HomeMy WebLinkAboutStaff Report 2507-4927CITY OF PALO ALTO
CITY COUNCIL
Monday, November 17, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
10.Review and Provide Feedback on an Analysis of a Conceptual Affordable Housing Project
on Land to be Conveyed to the City and Associated With the Sobrato Development
Agreement (340 Portage Avenue); Consideration and Possible Direction to Staff to
Prepare a Future Request for Proposal for a Future Affordable Housing Project. CEQA
Status: Not a Project. Staff Presentation
City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: November 17, 2025
Report #:2507-4927
TITLE
Review and Provide Feedback on an Analysis of a Conceptual Affordable Housing Project on
Land to be Conveyed to the City and Associated With the Sobrato Development Agreement
(340 Portage Avenue); Consideration and Possible Direction to Staff to Prepare a Future
Request for Proposal for a Future Affordable Housing Project. CEQA Status: Not a Project.
RECOMMENDATION
Staff recommends that Council:
1. Review the evaluation material including, massing diagrams and shadow studies
(Attachment B) and associated proforma analyses (Attachment C) presenting three
possible development scenarios and provide feedback to staff;
2. Provide direction to staff to prepare and release a Request for Proposals for a future
partnership to build an affordable housing project at the subject property or defer
release of the RFP as a future consideration.
EXECUTIVE SUMMARY
On September 12, 2023, City Council adopted Ordinance 55951 approving a Development
Agreement (DA) for an approximately 14.65-acre parcel located 3200 Park Boulevard/340
Portage Avenue. The terms of the development agreement included dedication of a 3.25-acre
parcel intended to be used for the development of an affordable housing project and a public
park.
Following Council’s decision on the DA, the City applied for a Metropolitan Transportation
Commission (MTC) grant, which provides funding to support housing development. On May 22,
2024, MTC awarded the City of Palo Alto funding for technical assistance to prepare initial
planning work for a future affordable housing development that could potentially take place on
the future dedicated parcel adjacent Matadero Creek across and from 340 Portage Avenue.
This report shares the work prepared under this grant and requests Council’s feedback on
whether the conceptual typology is aligned with its interest, including aspects related to
1 Ordinance 5595 is available online at: https://www.paloalto.gov/Departments/City-Clerk/City-Records
building height, density, unit mix, parking, or other characteristics. This feedback is anticipated
to inform preparation of an RFP and, in turn, better inform the proposals from affordable
housing partners.
BACKGROUND
ANALYSIS
The three potential scenarios presented in this report are not recommendations. Rather, they
are examples of what a developer may reasonably propose given the City’s goals and site
conditions. The massing diagrams and proformas for the three scenarios provide a conceptual
understanding both from a visual and cost perspective to better inform Council’s feedback.
Experienced housing developers have expressed that clarity and predictability in the RFP
process is a key consideration in determining whether to respond to an RFP and in a successful
partnership. Therefore, Council’s early feedback is intended to encourage responsiveness to the
RFP and set forth clear expectations for respondents.
Massing Diagrams and Shadow Studies
Table 1 provides a summary of the three scenarios, including key physical and programmatic
characteristics including building height, total square footage, unit mix, and parking ratios.
Building Height ± 55 ft (5 stories)± 65 ft (6 stories)± 75 ft (7 stories)
Total Gross Floor Area (square feet)110,935 150,030 173,950
Residential Floor Area (square feet)73,200 92,200 110,780
1-Bedroom Units 37 (42%)49 (44%)59 (44%)
2-Bedroom Units 26 (29%)30 (28%)36 (28%)
3-Bedroom Units 26 (29%)30 (28%)36 (28%)
Total Units 89 109 131
Average Unit Size (square feet)1BR: 590
2BR: 870
3BR: 1,080
1BR: 590
2BR: 870
3BR: 1,080
1BR: 590
2BR: 870
3BR: 1,080
Parking Provided 45 (90 with
stackers)
52 (104 with
stackers)
52 (104 with
stackers)
Parking Ratio 0.5 (1.0 with
stackers)
0.47 (0.95 with
stackers)
0.4 (0.8 with
stackers)
Additionally, staff requested that at least one scenario evaluate the open space opening to the
future public park to understand how it may modify the building’s interface with the park and
the effect of shadows from the building. For consistency with the NVCAP, all scenarios assumed
a 50-foot setback from the mid-line of the creek.
Staff did not explore an eight-story scenario based on feedback from affordable housing
developers that because of cost escalation and construction complexity, there was a preference
for pursuing projects of seven stories or less. In particular, they indicated that adding a level of
parking to meet desirable parking ratios increases the cost significantly without improving
financing potential. Additionally, staff did not seek scenarios that explore a greater number of
larger units as affordable housing developers have expressed that too many large family units
increases the cost per unit and that in order to achieve a minimum number of units the overall
size of the building needs to increase.
Shadow studies
necessary funding. But this analysis suggests that this is a competitive location for affordable
housing. Table 2 provides a high-level summary of the three scenarios. Attachment C includes a
more detailed breakdown.
Table 2: Summary of Financing Scenarios
Anticipated Gap Funding
Estimated City Contribution*$5 Million $5 Million $5 Million
*For the City to reach the level of local subsidy per unit that was typical of the winning projects in the most recent State
SuperNOFA, the City would need to commit at least $5 million in addition to the land.
this document to solicit and select a development partner to construct affordable housing
units.
FISCAL/RESOURCE IMPACT
ad hoc when it returns to the City Council
with its evaluation of activities in ‘Phase 2’ of the City’s response.
of the Citywide Affordable Housing funds toward this use so that all respondents assume the
same funding from the City in preparing their proposal.
STAKEHOLDER ENGAGEMENT
Daily
Post on November 7, 2025, which is 10 days in advance of the meeting. Postcard mailing
occurred on November 6, 2025, which is 11 days in advance of the meeting.
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
JOB
DR. BY
SCALE
DATE
PORTAGE AVENUE - LOT 2
PALO ALTO CALIFORNIA
10/4/2023
N/A
MC
A10128-7
LOT 1LOT 3
LOT 4 LOT 2
LOT 5
Exhibit A: Plat and Legal
Attachment A: Project Site
1
PALO ALTO, CA | NOvember 4, 2025 | mTC
0 100’50’
340 POrTAGe Ave | eXISTING AerIAL + ZONING SUmmArY
ZONING INFORMATION
APN #132-38-071
Site Area 3.25 acres
Zoning
RM-30 (Medium Density Multiple-Family Residence District)
*New Zoning from Specific Plan: NV-R4 (High Density Multiple-Family
Residential District)
Comprehensive
Plan Land Use
Designation
MF
Development
Standards
FAR 0.6:1
Density Min. 16 DU/ Acre - Max. 30 DU/Acre
Height 35 Feet
Setbacks
• Front = 20 Feet
• Interior side yards = 10 Feet
• Interior rear yards = 10 Feet
• Street side = 16 Feet
Parking
• 1 space per micro unit
• 1 spaces per studio unit
• 1 space per 1-bedroom unit
• 2 spaces per 2-bedroom unit (at least 1
covered)
Bicycle Parking 1 space per unit
Min. landscape/open
space coverage (percent)30%
Min. usable open space
(sf per unit)150 SF/Unit
Min. common open space
(sf per unit)75 SF/Unit
Min. Private Open Space
(sf per unit)50 SF/Unit
**See North Ventura Coordinated Area Plan (August 2024)
PARK BLVD
LA
M
B
E
R
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A
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matade
r
o
C
r
e
e
k
PrOJeCT SITe3.25 ACre
ASH ST
89’
66
4
’
42
’
131’
215’
40
’
100’
274
’
240’
16
8
’
160’
25
’
160’45
’
126’
* NV-R4 district provides high-density apartment living, primarily along major transportation
corridors near mass transit and employment centers. Density ranges anticipated from 61 to
100 dwelling units per acre, with a maximum FAR of 3.0:1
PO
R
T
A
G
E
A
V
E
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PALO ALTO, CA | NOvember 4, 2025 | mTC
0 100’50’
340 POrTAGe Ave | OPTION 1 - 50’ CreeK SeTbACK, SOUTH FACING COUrTYArD, eLevATeD GrOUND FLOOr reS.
PARK BLVD
PO
R
T
A
G
E
A
V
E
89’
matade
r
o
C
r
e
e
k
66
4
’
42
’
ASH ST
131’
215’
40
’
100’
274
’
240’
Park
2.25 Acre
CommonRoom
Trash
Bike Room
Office
Mech
Courtyard exit stair
Parking (45 spaces or 90 w/stackers)
GrOUND FLOOr PLAN
LeveL 2 FLOOr PLAN
LeveL 3-5 FLOOr PLAN
Courtyard
9,730 SF
20
’
Fr
o
n
t
se
t
b
a
c
k
10’Sidesetback
16’Street sidesetback
Lobby
L
T
T
OPTION 1: 5 STOrIeS bUILDING (± 55 FeeT)
OPTION 1: 5 STORIES (± 55 FEET)
UNIT MIX
Unit Type 1-BR 2-BR 3-BR Total
1st floor 2 2 2 6 units
2nd floor 8 6 6 20 units
3rd floor 9 6 6 21 units
4th floor 9 6 6 21 units
5th floor 9 6 6 21 units
TOTAL 37 26 26 89 units
Mix %42%29%29%100%
Average Size 590 sf 870 sf 1,080 sf
PARKING
Provided 45 spaces; 0.5 spaces / unit
(90 spaces if stackers; 1 space / unit)
BUILDING AREAS (OPTION 1 - 5 STORIES BUILDING)
Gross Area Residential Common Circulation / Services Parking / Ramp
Ground Floor 30,070 5,270 2,320 4,460 18,020
Floor 2 20,220 16,540 595 3,085 -
Floor 3 21,215 17,130 -3,085 -
Floor 4 21,215 17,130 -3,085 -
Floor 5 21,215 17,130 -3,085 -
5 STORIES TOTAL 110,935 73,200 2,915 16,800 18,020
Affordable housing site
1 Acre
Raised residential entrances
Elec
16
8
’
160’
25
’
160’45
’
126’
LA
M
B
E
R
T
A
V
E
Alley with special
paving connecting
Lambert Ave to the park
50’ creek centerlinesetback
3
PALO ALTO, CA | NOvember 4, 2025 | mTC
0 100’50’
340 POrTAGe Ave | OPTION 2 - 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr
89’
matade
r
o
C
r
e
e
k
66
4
’
42
’
131’
215’
40
’
100’
274
’
240’
Park
2.25 Acre
Trash
Bike Room
Mech
Courtyard exit stairs
Office
Mail
Parking (52 spaces or 104 w/stackers)
GrOUND FLOOr PLAN
LeveL 2 FLOOr PLAN
LeveL 3-6 FLOOr PLAN
Courtyard
6,265 SF
20
’
Fr
o
n
t
se
t
b
a
c
k
10’ Sidesetback
16’Street sidesetback
Lobby
L
T
T
OPTION 2: 6 STOrIeS bUILDING (± 65 FeeT)
OPTION 2: 6 STORIES (± 65 FEET)
UNIT MIX
Unit Type 1-BR 2-BR 3-BR Total
1st floor ----
2nd floor 9 6 6 21 units
3rd floor 10 6 6 22 units
4th floor 10 6 6 22 units
5th floor 10 6 6 22 units
6th floor 10 6 6 22 units
TOTAL 49 30 30 109 units
Mix %44%28%28%100%
Average Size 590 sf 870 sf 1,080 sf
PARKING
Provided 52 spaces; 0.5 spaces / unit
(104 spaces if stackers)
BUILDING AREAS (OPTION 2 - 6 STORIES BUILDING)
Gross Area Residential Common Circulation / Services Parking / Ramp
Ground Floor 30,430 -4,780 5,120 20,530
Floor 2 23,920 17,880 700 5,340 -
Floor 3 23,920 18,580 -5,340 -
Floor 4 23,920 18,580 -5,340 -
Floor 5 23,920 18,580 -5,340 -
Floor 6 23,920 18,580 -5,340 -
6 STORIES TOTAL 150,030 92,200 5,480 31,820 20,530
Affordable housing site
1 Acre
Elec
16
8
’
160’
25
’
160’45
’
126’
Community/Amenity
50’ creek centerlinesetback Alley with special
paving connecting
Lambert Ave to the park
PARK BLVD
PO
R
T
A
G
E
A
V
E
ASH ST
LA
M
B
E
R
T
A
V
E
4
PALO ALTO, CA | NOvember 4, 2025 | mTC
0 100’50’
340 POrTAGe Ave | OPTION 3 - 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr
89’
matade
r
o
C
r
e
e
k
66
4
’
42
’
131’
215’
40
’
100’
274
’
240’
Park
2.25 Acre
Trash
Bike Room
Mech
Courtyard exit stairs
Office
Mail
Parking (52 spaces or 104 w/stackers)
GrOUND FLOOr PLAN
LeveL 2 FLOOr PLAN
LeveL 3-7 FLOOr PLAN
Courtyard
6,265 SF
20
’
Fr
o
n
t
se
t
b
a
c
k
10’ Sidesetback
16’Street sidesetback
Lobby
L
T
T
BUILDING AREAS (OPTION 3 - 7 STORIES BUILDING)
Gross Area Residential Common Circulation / Services Parking / Ramp
Ground Floor 30,430 -4,780 5,120 20,530
Floor 2 23,920 17,880 700 5,340 -
Floor 3 23,920 18,580 -5,340 -
Floor 4 23,920 18,580 -5,340 -
Floor 5 23,920 18,580 -5,340 -
Floor 6 23,920 18,580 -5,340 -
Floor 7 23,920 18,580 -5,340 -
7 STORIES TOTAL 173,950 110,780 5,480 37,160 20,530
Affordable housing site
1 Acre
Elec
16
8
’
160’
25
’
160’45
’
126’
Community/Amenity
50’ creek centerlinesetback Alley with special
paving connecting
Lambert Ave to the park
OPTION 3: 7 STOrIeS bUILDING (± 75 FeeT)
OPTION 3: 7 STORIES (± 75 FEET)
UNIT MIX
Unit Type 1-BR 2-BR 3-BR Total
1st floor ----
2nd floor 9 6 6 21 units
3rd floor 10 6 6 22 units
4th floor 10 6 6 22 units
5th floor 10 6 6 22 units
6th floor 10 6 6 22 units
7th floor 10 6 6 22 units
TOTAL 59 36 36 131 units
Mix %44%28%28%100%
Average Size 590 sf 870 sf 1,080 sf
PARKING
Provided 52 spaces; 0.4 spaces / unit
(104 spaces if stackers; 0.8 spaces / unit)
PARK BLVD
PO
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T
A
G
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A
V
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ASH ST
LA
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A
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5
PALO ALTO, CA | NOvember 4, 2025 | mTC
340 POrTAGe Ave | SHADOW STUDY
NOTe: THIS SHADOW STUDY SHOWS THe SHADOWS CASTeD bY eACH OF THe OPTIONS, ON THe LONGeST DAY OF THe YeAr(JUNe 21) AND THe SHOrTeST DAY OF THe YeAr(DeC 21), AT TWO HOUrS PAST SUNrISe, NOON, AND TWO HOUrS PrIOr TO SUNSeT.
JUNe 21; 8 Am JUNe 21; 12 NOON JUNe 21; 6 Pm DeCember 21; 9 Am DeCember 21; 12 NOON DeCember 21; 3 Pm
OPTION 1: 5 STOrIeS, 50’ CreeK SeTbACK, SOUTH FACING COUrTYArD, eLevATeD GrOUND FLOOr reSIDeNTIAL
JUNe 21; 8 Am JUNe 21; 12 NOON JUNe 21; 6 Pm DeCember 21; 9 Am DeCember 21; 12 NOON DeCember 21; 3 Pm
OPTION 2: 6 STOrIeS, 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr
JUNe 21; 8 Am JUNe 21; 12 NOON JUNe 21; 6 Pm DeCember 21; 9 Am DeCember 21; 12 NOON DeCember 21; 3 Pm
OPTION 3: 7 STOrIeS, 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr
6
PALO ALTO, CA | NOvember 4, 2025 | mTC
0 100’50’
340 POrTAGe Ave | SHADOW STUDY - DeCember 21, 3 Pm - mAX SHADe
OPTION 1: 5 STOrIeS, 50’ CreeK SeTbACK, SOUTH FACING COUrTYArD, eLevATeD GrOUND FLOOr reSIDeNTIAL OPTION 2: 6 STOrIeS, 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr OPTION 3: 7 STOrIeS, 50’ CreeK SeTbACK, NOrTH FACING COUrTYArD, COmmUNITY USeS ON GrOUND FLOOr
(25,480 SF)
26%32.9%(27,280 SF)(32,245 SF)
27.8%
1
To: Claire Raybould, Current Planning Manager, City of Palo Alto
From: Rick Jacobus, Street Level Advisors
Date: October 8, 2025
Re: Matadero Creek Affordable Housing – Financial Feasibility Analysis
Summary of Findings
Street Level Advisors conducted a financial feasibility analysis to understand the potential
for 100% affordable housing developments on a 1-acre portion of the 340 Portage Avenue
site. We developed three detailed project proformas for building prototypes that
correspond with the three scenarios developed by Van Meter, Williams, Pollack including 5,
6, and 7 story heights with varying amounts of parking. For each of the three scenarios we
evaluated the likely range of development costs based on a review of the costs of
comparable affordable projects in the region and developed realistic financing scenarios .
Affordable housing financing is very competitive: there are far more projects seeking funds
than there are funds available. Generally, a 100% affordable housing project will need to
compete successfully for federal Low-Income Housing Tax Credits and critical gap funding
from the State of California. Therefore, we evaluated the site and each of the three
scenarios against the scoring criteria used in the most recent rounds of these key funding
sources. We found that an affordable housing development of any of the three scenarios at
this location would have been competitive for state funding in recent years. Because the
available State funds may be more limited in the coming years and because the scoring
systems used to allocate these funds change, it may nonetheless take time for the selected
development team to assemble the necessary funding. But our analysis suggests that this is
a competitive location for affordable housing.
2
Table 1: Financing Scenario Summary
One key question we considered was the necessary level of gap funding from the City of
Palo Alto. Local funding is critical to feasibility for two reasons. First, every affordable
housing project struggles to assemble the funding needed from a limited number of sources
so local funding is often the only way to close the gap. Second, the state funding sources
often use the level of local funding as a tie-breaker when they determine which projects to
fund. Projects with stronger local investment are more likely to secure state funding. We
assumed that in all of the three scenarios the development would receive the land at
essentially no cost and would receive development impact fee waivers that Palo Alto
provides for all affordable housing projects. Both of these would be treated as local
contributions under state program rules. We also considered the extent to which an
additional cash investment from the City’s Affordable Housing Fund would improve the
competitiveness of the project. and concluded that the City would need to commit at least
$5 million, in addition to the land, in order for the project to reach the level of local subsidy
that was typical of the winning projects in the most recent state SuperNOFA. Higher levels
of funding, up to $10 million would strengthen the project’s competitiveness and likely
shorten the timeline for development of the site noticeably.
3
Why We Did This Analysis
As the City prepares to issue a Request for Proposals (RFP) for the Matadero Creek
Affordable Housing site, we want to understand the range of projects that developers might
propose. Different building sizes and layouts can change both the number of homes
delivered and the amount of subsidy required to make the project feasible. Because the
funding landscape for affordable housing is constantly changing, we can’t exactly project
what the most effective funding strategy will be, even a few years from now. But we can
ensure that the site and potential projects would have been competitive for funding under
the conditions available in recent years. Ultimately, the City will select a development
partner with a strong track record lining up the many sources of funding needed to make
these projects possible and that partner will determine the most promising funding strategy
available at that time.
Developer Feedback
Between late April and early May 2025, we conducted five in-depth interviews with
organizations representing a broad cross-section of the affordable housing developers and
affordable housing finance experts. Each interview lasted roughly one hour and followed
a consistent discussion guide covering site design, financing, affordability strategy, and
RFP structure. The purpose was not to solicit proposals but to understand how
experienced developers view the site’s opportunities and challenges, and what process
design would make the project most attractive and feasible.
Design and Site Considerations: Developers were largely aligned on design
principles. There was little appetite for buildings taller than 7 stories, both
because of cost escalation and construction complexity. Most agreed that one
level of podium parking is the upper limit of what remains feasible. Beyond that,
costs rise sharply without improving financing potential. Developers also
encouraged the City to identify a long-term operating plan for community-serving
spaces to ensure their financial sustainability. Several respondents noted that
orienting units and shared spaces toward the park would help activate the public
edge and strengthen the relationship between housing and open space.
Parking: Developers agreed that parking ratios are a key feasibility driver. Most
suggested between 0.5 and 0.75 spaces per unit, depending on unit mix and transit
access. There was broad consensus that mechanical stackers are disfavored, citing
maintenance costs and operational reliability – though several developers might
consider using them if necessary.
Target Populations and Unit Mix: Developers urged the City to clarify target
populations early. If the City intends to include supportive housing or veteran
units, they suggested doing so only if funding or service commitments are already
identified. They also advised allowing flexibility in unit mix so developers can
4
align designs with evolving funding opportunities, market conditions, and
management strategies. Rigid requirements can make projects less competitive in
state funding rounds.
Financing Strategy and Funding Sources: All interviewees recognized that 340
Portage will require layered financing, with state programs playing a central role.
Most agreed that the project would rely on 4% Low-Income Housing Tax Credits
rather than 9% credits, given the competitive limits of the regional allocation
pool. One developer floated the idea of splitting the site into two smaller 9%
projects, but most favored a single 4%-credit project paired with MHP funding as
the most practical structure.
Leveraging State Programs: Developers highlighted the opportunity to
maximize MHP and AHSC scoring through the site’s high-resource location,
transit proximity, and City land contribution. They recommended that the City
document Surplus Lands Act compliance early, since formal designation as
“exempt surplus land” earns critical MHP points. Several developers noted that
AHSC (Affordable Housing and Sustainable Communities) funds could be
attainable if the City partners with a transit agency (VTA or Caltrain) to include a
modest mobility improvement, such as a new bike connection or crosswalk
enhancement near the site.
Need for Local Match Funding: Interviewees pointed out that state programs
reward local match commitments. While the land contribution counts, adding
$100,000–$200,000 per unit in City housing trust funds could strengthen
competitiveness. To be recognized, such funds must be committed prior to
application submission.
Overall, developers expressed strong interest in an affordable housing project at this site,
but emphasized the importance of clarity, predictability, and simplicity. They view the
project as financially feasible under a 4% LIHTC + MHP model, assuming clear direction
on parking, affordability targets, and local participation. Developers also noted that an
efficient, well-scoped RFP—focused on developer qualifications, capacity and readiness
rather than design detail—would attract a strong pool of proposers while reducing
administrative burden for both applicants and City staff.
Three Development Scenarios
We tested three different building sizes, each consistent with the massing studies prepared
by the design team. The table below compares the three building prototypes studied for a
potential affordable housing project at this site. It summarizes key physical and
programmatic characteristics, including building height, total square footage, unit mix, and
parking ratios.
5
Table 2: Building Prototypes Studied
Option 1 – 5 stories Option 2 – 6 stories Option 3 – 7 stories
Building Height ± 55 ft ± 65 ft ± 75 ft
Total Gross Area (sf) 110,935 150,030 173,950
Residential Area (sf) 73,200 92,200 110,780
1-Bedroom Units 37 49 59
2-Bedroom Units 26 30 36
3-Bedroom Units 26 30 36
Total Units 89 109 131
Average Unit Size (sf) 1BR 590 / 2BR 870 / 3BR
1,080
1BR 590 / 2BR 870 / 3BR
1,080
1BR 590 / 2BR 870 / 3BR
1,080
Parking Provided 45 (90 with stackers) 52 (104 with stackers) 52 (104 with stackers)
Parking Ratio 0.5 (1.0 w/stackers) 0.5 (1.0 w/stackers) 0.4 (0.8 w/stackers)
Development Cost Estimates
In order to evaluate the financing need, we first estimated the total cost to develop each of
the prototypes. We reviewed detailed proformas for several recently proposed affordable
projects in and around Palo Alto, development cost proposals provided to the State for
dozens of other projects as part of the most recent affordable housing SuperNOFA, as well
as a detailed study on the cost of development of both market rate and affordable housing
commissioned by the City of San Jose in 20241. We intentionally selected cost assumptions
at the high end of the ranges suggested by these sources, both to reflect the likely cost
increases that have occurred since these projects were proposed and to provide a
somewhat more conservative estimate of the financing need. Note that we have not
attempted to adjust these costs to reflect future cost inflation. This project will take many
years to develop, and the actual costs will certainly be somewhat higher than these present-
day projections.
Appendix A includes the detailed cost assumptions we used to construct the proformas.
Table 3 summarizes the high-level cost break down for each prototype.
1 San Jose Cost of Development Study, Century Urban 2024
6
Table 3: Development Cost Summary
The taller, denser projects cost more to build, both because there is more building to
construct and because we assume that the cost per foot is higher for denser buildings.
Affordability
For each scenario we assumed that all units (aside from 1 managers unit) would be
restricted to households earning less than 60% of Area Median Income (AMI). For
reasons of competitiveness for State funding, we have assumed that 20% of units in each
scenario would target Extremely Low Income (ELI) households earning less than 30% of
AMI. We assumed that the remaining units would serve a mix of incomes between 40%
and 60% of AMI.
Table 4: Income Mix
Key State and Federal Financing Sources
Affordable housing projects in California almost always require a combination of federal
and state subsidies in addition to local funds and tax credit equity. The primary programs
are administered by the California Department of Housing and Community Development
(HCD), the California Tax Credit Allocation Committee (TCAC/CDLAC), and federal
agencies such as the U.S. Department of Housing and Urban Development (HUD) and
the U.S. Department of the Treasury.
Federal Programs
7
Low-Income Housing Tax Credit (LIHTC)
What it is: The main federal incentive for building affordable rental housing,
created under Section 42 of the Internal Revenue Code.
How it works: Provides a dollar-for-dollar tax credit to investors who finance
affordable housing. Projects receive either 4% or 9% credits depending on the
financing structure.
Why it matters: LIHTC is the financial backbone of nearly all affordable rental
developments in the U.S., generating about 40–50% of the total project funding.
Tax-Exempt Multifamily Housing Bonds (Private Activity Bonds)
What it is: Long-term, below-market-rate financing made possible when states
and localities issue tax-exempt bonds for affordable housing.
How it works: Developers borrow bond proceeds to finance construction and
permanent loans. Projects using these bonds automatically qualify for 4%
LIHTCs if at least 50% of the project’s costs are financed with bond proceeds.
The loans are generally made by commercial banks with tax exemption facilitated
by a public agency.
Why it matters: This pairing of bonds and 4% tax credits is a cornerstone of
financing for larger affordable projects like 340 Portage.
Project-Based Vouchers (PBVs)
What it is: HUD-funded rental assistance administered by local housing
authorities.
How it works: Provides long-term rental subsidies tied to specific units, ensuring
that very low-income households pay no more than 30% of their income toward
rent.
Why it matters: PBVs make the deepest affordability levels financially
sustainable by guaranteeing stable rental income for the most vulnerable
residents.
State Programs
Multifamily Housing Program (MHP)
What it is: The state’s core subsidy program for new affordable rental housing.
How it works: Provides long-term, low-interest loans (often 55 years) to help fill
the gap between development costs and other financing sources.
Why it matters: Almost every competitive affordable housing project in
California applies for MHP funds.
Affordable Housing and Sustainable Communities (AHSC)
What it is: Funding from the state’s cap-and-trade revenues to support housing
near transit.
How it works: Provides loans for housing plus grants for related infrastructure
8
(sidewalks, bike lanes, transit stops).
Why it matters: 340 Portage, located near jobs and transit, would be a strong
candidate for this program.
Infill Infrastructure Grant Program (IIG)
What it is: Grants to help cover infrastructure costs for infill housing sites.
How it works: Can fund utilities, streets, sidewalks, and other improvements
needed to make a site ready for housing.
Why it matters: Helps reduce the amount of subsidy needed for construction by
covering upfront site prep.
No Place Like Home (NPLH)
What it is: Funds permanent supportive housing for people experiencing
homelessness and mental illness.
How it works: Counties receive allocations and may partner with affordable
housing developers.
Why it matters: If supportive units are included in the mix, NPLH could provide
both capital and operating support.
Other Targeted Programs
• Veterans Housing and Homelessness Prevention (VHHP): For projects that
include units for veterans.
• Joe Serna Jr. Farmworker Housing Grant Program: For developments
serving farmworker households.
• Transit-Oriented Development (TOD) Program: For projects adjacent to major
public transit corridors.
Financing Strategy
The 9% tax credits are more generous (they provide a higher share of cost per project) but
also more competitive. The 9% tax credits are allocated by the State into regional pools and
the South Bay pool may be too small to support a large project like this. The 4% tax credits
are a more likely source, but they leave a larger gap for the developer to fill. Based on a
review of the 4% projects funded in 2024, we assumed that tax credits would provide 47%
of the total development cost in each of our prototypes (though a number of factors could
mean that more or less tax credit equity was available to a project at this site). The 4% tax
credits must be paired with tax exempt bond financing which lowers the cost of the
permanent debt on the project. In each case we have calculated the maximum supportable
permanent loan given the restricted rents.
But the tax credits and debt together cover less than 60% of the cost of the project. This
leaves a ‘gap’ that has to be filled with affordable housing subsidies from one source or
another (often many different sources). The most promising sources are the State MHP and
AHSC programs. Most of the 4% LIHTC projects receive one or the other or sometimes both
of these sources.
9
The MPH Program is promising because it provides significant scoring incentives both to
projects located in “High Resource Areas” and to projects developed on surplus public land.
The Portage Ave site would qualify for both of these bonus categories. Only 19% of projects
that applied in the last round qualified for both. The challenge with MHP is that ongoing
funding for the program is uncertain. It seems likely that the State will continue to invest,
but the budget situation in Sacramento makes it difficult to anticipate the level of funding.
The other large state program, AHSC, was recently extended. The program will receive
$800 million annually in proceeds from the state’s cap and trade greenhouse gas emissions
auctions through 2045. Portage Avenue also appears to be a competitive site for AHSC
funding. AHSC requires pairing an affordable housing project with a transportation
infrastructure project serving the same area. A successful award funds both projects.
The other critical source for any project is local government funding. For the purpose of
this analysis, we assumed that the City of Palo Alto would commit additional Affordable
Housing Fund resources to the project to help fill the gap.
Figure 1: Capital Stack
The Impact of Local Investment
In order to understand the critical role that local government investment can play in making
projects like this feasible, we evaluated the data from recently funded projects. We looked
at all the 4% LIHTC projects funded in the most recent State SuperNOFA2. The State awards
funding from several sources including MHP, IIG and VHHP in a single competitive process.
In 2025 they funded 16 projects that also received 4% tax credits. These projects received
between $2 and $42.5 million in state funding. This funding represented between 4% and
2 February 2025 Multifamily Finance SuperNOFA (Round 3). https://www.hcd.ca.gov/grants-and-
funding/supernofa
10
51% of total development costs with the average State share representing 22% of total
development costs.
Table 5: Financing Mix with $5 Million in City funding
Table 5 shows the financing mix for each of the prototypes under the assumption that the
City committed $5 million in funding3. The table shows that, at this level of City funding, the
project would require between $24 and $50 million in State funding. That funding would
represent between 27 and 33% of total development cost. This is well above the average
State funding share from the last SuperNOFA but not outside of the range.
We also considered an alternative where the City contribution to the project was $10
million. As Table 6 shows, at this level the State share of funding would range from 22 to
29% of cost – closer to the average among winning projects in the last State funding round.
Table 6: Financing Mix with $10 Million in City funding
3 While the need for subsidy increases for the larger projects we assumed a flat level of funding
regardless of project size on the assumption that the City would either commit a given level of
funding or indicate that a given amount is being held aside for future commitment for this site prior
to issuance of an RFP. This would mean that developers would receive the same level of city funding
regardless of the density of their project. An alternative approach would be to allow developers to
request funds from the City either as part of the RFP or through the City’s regular award process
after selection. Either of those approaches might result in a higher award of City funding for projects
with more units. The developers we interviewed, however, indicated that a clear statement of
available City funding would strengthen the RFP and make it more attractive to potential developers.
11
What This Means Going Forward
These three scenarios are not recommendations. They are examples of what a developer
could reasonably propose given the City’s goals and site conditions. A developer responding
to the RFP might bring forward something that looks like Option 1, Option 3, or something
in between.
The takeaway is that all are financially possible — but each comes with different tradeoffs.
Smaller buildings mean fewer homes but easier financing. Larger buildings mean more
homes but bigger gaps to close.
12
Appendix A – Key Assumptions Behind All Scenarios
This project’s financial analysis is based on a common set of assumptions. Below we outline
those assumptions and explain in plain language what they mean.
Affordability
Who the housing is for: For each prototype we assumed that all units would be
restricted to households earning less than 60% of Area Median Income (AMI).
For reasons of competitiveness for State funding, we have assumed that 20% of
units in each scenario would target Extremely Low Income (ELI) households
earning less than 30% of AMI. We assumed that the remaining units would serve
a mix of incomes between 40% and 60% of AMI.
How rents are set: Rents are capped for each income group based on LIHTC rent
limits published by the California Department of Housing and Community
Development.
How big are the units: For all the prototypes we assumed roughly the same mix
of 1, 2- and 3-bedroom units based on Van Meter, Williams, Pollack’s designs.
Voucher support: In the case of scenarios that take advantage of Project Based
Vouchers, we assume rental income based on HUD’s Fair Market Rent (FMR) for
the unit size rather than the tenant’s income. Tenants in voucher units pay a share
of their income and HUD makes up the difference between this payment and
FMR.
Rent and Utilities
Maximum affordable rents: The rent shown in the model is the most a
household at that income level could be asked to pay, based on federal and state
formulas.
Utility deductions: Because tenants pay utilities, we subtract a standard
allowance from the maximum rent. For example, about $98 is taken off for a 1-
bedroom, $128 for a 2-bedroom, and $157 for a 3-bedroom.
Manager’s unit: One apartment in each scenario is set aside for an on-site
manager and doesn’t generate rent.
Costs to Build
Construction type: Costs assume modern wood-frame apartments over a
concrete podium (the most common and efficient structure for this type of
project).
Hard costs: We budget between $535 to $650 per gross residential foot for the
direct costs to build the building.
Parking cost: In addition, we assume a cost of $65,000 per parking space to build
the parking.
13
Soft costs: Professional fees, permits, and other non-construction costs are
assumed to be about 18% of hard construction costs.
Land: The site is contributed by the City, so no land purchase cost is included.
How It’s Paid For
Permanent loan: Each scenario assumes a long-term mortgage funded with tax
exempt bond financing. This loan is sized conservatively based on the project’s
income, so it can be safely repaid. We assume a Debt Service Coverage Ratio of
1.15 meaning that the Net Operating Income (after all expenses) for the building
must be at least 15% greater than the monthly loan payment. This ratio limits the
amount that the project can borrow because the rents are limited. We assume a
permanent loan interest rate of 6.5% and a loan term of 35 years.
Construction loan: We assume a construction loan interest rate of 6.85% and
that the construction loan will cover 60% of the total development cost.
Tax Credit Equity: While the exact amount of tax credit equity depends on both
building cost and market factors, we assumed that tax credit equity would
contribute 47% of total development cost for each prototype. This was the
average tax credit investment among 15 projects funded with 4% LIHTC credits
in 2023 in San Mateo and Santa Clara counties.
State funding: For each prototype we calculated the amount of funding from the
State that would be necessary to fill the remaining gap after accounting for all
other sources. We then compared the resulting funding levels to the typical
amounts awarded to successful 4% LIHTC projects in recent rounds of State
funding. This State funding could come from MHP, AHSC or any of several other
state programs.
City contribution: We assumed, for the purpose of analysis a City of Palo Alto
commitment of $5,000,000 for each project prototype.
Other contributions: The financial model includes a standard “owner’s equity”
contribution of $84,000 per unit and a small portion of the developer fee being
deferred until after the building is operating.
Operations Once Built
Operating expenses: We assumed that the operating expenses for each building
would be $10,000 per unit per year.
14
Net Operating Income (NOI): This is the project’s annual bottom line after
paying for operating costs. The first year NOI ranges from about $1.1M to $1.6M
depending on building size.
No extras included: For now, the models don’t count potential income from
things like commercial rent, parking, or services.
15
Appendix B – Project Prototype Pro formas
Matadero Creek Affordable Housing Project Option 1 - 5 Stories
Unit Mix and Rent Structure
Rent Information
Area Median Income
30% (PBV)50% (PBV)30% AMI 40% AMI 50% AMI 60% AMI MGR
Studio 968$ 1,291$ 1,613$ 1,936$ -$
1-Bed -$ 1,037$ 1,383$ 1,728$ 2,074$ -$
2-Bed 3,124$ 1,244$ 1,659$ 2,073$ 2,488$ -$
3-Bed 4,004$ 4,033$ 1,437$ 1,917$ 2,396$ 2,875$ -$
4-Bed 1,603$ 2,138$ 2,672$ 3,207$ -$
Commercial
Bedrooms Utility Allowance
Studio -$
1-Bed 98$
2-Bed 128$
3-Bed 157$
4-Bed
Unit Mix
# of Bedrooms Number of Units Square Feet Total Sq Ft AMI Level Monthly Rent Max Affordable
Rent (with
Utilities)
Utility Allowance 1st Year Annual
Revenue
Studio 0 500 0 30% AMI $968 $968 $0 $0
Studio 0 500 0 40% AMI $1,291 $1,291 $0 $0
Studio 0 500 0 60% AMI $1,936 $1,936 $0 $0
1-Bed 7 590 4,130 30% AMI $939 $1,037 $98 $78,876
1-Bed 11 590 6,490 40% AMI $1,285 $1,383 $98 $169,620
1-Bed 19 590 11,210 60% AMI $1,976 $2,074 $98 $450,528
2-Bed 5 870 4,350 30% AMI $1,116 $1,244 $128 $66,960
2-Bed 8 870 6,960 40% AMI $1,531 $1,659 $128 $146,976
2-Bed 12 870 10,440 60% AMI $2,360 $2,488 $128 $339,840
2-Bed 1 870 870 MGR -$128 $0 $128 ($1,536)
3-Bed 5 1,080 5,400 30% AMI $1,280 $1,437 $157 $76,800
3-Bed 8 1,080 8,640 40% AMI $1,760 $1,917 $157 $168,960
3-Bed 13 1,080 14,040 60% AMI $2,718 $2,875 $157 $424,008
Total 89 72,530 $1,921,032
AMI Units % Total Units % Tot Rev.AMI Units % Total Units
30% (PBV)0 0%0.0%ELI 17 19.1%
50% (PBV)0 0%0.0%VLI 27 30.3%
30% AMI 17 19%11.6%Low Income 44 49.4%
40% AMI 27 30%25.3%MGR 1 1.1%
50% AMI 0 0%0.0%Total 89 100%
60% AMI 44 49%63.2%
MGR 1 1%-0.1%Parking Spaces Spaces/unit
45 0.51
Total 89 100%100%
Building Net Feet Efficiency Gross Feet
Unit Type Units % Total Units % Tot Rev.72,530 65%110,935
Studio 0 0%0.0%
1-Bed 37 42%36.4%
2-Bed 26 29%28.7%
3-Bed 26 29%34.9%
4-Bed 0 0%0.0%
Total 89 100%100%
Project Proforma
Construction Sources Total Per Unit Financing Assumptions
Construction Loan 53,263,039$ 598,461$ Debt Coverage Ratio 1.15
Tax Credit Investor Proceeds 14,602,950$ 164,078$ Construction Loan Amount (%TDC)60%
GP Equity 7,480,094$ 84,046$ Construction Interest Rate 6.85%
HCD/Other -$ Permanent Interest Rate 6.50%
City of Palo Alto 5,000,000$ 56,180$ Permanent Loan Term 35
Total 80,346,083$ 902,765$ LIHTC Price 0.95
Basis Boost TRUE
LIHTC Eligible %100%
LIHTC Investor Proceeds % TDC 47%
City of Palo Alto Investment Limit 5,000,000$
HCD/Other %TDC 20%
Permanent Sources Total Per Unit %GP Equity per Unit 84046
Amortizing Permanent Loan 10,017,980$ 112,562$ 11%Tax Credit $ During Construction 35%
Tax Credit Investor Proceeds 41,722,714$ 468,795$ 47%Deferred Developer Fee per Unit 4790
GP Equity 7,480,094$ 84,046$ 8%
Deferred Developer Fee 426,310$ 4,790$ 0%Development Assumptions
HCD/Other 24,124,634$ 271,063$ 27%Construction Costs Per Gross Foot 535
City of Palo Alto 5,000,000$ 56,180$ 6%Site Acquisition Cost Per Acre 0
Total 88,771,732$ 997,435$ 100%Parking Cost per Space 65000
Soft Costs (as % of hard costs)18%
Financing Costs per unit 53,000
Developer Fee % of TDC 12.5%
Operating Assumptions
Uses Total Per Unit Per GSF Operating Costs 10,000$ Per Unit
Acquisition -$ -$ -$ Expense Inflation Rate 3.50%
Hard Cost 59,350,225$ 666,856$ 535$ Resident Services 1,700$ Per unit
Parking Cost 2,925,000$ 32,865$ 26$ Reserves 500$ Per Unit
Financing Costs 4,717,000$ 53,000$ 43$
Other Soft Costs 10,683,041$ 120,034$ 96$
Developer Fee 11,096,467$ 124,679$ 100$
Total Development Costs 88,771,732$ 997,435$ 800$
Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Effective Gross Income 1,921,032$ 1,988,268$ 2,057,858$ 2,129,883$ 2,204,428$ 2,281,583$ 2,361,439$ 2,444,089$ 2,529,632$ 2,618,169$
Operating Expenses (890,000)$ (921,150)$ (953,390)$ (986,759)$ (1,021,295)$ (1,057,041)$ (1,094,037)$ (1,132,329)$ (1,171,960)$ (1,212,979)$
Services (151,300)$ (156,596)$ (162,076)$ (167,749)$ (173,620)$ (179,697)$ (185,986)$ (192,496)$ (199,233)$ (206,206)$
Reserves (44,500)$ (46,058)$ (47,670)$ (49,338)$ (51,065)$ (52,852)$ (54,702)$ (56,616)$ (58,598)$ (60,649)$
Net Operating Income 835,232$ 864,465$ 894,721$ 926,037$ 958,448$ 991,994$ 1,026,713$ 1,062,648$ 1,099,841$ 1,138,335$
Debt Service (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$ (726,289)$
Net Cash Flow 108,943$ 138,176$ 168,433$ 199,748$ 232,159$ 265,705$ 300,425$ 336,360$ 373,552$ 412,047$
Debt Coverage Ratio 1.15 1.19 1.23 1.28 1.32 1.37 1.41 1.46 1.51 1.57
Bedrooms
Matadero Creek Affordable Housing Project Option 2 - 6 Stories
Unit Mix and Rent Structure
Rent Information
Area Median Income
30% (PBV)50% (PBV)30% AMI 40% AMI 50% AMI 60% AMI MGR
Studio 968$ 1,291$ 1,613$ 1,936$ -$
1-Bed -$ 1,037$ 1,383$ 1,728$ 2,074$ -$
2-Bed 3,124$ 1,244$ 1,659$ 2,073$ 2,488$ -$
3-Bed 4,004$ 4,033$ 1,437$ 1,917$ 2,396$ 2,875$ -$
4-Bed 1,603$ 2,138$ 2,672$ 3,207$ -$
Commercial
Bedrooms Utility Allowance
Studio -$
1-Bed 98$
2-Bed 128$
3-Bed 157$
4-Bed
Unit Mix
# of Bedrooms Number of Units Square Feet Total Sq Ft AMI Level Monthly Rent Max Affordable
Rent (with
Utilities)
Utility Allowance 1st Year Annual
Revenue
Studio 0 500 0 30% AMI $968 $968 $0 $0
Studio 0 500 0 40% AMI $1,291 $1,291 $0 $0
Studio 0 500 0 60% AMI $1,936 $1,936 $0 $0
1-Bed 10 590 5,900 30% AMI $939 $1,037 $98 $112,680
1-Bed 15 590 8,850 40% AMI $1,285 $1,383 $98 $231,300
1-Bed 24 590 14,160 60% AMI $1,976 $2,074 $98 $569,088
2-Bed 6 870 5,220 30% AMI $1,116 $1,244 $128 $80,352
2-Bed 9 870 7,830 40% AMI $1,531 $1,659 $128 $165,348
2-Bed 14 870 12,180 60% AMI $2,360 $2,488 $128 $396,480
2-Bed 1 870 870 MGR -$128 $0 $128 ($1,536)
3-Bed 6 1,080 6,480 30% AMI $1,280 $1,437 $157 $92,160
3-Bed 9 1,080 9,720 40% AMI $1,760 $1,917 $157 $190,080
3-Bed 15 1,080 16,200 60% AMI $2,718 $2,875 $157 $489,240
Total 109 87,410 $2,325,192
AMI Units % Total Units % Tot Rev.AMI Units % Total Units
30% (PBV)0 0%0.0%ELI 22 20.2%
50% (PBV)0 0%0.0%VLI 33 30.3%
30% AMI 22 20%12.3%Low Income 53 48.6%
40% AMI 33 30%25.2%MGR 1 0.9%
50% AMI 0 0%0.0%Total 109 100%
60% AMI 53 49%62.6%
MGR 1 1%-0.1%Parking Spaces Spaces/unit
52 0.48
Total 109 100%100%
Building Net Feet Efficiency Gross Feet
Unit Type Units % Total Units % Tot Rev.87,410 65%134,477
Studio 0 0%0.0%
1-Bed 49 45%39.3%
2-Bed 30 28%27.6%
3-Bed 30 28%33.2%
4-Bed 0 0%0.0%
Total 109 100%100%
Project Proforma
Construction Sources Total Per Unit Financing Assumptions
Construction Loan 71,565,711$ 656,566$ Debt Coverage Ratio 1.15
Tax Credit Investor Proceeds 8,408,971$ 77,147$ Construction Loan Amount (%TDC)60%
GP Equity 9,161,014$ 84,046$ Construction Interest Rate 6.85%
HCD/Other -$ Permanent Interest Rate 6.50%
City of Palo Alto 5,000,000$ 45,872$ Permanent Loan Term 35
Total 94,135,696$ 863,630$ LIHTC Price 0.95
Basis Boost TRUE
LIHTC Eligible %100%
LIHTC Investor Proceeds % TDC 47%
City of Palo Alto Investment Limit 5,000,000$
HCD/Other %TDC 35%
Permanent Sources Total Per Unit %GP Equity per Unit 84046
Amortizing Permanent Loan 11,938,979$ 109,532$ 10%Tax Credit $ During Construction 15%
Tax Credit Investor Proceeds 56,059,807$ 514,310$ 47%Deferred Developer Fee per Unit 4790
GP Equity 9,161,014$ 84,046$ 8%
Deferred Developer Fee 522,110$ 4,790$ 0%Development Assumptions
HCD/Other 36,594,275$ 335,727$ 31%Construction Costs Per Gross Foot 600
City of Palo Alto 5,000,000$ 45,872$ 4%Site Acquisition Cost Per Acre 0
Total 119,276,185$ 1,094,277$ 100%Parking Cost per Space 65000
Soft Costs (as % of hard costs)18%
Financing Costs per unit 53,000
Developer Fee % of TDC 12.5%
Operating Assumptions
Uses Total Per Unit Per GSF Operating Costs 10,000$ Per Unit
Acquisition -$ -$ -$ Expense Inflation Rate 3.50%
Hard Cost 80,686,154$ 740,240$ 600$ Resident Services 1,700$ Per unit
Parking Cost 3,380,000$ 31,009$ 25$ Reserves 500$ Per Unit
Financing Costs 5,777,000$ 53,000$ 43$
Other Soft Costs 14,523,508$ 133,243$ 108$
Developer Fee 14,909,523$ 136,785$ 111$
Total Development Costs 119,276,185$ 1,094,277$ 887$
Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Effective Gross Income 2,325,192$ 2,406,574$ 2,490,804$ 2,577,982$ 2,668,211$ 2,761,599$ 2,858,255$ 2,958,294$ 3,061,834$ 3,168,998$
Operating Expenses (1,090,000)$ (1,128,150)$ (1,167,635)$ (1,208,502)$ (1,250,800)$ (1,294,578)$ (1,339,888)$ (1,386,784)$ (1,435,322)$ (1,485,558)$
Services (185,300)$ (191,786)$ (198,498)$ (205,445)$ (212,636)$ (220,078)$ (227,781)$ (235,753)$ (244,005)$ (252,545)$
Reserves (54,500)$ (56,408)$ (58,382)$ (60,425)$ (62,540)$ (64,729)$ (66,994)$ (69,339)$ (71,766)$ (74,278)$
Net Operating Income 995,392$ 1,030,231$ 1,066,289$ 1,103,609$ 1,142,235$ 1,182,213$ 1,223,591$ 1,266,417$ 1,310,741$ 1,356,617$
Debt Service (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$ (865,558)$
Net Cash Flow 129,834$ 164,672$ 200,731$ 238,051$ 276,677$ 316,655$ 358,033$ 400,858$ 445,183$ 491,059$
Debt Coverage Ratio 1.15 1.19 1.23 1.28 1.32 1.37 1.41 1.46 1.51 1.57
Bedrooms
Matadero Creek Affordable Housing Project Option 3 - 7 Stories
Unit Mix and Rent Structure
Rent Information
Area Median Income
30% (PBV)50% (PBV)30% AMI 40% AMI 50% AMI 60% AMI MGR
Studio 968$ 1,291$ 1,613$ 1,936$ -$
1-Bed -$ 1,037$ 1,383$ 1,728$ 2,074$ -$
2-Bed 3,124$ 1,244$ 1,659$ 2,073$ 2,488$ -$
3-Bed 4,004$ 4,033$ 1,437$ 1,917$ 2,396$ 2,875$ -$
4-Bed 1,603$ 2,138$ 2,672$ 3,207$ -$
Commercial
Bedrooms Utility Allowance
Studio -$
1-Bed 98$
2-Bed 128$
3-Bed 157$
4-Bed
Unit Mix
# of Bedrooms Number of Units Square Feet Total Sq Ft AMI Level Monthly Rent Max Affordable
Rent (with
Utilities)
Utility Allowance 1st Year Annual
Revenue
Studio 0 500 0 30% AMI $968 $968 $0 $0
Studio 0 500 0 40% AMI $1,291 $1,291 $0 $0
Studio 0 500 0 60% AMI $1,936 $1,936 $0 $0
1-Bed 12 590 7,080 30% AMI $939 $1,037 $98 $135,216
1-Bed 18 590 10,620 40% AMI $1,285 $1,383 $98 $277,560
1-Bed 29 590 17,110 60% AMI $1,976 $2,074 $98 $687,648
2-Bed 7 870 6,090 30% AMI $1,116 $1,244 $128 $93,744
2-Bed 11 870 9,570 40% AMI $1,531 $1,659 $128 $202,092
2-Bed 17 870 14,790 60% AMI $2,360 $2,488 $128 $481,440
2-Bed 1 870 870 MGR -$128 $0 $128 ($1,536)
3-Bed 7 1,080 7,560 30% AMI $1,280 $1,437 $157 $107,520
3-Bed 11 1,080 11,880 40% AMI $1,760 $1,917 $157 $232,320
3-Bed 18 1,080 19,440 60% AMI $2,718 $2,875 $157 $587,088
Total 131 105,010 $2,803,092
AMI Units % Total Units % Tot Rev.AMI Units % Total Units
30% (PBV)0 0%0.0%ELI 26 19.8%
50% (PBV)0 0%0.0%VLI 40 30.5%
30% AMI 26 20%12.0%Low Income 64 48.9%
40% AMI 40 31%25.4%MGR 1 0.8%
50% AMI 0 0%0.0%Total 131 100%
60% AMI 64 49%62.7%
MGR 1 1%-0.1%Parking Spaces Spaces/unit
52 0.40
Total 131 100%100%
Building Net Feet Efficiency Gross Feet
Unit Type Units % Total Units % Tot Rev.105,010 65%161,554
Studio 0 0%0.0%
1-Bed 59 45%39.3%
2-Bed 36 27%27.7%
3-Bed 36 27%33.1%
4-Bed 0 0%0.0%
Total 131 100%100%
Project Proforma
Construction Sources Total Per Unit Financing Assumptions
Construction Loan 92,046,720$ 702,647$ Debt Coverage Ratio 1.15
Tax Credit Investor Proceeds 10,815,490$ 82,561$ Construction Loan Amount (%TDC)60%
GP Equity 11,010,026$ 84,046$ Construction Interest Rate 6.85%
HCD/Other -$ Permanent Interest Rate 6.50%
City of Palo Alto 5,000,000$ 38,168$ Permanent Loan Term 35
Total 118,872,236$ 907,422$ LIHTC Price 0.95
Basis Boost TRUE
LIHTC Eligible %100%
LIHTC Investor Proceeds % TDC 47%
City of Palo Alto Investment Limit 5,000,000$
HCD/Other %TDC 35%
Permanent Sources Total Per Unit %GP Equity per Unit 84046
Amortizing Permanent Loan 14,451,774$ 110,319$ 9%Tax Credit $ During Construction 15%
Tax Credit Investor Proceeds 72,103,264$ 550,407$ 47%Deferred Developer Fee per Unit 4790
GP Equity 11,010,026$ 84,046$ 7%
Deferred Developer Fee 627,490$ 4,790$ 0%Development Assumptions
HCD/Other 50,218,646$ 383,348$ 33%Construction Costs Per Gross Foot 650
City of Palo Alto 5,000,000$ 38,168$ 3%Site Acquisition Cost Per Acre 0
Total 153,411,200$ 1,171,078$ 100%Parking Cost per Space 65000
Soft Costs (as % of hard costs)18%
Financing Costs per unit 53,000
Developer Fee % of TDC 12.5%
Operating Assumptions
Uses Total Per Unit Per GSF Operating Costs 10,000$ Per Unit
Acquisition -$ -$ -$ Expense Inflation Rate 3.50%
Hard Cost 105,010,000$ 801,603$ 650$ Resident Services 1,700$ Per unit
Parking Cost 3,380,000$ 25,802$ 21$ Reserves 500$ Per Unit
Financing Costs 6,943,000$ 53,000$ 43$
Other Soft Costs 18,901,800$ 144,289$ 117$
Developer Fee 19,176,400$ 146,385$ 119$
Total Development Costs 153,411,200$ 1,171,078$ 950$
Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Effective Gross Income 2,803,092$ 2,901,200$ 3,002,742$ 3,107,838$ 3,216,613$ 3,329,194$ 3,445,716$ 3,566,316$ 3,691,137$ 3,820,327$
Operating Expenses (1,310,000)$ (1,355,850)$ (1,403,305)$ (1,452,420)$ (1,503,255)$ (1,555,869)$ (1,610,324)$ (1,666,686)$ (1,725,020)$ (1,785,396)$
Services (222,700)$ (230,495)$ (238,562)$ (246,911)$ (255,553)$ (264,498)$ (273,755)$ (283,337)$ (293,253)$ (303,517)$
Reserves (65,500)$ (67,793)$ (70,165)$ (72,621)$ (75,163)$ (77,793)$ (80,516)$ (83,334)$ (86,251)$ (89,270)$
Net Operating Income 1,204,892$ 1,247,063$ 1,290,710$ 1,335,885$ 1,382,641$ 1,431,034$ 1,481,120$ 1,532,959$ 1,586,613$ 1,642,144$
Debt Service (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$ (1,047,732)$
Net Cash Flow 157,160$ 199,331$ 242,978$ 288,153$ 334,909$ 383,302$ 433,388$ 485,227$ 538,881$ 594,412$
Debt Coverage Ratio 1.15 1.19 1.23 1.28 1.32 1.37 1.41 1.46 1.51 1.57
Bedrooms
340 Portage Affordable Housing
Presenters:
Claire Raybould, AICP, Planning Manager
Karen Murray, Van Meter Williams Pollock
Rick Jacobus, Street Level Advisors
November 17, 2025 www.paloalto.gov
1
Sobrato Development Agreement:
•Approved by Council in September 2023
•Merge 11 lots totaling 14.65 acres
•Re-subdivide to create five lots
•Includes one 3.25-acre lot identified as the
BMR/Parkland Dedication Parcel
Priority Site Designation/Metropolitan Transportation
Commission (MTC) Grant:
•Designated a priority site (November 2023)
•City awarded a grant of funds for early technical
work (June 2024)
BACKGROUND
Project Site
California Avenue Caltrain Station
2
MTC Grant Scope to Prepare:
•Proforma feasibility analysis of
three different unit mix
scenarios;
•Conceptual massing studies for
each of those three scenarios;
•Shadow studies; and
•Request for Proposal (RFP) for
the City to partner with an
affordable housing developer
for the project.
BACKGROUND
3
DEVELOPMENT SCENARIO 1
•5 stories (~55 feet)
•89 units
•45 parking spaces
•Total Development Cost: $88,771,732
•Total Development Cost/Unit: $997,435
•Anticipated Gap Funding: $24,124,634
•37 1-bedroom, 26 2-bedroom,26 3-bedroom
•19% ELI,30% VLI,49% LI, 1% manager's unit
4
DEVELOPMENT SCENARIO 2
•6 stories (~65 feet)
•109 units
•52 parking spaces
•Total Development Cost: $119,276,185
•Total Development Cost/Unit: $1,094,277
•Anticipated Gap Funding: $36,594,275
•49 1-bedroom, 30 2-bedroom, 36 3-bedroom
•20% ELI,20% VLI,49% LI, 1% manager's unit
5
DEVELOPMENT SCENARIO 3
•7 stories (~75 feet)
•131 units
•52 parking spaces
•Total Development Cost: $153,411,200
•Total Development Cost/Unit: $1,171,078
•Anticipated Gap Funding: $50,218,646
•59 1-bedroom,36 2-bedroom, 36 3-bedroom
•20% ELI,31% VLI,49% LI, 1% manager's unit
6
SHADOW STUDIES
7
KEY CONSIDERATIONS FOR THE RFP
•Key Design Parameters:
•Height Max/Min
•Parking Space Max/Min Ratio
•Unit Min/Max
•Courtyard Design
•Creek Setback
•City Contribution Assumption
•Release of the RFP
8
ENVIRONMENTAL REVIEW
•Feedback tonight is not subject to the California Environmental
Quality Act
•Final Environmental Impact Report (EIR) for the 200 Portage
Residential Project certified on September 12, 2023
•The Approved Alternative (Alternative 3) Assumed and
Evaluated 75 units on the BMR/Parkland Dedication Parcel;
however, Council may direct staff to explore more units.
9
RECOMMENDED MOTION
1.Review the evaluation material including, massing diagrams
and shadow studies and associated proforma analyses
presenting three possible development scenarios and provide
feedback to staff;
2.Provide direction to staff to prepare and release a Request for
Proposals (RFP) for a future partnership to build an affordable
housing project at the subject property or defer release of the
RFP as a future consideration.
Claire Raybould, AICP
Planning Manager
claire.raybould@paloalto.gov
650-329-2116