Gov. Code 65585).
City of Palo Alto Page 9
In addition, the City may not be eligible for State housing funds. The State has made a
“compliant Housing Element” an eligibility requirement for State housing funds. There have
also been discussions of having a compliant Housing Element as an eligibility requirement for
State transportation funds.
And most recently, there has been statewide discussions about a “builder’s remedy” in the
Housing Accountability Act (HAA) and jurisdictions with non-compliant Housing Elements. In
short, the builder’s remedy refers to a provision of the Housing Accountability Act (HAA) that
obligates a jurisdiction that does not have a compliant housing element to approve certain
affordable housing projects even if the projects are inconsistent with local zoning or general
plan regulations. Staff previously provided a discussion of the builder’s remedy as a
supplemental memo to Item #12 on the Council’s November 7, 2022 agenda.6
Summary of Key Issues:
City Council and PTC are requested to:
1. Review the draft Housing Element and provide feedback to staff for text corrections,
additions, and deletions; and
2. Review and comment on the attached list of additional information, including programs
that are planned to be added to the draft Housing Element.
Staff will review and incorporate the applicable comments received into the draft Housing
Element that is submitted to HCD.
Resource Impact:
The implementation of the Housing Element will require staff resources to complete rezones,
program implementation, and prepare studies. Generally, all tasks will need to be completed
within the first couple of years of Housing Element adoption. This will involve greater staff
resources and the use of consultants for the studies and potential environmental review.
Budget requests related to these activities will be reflected in the annual budget development
process.
Timeline:
The immediate next steps after the 30-day public comment period closes are to review all the
comments before submitting the draft Housing Element to HCD by late December 2022. The
City will receive HCD comments by late February 2023. Staff will revise the draft per HCD
comments and begin preparing the final draft for PTC consideration and ultimately City Council
adoption, when appropriate.
6 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council-
agendas-minutes/2022/20221107/20221107pccsm-amended-linked-q.a-2.pdf#page=229.
City of Palo Alto Page 10
Stakeholder Engagement:
To announce the release of the Public Review draft, a newspaper ad was published in the Daily
Post on November 4, 2022. An email blast was sent to over 400 recipients with information
about the Public Review draft release, the November 16 Community Meeting, and the
November 28 joint Council/PTC meeting. Social media flyers were also prepared and distributed
through the City’s social media. The City’s Housing Element website,
www.paloaltohousingelement.com, was updated with all the information including a copy of
the draft and zoom meeting information for the two meetings.
Environmental Review:
The City’s 6th Cycle Housing Element will require environmental review pursuant to the
California Environmental Quality Act (CEQA). While many of the impacts of the new Housing
Element may have been studied as part of the Comprehensive Plan Final Environmental Impact
Report, which was certified and adopted by the Council by Resolution No. 9720 on November
13, 2017, some additional analysis will likely be required.
Attachments:
Attachment A: Supplemental Revisions to Draft Housing Element (DOCX)
ATTACHMENT A
SUPPLEMENTAL REVISIONS TO DRAFT HOUSING ELEMENT
Staff seeks Council approval for staff discretion to modify the draft Housing Element as appropriate to
minimize HCD comments, facilitate HCD review and enable timelier certification. Staff will not introduce
substantive policy changes but may add programs that require future staff resources or consultant
funding. The City Council will ultimately have an opportunity to review any changes before adopting the
Housing Element. Changes made will generally relate to the following areas:
1. Public Comment. Revisions may be made based on public comments received during the
30-day public comment period and may include text revisions to improve clarity,
formatting or address identified deficiencies that staff agrees require correction. No
changes will be made to the draft Housing Element that materially alters prior Council
policy direction.
2. HCD Comment Letters. Staff and consultant continue to monitor HCD comment letters
on other jurisdiction’s Housing Elements. Based on this review and in comparison to the
City’s draft Housing Element, staff may incorporate changes to address any statutory
content deficiencies or improve clarity. Such changes may include the addition of new
programs, implementing objectives, adjusted timelines or other changes to achieve
statutory compliance. Staff will not introduce new material that departs from prior City
Council’s policy guidance or establishes new policy that reasonably warrants Council
review.
3. Affirmatively Furthering Fair Housing (AFFH). As noted in the staff report, many HCD
comments are generated based on AFFH compliance. Staff anticipates developing
additional information to facilitate HCD review and further demonstrate the City’s
compliance with State law. In preparing this document, if any statutory deficiencies are
identified, staff may include the addition of new programs, implementing objectives,
adjusted timelines or other changes to achieve statutory compliance. Staff will not
introduce new material that departs from prior City Council’s policy guidance or
establishes new policy that reasonably warrants Council review. Commitment of staff
resources and possibly consultant funding may be required.
4. New Programs. Based on the foregoing, staff has already identified specific new
programs that should be incorporated into the draft Housing Element. With Council’s
support the following Programs and implementing objectives will be included with the
HCD draft Housing Element:
PROPOSED PROGRAM A: LOT CONSOLIDATION. Approximately two-thirds of the City’s multifamily lots
are less than 10,000 sq. ft. To facilitate the development of housing, especially affordable housing, of all
sizes and scale, the City will routinely coordinate with property owners and give high priority to processing
subdivision maps that include affordable housing units. Additionally, the City will adopt incentives for
development of high-density residential sites such as reducing minimum yard setbacks, and open space
to enhance design flexibility and create a more pedestrian-oriented environment and modifying parking
standards where access exists to public transportation.
Responsible Agency: PDS
Funding Source General fund
Implementing Objective A. Implementing Objective: Facilitate lot consolidation on mixed-use
developments by providing information and technical assistance to
property owners and developers.
B. Offer incentives for lot consolidation when minimum standards are
met. Incentives could include graduated densities based on larger
lot sizes, reduced setbacks, increased lot coverage, rounding up
when calculating allowable units and height allowances.
Time Frame: June 30, 2024
Quantified Objective: Expedite four lot consolidation projects during
the planning period.
PROPOSED PROGRAM B: OBJECTIVE STANDARDS FOR SOUTH OF FOREST COORDINATED PLAN (SOFA).
The City recently adopted objective design standards in its zone districts. However, because of the
uniqueness of the SOFA standards, objective standards were not done for SOFA. Providing objective
design standards provides developers clear direction in developing projects, which leads to greater
efficiencies. In addition, in certain situations, the lack of objective design standards in the SOFA area may
limit the City’s ability to review projects.
Responsible Agency: PDS
Funding Source General fund
Implementing Objective Develop objective design standards for the South of Forest Coordinated
Plan (SOFA)
Time Frame: December 31, 2025
PROPOSED PROGRAM C: ZONING ORDINANCE MONITORING. The City’s Zoning Ordinance is
continuously updated to address changes among a range of issues and State/Federal laws. The City will
continue to monitor its policies, standards, and regulations to ensure they comply with State and federal
requirements. The zoning ordinance will be amended annually, at a minimum, to ensure compliance.
Responsible Agency: PDS
Funding Source General fund
Implementing Objective C. Amend the zoning code to comply with AB 101 to permit low
barrier navigation centers
D. Amend the zoning code to comply with the Employee Housing
Act.
E. Amend the zoning code to comply with AB 101 to permit
residential care facilities by right and remove the requirement
of a CUP
Time Frame: Complete December 31, 2024. This program would be
implemented on an ongoing basis through the remainder of the
planning period.
Quantified Objective: Continue to amend the zoning code as needed.
PROPOSED PROGRAM D: CIRCULATE HOUSING ELEMENT TO WATER SUPPLIERS. Meeting a State
requirement, the City will provide a copy of the adopted 2023–31 Housing Element to applicable water
supply agencies and purveyors within 30 days of adoption. The City will also continue to coordinate with
these agencies to ensure affordable housing developments receive priority water service provision if and
when development is restricted by water shortages within the region.
Responsible Agency: PDS
Funding Source General fund
Implementing Objective Provide a copy of the adopted 2023-31 Housing Element to the City’s
Utilities Department.
Time Frame: Within 30 days of adoption