HomeMy WebLinkAboutStaff Report 2512-5781CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, February 09, 2026
Council Chambers & Hybrid
5:30 PM
Agenda Item
A.Rental Residential Vacancy Rate Determination for Properties Containing Three or More
Dwelling Units for the Second Half of 2025. CEQA: Not a Project, Pursuant to CEQA
Guidelines Section 15378(b).
City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Planning and Development Services
Meeting Date: February 9, 2026
Report #:2512-5781
TITLE
Rental Residential Vacancy Rate Determination for Properties Containing Three or More
Dwelling Units for the Second Half of 2025. CEQA: Not a Project, Pursuant to CEQA Guidelines
Section 15378(b).
RECOMMENDATION
This is an informational report and City Council action is not required.
EXECUTIVE SUMMARY
This report transmits the reporting of the vacancy rates of properties containing three or more
residential rental units for the second half of 2025. The vacancy rate was below the 3%
threshold at 0.85% for the first half of calendar year 2025 and 1.01% for the second half of
2025; therefore, applications to convert residential rental to ownership units via a 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 (PAMC) Section 21.40.040, Determination
of Vacancy Rate and Surplus. 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.
All conversions involving a change in the type of ownership of three or more rental units are
subject to the provisions of this chapter. PAMC Section 21.40.020 includes a definition of
1 Municipal Code Chapter 21.40: https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-83254
“Vacancy Surplus” as the number of rental units being offered for rent or lease more than the
3% vacancy rate. Per PAMC Section 21.40.050, the City cannot accept tentative or preliminary
parcel map applications for subdivisions created from conversions unless there is a vacancy
surplus of 3% or more as of the most recent determination.
ANALYSIS
Table 1. Ten Years of Estimated Housing Units, Vacant Utility Accounts, and Vacancy Rate
Year Estimated Housing
Units3
Utility Accounts
Deemed Vacant
Estimated Vacancy
Rate (Average)4
3 The U.S. Census Bureau Decennial Census 2010 data is used as a baseline for the total rental stock data in Palo
Alto and changes (addition or demolition) to the total rental dwelling unit stock are tracked by staff biannually
using the City of Palo Alto’s land use management system (Accela) to generate the vacancy rate. Staff expected to
update the baseline with the release of the 2020 Decennial Census; however, the U.S. Census Bureau decided to
discontinue the rental data point and staff will continue to use the original methodology.
4 This percentage is the number of utility accounts deemed “vacant” divided by the utility accounts sample size.
Year Estimated Housing
Units4
Utility Accounts
Deemed Vacant
Estimated Vacancy
Rate (Average)5
2024 8,057 61 1.22%
2025 (1st half)8,057 42 0.85%
2025 (2nd half)8,057 50 1.01%
Staff acknowledge there may be gaps and inconsistencies in this data methodology. Multi-
family properties could have different types of utility accounts and for various reasons, not all
accounts could be identified. Examples of data limitations include but are not limited to,
addresses between databases may not match utility account addresses, there is not a one-to-
one relationship between estimated three or more rental housing units and three or more
rental unit utility accounts, instances where a property has one utility meter or all meters are
billed to the property manager/owner, and some units with legacy “inactive” accounts may be
vacant or no longer available to rent altogether. Accordingly, the data included in this analysis
represents staff’s best effort to address these discrepancies.
With the implementation of the new Rental Registry Program (RRP) in October 2024, staff
identified and included additional “three or more” rental properties in the 2025 report
compared to the 2024 report. Staff analyzed the rental vacancy rate both with and without the
inclusion of the newly added RRP rental units. The analysis showed a consistent reduction in
the vacancy rate under both scenarios. Staff will continue to update and expand the list of
qualifying properties in the 2026 reporting period, as the RRP continues to identify additional
properties that meet the "three or more" rental unit threshold.
FISCAL/RESOURCE IMPACT
Planning staff prepares this report biannually and there are no additional resource impacts
beyond the time it takes to prepare this report.
STAKEHOLDER ENGAGEMENT
This is an informational report for the City Council and does not require any external
stakeholder engagement.
Planning and Development Services staff continues to coordinate with colleagues in the Utilities
department to refine the analysis.
ENVIRONMENTAL REVIEW
4 The U.S. Census Bureau Decennial Census 2010 data is used as a baseline for the total rental stock data in Palo
Alto and changes (addition or demolition) to the total rental dwelling unit stock are tracked by staff biannually
using the City of Palo Alto’s land use management system (Accela) to generate the vacancy rate. Staff expected to
update the baseline with the release of the 2020 Decennial Census; however, the U.S. Census Bureau decided to
discontinue the rental data point and staff will continue to use the original methodology.
5 This percentage is the number of utility accounts deemed “vacant” divided by the utility accounts sample size.
This project is exempt from environmental review under Section 15061 of the California
Environmental Quality Act Guidelines.
ATTACHMENTS: None.
APPROVED BY: Jonathan Lait, Planning and Development Services Director