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City Council Meeting

City of East Palo Alto CITY COUNCIL AGENDA

EPA Government Center

2415 University Avenue, First Floor - City Council Chamber East Palo Alto, CA 94303 TUESDAY, APRIL 24, 2018

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SPECIAL CITY COUNCIL MEETING - 7:00 P.M.

MAYOR: RUBEN ABRICA VICE MAYOR: LISA GAUTHIER

distributed to the majority of the City Council will be available for public inspection at the

City Clerk s Office, 2415 University Avenue, East Palo Alto, CA at the same time that the public records are distributed or made available to the City Council. Such documents may
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also be available on the East Palo Alto website www.ci.east-palo-alto.ca.us subject to staff s ability to post the documents prior to the meeting. Information may be obtained by calling

(650) 853-3100.

Community Forum and Special Presentations: Members of the audience may address the

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City Council on any agenda item or on any item of interest to the public within the Council's

No additional detail provided

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purview, before or during the Council's consideration of the item. If you wish to address the

City Council, please fill out a Speaker Sheet and give it to the Deputy City Clerk. When your name is called, step to the podium and address the City Council. Speakers are limited to 2

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minutes each, and Presentations are limited to 10 minutes. The Mayor has the discretion

to lengthen or shorten the allotted times. East Palo Alto City Council Chambers is ADA compliant. Requests for disability related modifications or accommodations, aids or services may be made by a person with a disability to the City Clerk's office at (650) 853-3127 no less than 72 hours prior to the meeting as required by Section 202 of the Americans with Disabilities Act of 1990 and the federal rules and regulations adopted in implementation thereof.

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CALL AND NOTICE OF SPECIAL MEETING AT 7:00 P.M.

OF THE EAST PALO ALTO CITY COUNCIL
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TO THE MEMBERS OF THE EAST PALO ALTO CITY COUNCIL:

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You are hereby notified that I, Ruben Abrica, do hereby call the East Palo Alto City Council

in special session to consider only the matters stated on the agenda listed below.

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Notice to the Public: Members of the public shall have the opportunity to address the City

1.
CALL TO ORDER AND ROLL CALL

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2.
APPROVAL OF THE AGENDA (Government Code Section 54957.7(a))

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3.
COMMUNITY FORUM Notice to the public: Anyone wishing to address the City Council on any matter for which another opportunity to speak

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is not provided on the Agenda, and which is within the Council s purview, is requested to submit a completed Speaker Sheet to the Deputy City Clerk. When your name is called, step to the podium and address the Council. Each speaker is

limited to 2 minutes. The Mayor has the discretion to lengthen or shorten allotted times
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4.
STUDY SESSION ITEM A. Draft Affordable Housing Strategy

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(Sean Charpentier, Assistant City Manager, Hanson Hom, Special Projects

Manager) Recommendation
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Review documents and provide direction to City staff on the Draft Affordable

Housing Strategy

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4.
ADJOURNMENT

This Notice is posted in accordance with Government Code 54954.2(a) or 54956.

Members of the public can view electronic agendas and staff reports by accessing the City

website at http://www.ci.east-palo-alto.ca.us/AgendaCenter and can receive e-mail

notification of agenda and staff report postings by subscribing to the Notify Me service at http://www.ci.east-palo-alto.ca.us/list.aspx agendaCenter

Agendas and staff reports may also be obtained by contacting the City Clerk s Office at 650-853-3127. Posted April 16, 2018 at 3:30 p.m. UPCOMING CITY COUNCIL MEETINGS: Tuesday, May 1, 2018 (7:30 p.m.) Regular City Council Meeting Tuesday, May 15, 2018 (7:30 p.m.) Regular City Council Meeting Mission Statement The City of East Palo Alto provides responsive, respectful, and efficient public services to enhance the quality of life and safety for its multi-cultural community.
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CITY OF EAST PALO ALTO OFFICE OF THE CITY MANAGER

2415 UNIVERSITY AVENUE EAST PALO ALTO, CA 94303 Study Session Item 4A
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City Council Agenda Report

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Date: April 24, 2018

To: Honorable Mayor and Members of the City Council

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Via: Carlos Mart nez, City Manager

From: Sean Charpentier, Assistant City Manager Hanson Hom, Special Projects Manager
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Subject: Draft Affordable Housing Strategy

Recommendation
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Review documents and provide direction to City staff on the Draft Affordable Housing

Strategy

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Alignment with City Council Strategic Plan

This recommendation is primarily aligned with: Priority 3: Increaes Organizational Effectiveness and Efficiency Priority 6: Create a Healthy and Safe Community Background The City of East Palo Alto is working on an Affordable Housing Strategy to provide a

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blueprint for the delivery of affordable housing projects and programs over the next 10-15

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years. The City hired David Paul Rosen and Associates (DRA) to assist with this task.

The Bay Area is experiencing a severe housing crisis caused by other Cities developing
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more jobs than housing units. Between 2010 and 2015, 72,800 jobs were created n San

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Mateo County, and only 3,844 housing units 1 .

The elimination of Redevelopment Agencies (RDAs) in 2011 in California, intended to raise

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1
San Mateo County Home for All: http://homeforallsmc.com/challenge/ CA EDD, US Census, American Community

Survey

1
revenues to mitigate the Great Recession and the State s large budget deficits, also meant approximately 6 billion less dedicated to the creation of affordable housing; which

exacerbated the state s housing crisis by eliminating approximately 1 billion in annual revenues earmarked for affordable housing. Thus, as the State came out of the recession and its population grew, affordable housing funding and production dried up. Consequently, housing prices and rents have soared. Controlled for size, East Palo Alto is a leader in providing housing and affordable housing. The City has a very low jobs to housing ratio. East Palo Alto has approximately 0.2 jobs per
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employed resident. Surrounding cities have 2-3 jobs per employed resident. Approximately

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40
of the total housing units in the City have affordability restrictions.

Table 1: Affordable Housing in East Palo Alto Units
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Affordable Income Restricted Rentals 488

Affordable Ownership 90
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Affordable Rent Stabilized 2,500

Total Affordable Housing Units 3,078
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Total Housing Units 7,819

Percent Affordable Housing 39
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Source: 2010 US Census Bureau, http://www.treasurer.ca.gov/ctcac/projects.asp

East Palo Alto has 488 units of multifamily rental housing that were developed using Low

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Income Housing Tax Credits. That equals 6.2 of the total housing units in the City, which

makes East Palo Alto among the cities with the highest percentages of total housing developed with Low Income Housing Tax Credits.
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Source: US Census, http://www.treasurer.ca.gov/ctcac/projects.asp

East Palo Alto also has one of the highest population densities per square mile in the Bay Area at (11,239) compared to San Mateo County s 1,602, or Redwood City s 3,955 and has

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significantly higher percentage of overcrowded units. East Palo Alto also has one of the

strongest rent stabilization and tenant protection frameworks in the State. Despite all these

efforts, it is still not enough, and far too many East Palo Alto residents are negatively impacted by the housing crisis. The Affordable Housing Strategy will establish priorities that will guide City programs and investments in affordable housing for the next 10-15 years. The Affordable Housing Strategy is a policy document that will reflect the City Council s priorities for affordable housing and present a blueprint for the implementation of those priorities. In East Palo Alto, the timing is advantageous for the preparation of the affordable housing strategy that will guide the City s response to this severe housing crisis. Affordable housing production is cyclical, and it is possible that the State will be entering a period of high (relative to the past) affordable housing production due to the extreme need and available resources. Currently, the City has resources, in terms of land and financing, for
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affordable housing; and there are significant local, County, and State funding sources

available. The key independent variables in the development of affordable housing are local political support, the availability of local gap financing, the availability of land parcels of sufficient size, and site control. The City has resources for affordable housing development. The City owns 965 Weeks St., a 2.58 acre parcel designated for affordable housing development. The City also has access to approximately 18 million in affordable housing gap financing, including the following sources included in Table 2 below:

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Table 2: Estimated City Funding for Affordable Housing

Source Amount
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965 Weeks (Land) TBD

Housing In Lieu Fees 6,242,000

No additional detail provided

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TOT Set Aside 1,547,700

Low Mod Successor Agency Funds 606,500

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Catalyst Housing Fund (Facebook Settlement) 10,000,000

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Housing Assistance Funds 291,800

The next ten (10) years represent a major opportunity for the City of East Palo Alto to significantly expand its leadership in the development of affordable housing. The City s existing funds will be advantageous for leveraging and competing for available state resources for affordable housing projects. This will be especially true if the voters approve the proposed 4 billion State Housing Bond measure slated for the November 2018 ballot.
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The Affordable Housing Strategy will identify the City Council priorities and the blueprint

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to implement them. The primary goal of the Affordable Housing Strategy is to provide the

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necessary analysis to assist Council in determining how to more effectively develop,

maintain, and protect affordable housing. The demand for affordable housing, however,

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significantly exceeds the available affordable housing subsidy. The City has to strategize

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and prioritize the investment of its limited affordable housing funding to ensure alignment

with the priorities of the City Council. Affordable Housing Development Models and Programs There are generally 10 types of affordable housing development models and programs. They are described below, along with a general description of their pros and cons.
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1.
Affordable Ownership Units: These are below market rate ownership units. They are usually targeted for moderate-income households earning between 80 and 120 of the

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Area Median Income (AMI). )

a) Pros: Help households gain a foothold in ownership and build equity. High leverage per unit because of higher AMIs. b) Cons: Staff intensive to manage. Difficult to enforce resale restrictions. Can be expensive per unit. Do not assist low or very low-income households.

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2.
Tax Credit Allocation Committee (TCAC) Affordable Rental Units: These are affordable income restricted rental units. Rents are restricted and linked to AMI. Upon

vacancy, unit is rented to new tenant at target AMI. These are used for families and
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individuals. In addition, there are special needs populations like youth, seniors, or the

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developmentally disabled. There is wide variation with the allowable AMIs from

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Extremely Low Income (ELI) units at 30 AMI to 60 AMI. The lower the AMI (the

higher the affordability) the larger the local subsidy required. TCAC funds for the more valuable 9 LIHTC program are highly competitive. Projects can include new construction or rehabilitation. a) Pros: Rents are controlled at specific income levels. Skilled developers can efficiently produce large number of units. Minimal City staff resources required to manage and monitor. b) Cons: Some people may barely exceed the income limit restrictions and not qualify for the subsidized rental units. The funding structure of these types of projects are usually multi layered that may lead to multiple restrictions due to the sources of funding, which may limit the City s ability to define the qualification and occupancy criteria of the project.

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3. Permanent Supportive Housing for Homeless: These are affordable rental units for the homeless individuals and families that provide significant support services to ensure that

the residents remain housed. Incomes typically range from 0-30 AMI. Product type can be Single Room Occupancies (SROs) or apartments. These projects are also eligible for TCAC financing. a) Pros: Provide a comprehensive and real solution for homelessness. b) Cons: Extremely expensive due to very high levels of subsidy and cost of support

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services. Not financially feasible without ongoing operating subsidies for social

services. Potentially, higher neighborhood opposition to projects.
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4.
Transitional Housing: These are affordable rental units for homeless individuals and families that provide significant support services for up to 24 months to prepare

households for permanent housing. Incomes typically range from 0-30 AMI. Typically apartments. a) Pros: Provide high level of subsidy and social services. Can incorporate supportive service elements of a permanent supportive housing for homeless but with defined timelines. b) Cons: Very expensive due high levels of subsidy and cost of support services. Not financially feasible without ongoing operating subsidies for social services. Potential higher neighborhood opposition to projects. General lack of affordable

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housing complicates transition when the 24 months expire.

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5.
Rapid Re-Housing: Similar to Transitional Housing, but the goal is to move households into permanent housing as quickly as possible rather than every 24 months. Focus is on

housing location services and financial assistance for housing related expenses (e.g., rent arrears, ongoing rent assistance, moving costs). a) Pros: Provide housing quickly to displaced households to help prevent homelessness after displacement. Due to shorter tenancies, can assist multiple households at separate times in one unit. b) Cons: Expensive due high levels of subsidy. Might be difficult to prevent temporary re-housing from becoming permanent housing.

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6.
Emergency Shelter: Homeless shelter providing beds in a group setting. Incomes typically range from 0-30 AMI. Stays are limited to 90 days. Tenants have to vacate

No additional detail provided

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shelter during the day. Typically individuals, although there are special shelters for

families. a) Pros: Provide a place off the streets. Generally, low development costs if an existing building can be easily adapted for this use. b) Cons: Challenging to address needs of families. Community opposition is common. Immediate response to homelessness, but does not provide a longer-term housing
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solution. Challenging to secure funding for operations.

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7. Homeless Drop In Center: Drop in Center where homeless can receive social services, case management, housing referrals. Sometimes provide showers, clothing, and/or

laundry as part of their services. Can be connected to an affordable housing development or separate from it. Incomes typically range from 0-30 AMI. Location should have good transit service. a) Pros: Provide needed services. Stand-alone Drop In Center can provide services in commercial buildings. Can be combined with a permanent affordable housing project to achieve housing/service synergies.
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b) Cons: Stand Alone Drop In Center does not include housing and rely on housing referrals. Challenging to secure funding for construction and operations.

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8.
Inclusionary Affordable Housing: Affordable Units constructed by a market rate developer as part of a market rate project. Can be both rental or ownership. Often at

higher income levels. Can be both individuals and families. a) Pros: Creates mixed income projects. Cost effective, it builds affordable units at the same time as market rate units.

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b) Cons: Typically higher income, especially for the ownership units. Require significant City Staff resources to manage.

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9.
Second Units (Detached and Attached): Small attached or detached units generally constructed in the backyard of an existing house. No income or affordability restriction,

unless publicly subsidized. Technically not affordable because there is no income or affordability restriction. EPA Municipal Code requires that one of the units be occupied by the owner of the parcel. Often developed first for family or other non market consideration (housing for a child or in-law) a) Pros: Increases available housing units. Rents might not rise as quickly as the market because landlord might place a premium on having a good tenant due to proximity. Garage Conversions are relatively inexpensive. Allows primary homeowner to generate supplemental income. b) Cons: It is exceedingly complicated and expensive to build a legal 2nd Unit in one s back yard. High construction and rental costs per square foot due to limited construction economies of scale. The 21 Elements 2 nd

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Unit Calculator estimates that

it would cost 265,000 to build a permitted 700 sqft second unit in East Palo Alto.

See http://secondunitcentersmc.org/calculator/. No deed recorded affordability

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restriction on second unit or existing unit. Not clear if a good model exists for

providing public subsidy and requiring affordability restrictions on 2 nd units, and it would require significant staffing resources to manage such a program.
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10. Anti Displacement Services: Legal assistance to remain housed, rental assistance, first and last month s rent, motel vouchers, housing relocation assistance, and other social and legal services intended to prevent and mitigate displacement.

a) Pros: Supports households in need. Can prevent or mitigate displacement and or homelessness. b) Cons: It does not provide housing. It treats the symptoms but does not address the root cause of the problem. Analysis
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Affordable Housing Strategy Process

In July 18, 2017, the City Council awarded the contract to prepare the Affordable Housing Strategy to David Paul Rosen and Associates (DRA). There is a two steps process. First, the presentation of background data and key questions to the community and the City

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Council. Second, based on the community input and City Council direction, the preparation

of a draft and then final Affordable Housing Strategy to be adopted by the City Council. The Background Document is attached to this document. See Attachment 2. The chapters include:
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1.
Background Report a) Summary of Existing Housing Conditions b) Housing Needs and Market Assessment c) Homelessness Analysis d) Affordability Gap Analysis

Staff will present the Background Documents to the community and to the City Council,

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and receive direction from the City Council.

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A
draft schedule for the Affordable Housing Strategy is below.

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1.
Week of April 10th- Release of Draft Background Reports 2. April 16, Stakeholder meetings 3. April 16th, 6:30pm; Community Meeting 4. April 24th, 7:30pm; City Council Study Session 5. TBD- July/Sept(?) Preparation/Release of Draft Affordable Housing Strategy based

on input from the community and City Council direction

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6.
TBD- Sept/Oct. Community Meeting for Draft Affordable Housing Strategy 7. TBD- Oct./Nov. City Council meeting for adoption of Draft Affordable Housing

Strategy

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The schedule above depends in part on the questions and information requests received by

the community and the City Council. Staff will include summaries of the stakeholder and community meetings on April 16 th in the final staff report for the April 24 th

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City Council

Study session. Discrete sections of the Affordable Housing Strategy can proceed in tandem, in particular the City Council direction regarding 965 Weeks. Staff can work on a draft RFP while finalizing the Draft Affordable Housing Strategy.

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City Council Direction

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To prepare the draft Affordable Housing Strategy, staff require direction from the City

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Council. Staff and DRA have attempted to structure the process to facilitate actionable

outcomes and priorities. The topic of affordable housing crisis and its potential solutions is expansive. Staff have attempted to create a focused process that balances providing necessary granular information without becoming overwhelming with too many details. Staff and DRA seek Council guidance and priorities for the allocation of City affordable

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housing financial and land resources to specific priority projects and/or programs serving

specific resident populations. Staff have attempted to accomplish this by preparing a list of questions that will guide the City Council prioritization process and a potential draft strategy for discussion purposes only. The Affordable Housing Strategy (AFS) will reflect the City Council s priorities, and staff have prepared limited options and potential courses of action to focus the discussion and to provide a template of what a strategy might resemble. During the review process, it is likely that the community and/or City Council will raise additional questions.

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Staff has prepared recommendations for many of the questions as a starting point only. The

Staff recommendations are merely intended to focus the conversation and provide a

template for the type of direction that is ultimately needed. The AFS is a City Council

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document. The City Council may reject, amend, or accept the Staff recommendations.

The severity of the housing crisis and the scarcity of resources necessitate a difficult trade off and prioritization among a variety of valid potential uses for affordable housing
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resources. The resources available to provide affordable housing are insufficient to address

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all needs. The City Council will have to make a series of policy decisions to prioritize the

allocation of scarce public resources to priority projects and programs. All eligible uses of
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affordable housing funds meet critical needs, including the homeless, the extremely low

income, the working poor, and moderate-income households. Each decision will involve a trade off among a variety of different potential uses.
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To aid in the decision making process, Staff have prepared the East Palo Alto Affordable Housing Options Matrix that identifies the typical programs and projects, the target populations and incomes, and the eligible city funding sources. See Attachment 1.

Seven (7) Initial Questions
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1.
Should the City establish an aspirational goal of achieving a certain number of affordable housing, rental TCAC, deed-restricted units to construct in 10-15 years?

There might be significant (relative to the past) resources available in the next 10 years. Affordable housing development will depend in part on local gap financing and also local
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political support. The Housing Element, which is based on 7 years of housing needs (2015-

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2023), includes 118 units of extremely low, very low, and low income housing as part of

East Palo Alto s Regional Housing Need. However, the RHNA is a based on regional projections. Staff Recommendation: Establish an ambitious goal of adding 500 net new (not replacement for deed restricted or RSO units) TCAC affordable rental units (low or very low income) in the next 10-15 years. It establishes a political message that will assist the City and developers in attracting external forms of affordable housing subsidy. East Palo Alto has approximately 500 TCAC affordable rental units. This recommendation
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would double the amount in the next 10-15 years. This is an extremely ambitious goal and

it would be very challenging to meet. This would exceed the known and likely sources of local East Palo Alto gap financing, and would require county, regional, and State funding sources to provide significant amounts of local gap financing. Accomplishing this goal would require a few larger projects with 150 or more TCAC units. There is limited land available for these larger projects. 2. What type of affordable housing should the Council support on 965 Weeks St.? The City owns 965 Weeks St, a 2.5 acre parcel that will support 100-120+ affordable
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housing units. The City is working with an appraiser to get a letter of valuation. The

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Affordability Gap Analysis section of the Background Report includes the analysis of 965

Weeks Street in its feasibility pro formas. The project is eligible for 9 Tax Credits, which allows for a project with deeper levels of affordability (lower AMIs).The project will leverage other sources of county, regional, and state funding. Once the City Council indicates the desired type of affordable housing on 965 Weeks, staff
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will prepare a Request for Proposals (RFP) to select a developer and begin the selection

process. This process does not have to wait the completion of the AFS, and can proceed
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once the City Council has provided sufficient direction to begin drafting an RFP.

A potential draft schedule is below. a) Fall 2018/Winter 2019- City Council authorizes release of RFP for 965 Weeks Street b) Winter/Spring 2019-City Council authorizes negotiations of an Exclusive Negotiating Agreement (ENA) with a preferred developer for 965 Weeks Street
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c) Summer/Fall 2019- Entitlements for 965 Weeks Street d) Spring/Summer/Fall 2020- Building Permits and start of Construction for 965 Weeks

St (Depends on funding cycles) e) Fall 2021/Winter Spring 2022- Grand Opening 965 Weeks St. The key variables for 965 Weeks are the demographics, income levels, and product types. The options generally include: a) Affordable Ownership Units, 80-120 AMI, families b) Affordable Rental Units, 30 -60 AMI; Families, individuals, seniors c) Permanent Supportive Housing for Homeless, 0-30 AMI, Individuals (SROs) or Families d) Other: Emergency Shelter, transitional housing, Rapid Rehousing 0-30 AMI
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See outline on typologies of affordable housing and East Palo Alto Affordable Housing

Options Matrix in Attachment 1 for more information. The Matrix has the affordable
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housing type, the populations and incomes, and the eligible local funding sources.

Staff Recommendation: Pursue a large family (2 and 3 bedroom units) TCAC affordable rental project with at least 30 of the units at 30 AMI (ELI). It is exceedingly difficult to find an affordable 3-bedroom apartment. The housing market does not produce many 3

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bedroom units, and East Palo Alto has large household sizes. Large family units help

families to stay in East Palo Alto and in East Palo Alto schools.

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3.
What other housing development priorities should the City pursue?

No additional detail provided

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Staff Recommendation: Explore possibility of adding units to existing TCAC affordable

rental housing projects. Adding new affordable units to existing affordable housing sites would be an effective and cost efficient method to provide affordable housing. Eden Housing, the owner of the LightTree Apartments, has expressed interest in rehabilitating the
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existing units and adding approximately 30 net new units on the site.

No additional detail provided

Staff Recommendation: Explore possibility of other projects that would be eligible for 9

TCAC and be of significant size (100+ units) to assist in maximizing development potential.
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4. What other developments and programs should the City pursue to prevent displacement?

Staff Recommendation: Implement the RV Safe Parking Program to provide overnight RV
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Parking Spaces and program management for up to 15+ parking spaces on the City-owned

Tanklage site. Staff Recommendation: Pursue a Rapid Rehousing Project with 20-30 units or apartments.

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This is consistent with the recommendation from the 2012 Homeless Strategy. See page 16

of the Homeless Analysis section of the Background Report in Attachment 2. Providing anti-displacement services (legal assistance, housing location assistance, and housing costs) is critical, but it is not enough. Housing referrals have limited value when there is simply no

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housing available. A Rapid Rehousing project would help to ensure that East Palo Alto

residents who are displaced have a safe landing location in East Palo Alto to try to find another housing unit in East Palo Alto. This is especially important for displaced families with children in the local school system.

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Staff Recommendation: Pursue RFP for anti displacement services that complement the RV

No additional detail provided

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Safe Parking Program and the Rapid Rehousing Program.

5. What should the City do to encourage legal second units and bring second units without permits into compliance, if possible? Staff Recommendation: Staff recommend waiting until July/September to answer this question to consider and include the input of the 2 nd

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Unit Taskforce, and make

No additional detail provided

room for the City s budget adoption process. The City Council created 2nd Unit Taskforce in 2016 to seek ways to minimize displacement, encourage legal second

units, and facilitate bringing second units without permits into compliance. The Taskforce has met 4 times between May 2017 and October 2017. Accomplishments include:
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a) Updated the City Ordinance to allow a maximum of 30 days before vacating a red tagged unit.

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b) Organized and did outreach for two community informational meetings to describe the planning and building requirements for second units

c) Presentation on Anti Displacement Services from El Concilio d) Presentation on Code Enforcement Best Practices from San Mateo County Health Department. e) Presentation on Code Enforcement from Christopher Gale, former East Palo Alto Chief Building Official. f) Prepared a Draft Scope of Work (RFP) for Anti Displacement Assistance g) Presentation on Report from Displaced Tenants Workgroup h) Presentation from Josh Abrams, from 21 Elements on encouraging ADUs

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i) Discussion of Draft Priorities and recommendations j) Preparing updated City handouts for garage conversions

In addition to the work of the Taskforce, a subcommittee of Rebuilding Together Peninsula,

City Planning and Building staff, and PIA have been meeting monthly since December 2017

to bring several garage conversions built without permits into compliance. The Building Division prepared a handout titled: Garage Conversion Submittal Requirement and had the group review it. As background, since 2014, the City has approved approximately 80 ADUs since the zoning

Tagged Passions:compliance, planning, and zoning

amendments were amended in 2014 to facilitate more ADUS.

2014-Aug 2016 Aug 2016- Oct 2017 Total

Second units 16 6 22

Garage conversions 17 34 51

Guest houses 3 4 7

6.
Should the City explore ways to convert Rent Stabilized Units into TCAC, deed restricted units?

There are approximatey 2,500 units in the City s rent stabilization program (RSO). Approximately 1,830 of the RSO units are owned by Woodland Park Communities. However, there are individual owners who own RSO apartment complexes. These apartment complexes, which are not owned by Woodland Park, are occasionally offered on the market for sale. Staff have traditionally strongly discouraged non-profit affordable housing developers from acquiring these RSO apartment complexes due to concerns that there could be displacement due to income standards, immigration status, or occupancy standards (affordable housing funding sources have strict occupancy standards that limit the number of people who can occupy each unit to prevent overcrowding). It is possible that ownership by a non-profit affordable housing developer would be preferable to remaining in private ownership. Also, RSO units convert to market rents upon vacancy, while deed restricted TCAC affordable units rents are restricted to the income levels. There is also the concern that owners might sell them to an unsuspecting private investor who is not familiar with managing a rent-stabilized portfolio. It would require analysis of principles that would guide the acquisition of RSO units by affordable non-profit developers and how it might be accomplished to prevent displacement. Staff Recommendation: This is a complicated and sensitive issue, and staff recommend
Tagged Passions:rent stabilization, Immigration, funding, market, parks, program, sale, and housing

hearing from the community and the City Council on this complex issue.

No additional detail provided

Tagged Passions:hearing and council

12
7. Are there additional questions or priorities the City Council would like to be explored? Is there additional information the City Council needs to provide direction on the

Affordable Housing Strategy? The AHS is a City Council policy document. There might be priorities or projects or questions that are not covered within the questions above. The City Council might require

Tagged Passions:policy, council, strategic, and housing

additional information to provide direction.

Staff Recommendation: Staff will return in July/September with the additional information requested. Staff request that additional information be related to producing actionable priorities. The topic of affordable housing is voluminous, and staff are attempting to distill the expansive topic into manageable sections that translate into actionable priorities and policies. Staff will provide the City Council with the information necessary to make an

Tagged Passions:council and housing

informed policy decision. However, the decision is ultimately a policy decision that reflects

No additional detail provided

Tagged Passions:policy

the values and priorities of the City Council.

Next Steps Staff will receive input and return in July/September with a Draft AFS for Council consideration. Depending on the comfort of the City Council in making the development of
Tagged Passions:council, development, and Development

965 Weeks the AHS priority, staff might be able to return with a draft RFP in September for

comment and further refinement. The preparation of a final RFP for release most likely will take several meetings. Fiscal Impact NA Public Notice The public was provided notice of this agenda item by posting the City Council agenda on the City s official bulletin board outside City Hall and making the agenda and report available at the City s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto. In addition, this study session was noticed through several public email notices. Environmental NA
Tagged Passions:university, rfp, RFP, environment, and library

13
Attachments

No additional detail provided

1.
Affordable Housing Options Matrix 2. East Palo Alto Affordable Housing Strategy, Background Document a) Summary of Existing Housing Conditions b) Housing Needs and Market Assessment c) Homelessness Analysis d) Affordability Gap Analysis

No additional detail provided

Tagged Passions:strategic, market, and housing

14
ATTACHMENT 1: EAST PALO ALTO AFFORDABLE HOUSING OPTIONS MATRIX

Anti Displacement Services RV Safe Parking Program Drop In Center for Homeless (w/o housing) Emergency Shelter Transitional Housing Rapid Rehousing Permanent Supportive Housing Permanent Supportive Housing with Drop In Center for Homeless Single Room Occupancy

Tagged Passions:services, parking, program, emergency, housing, and homeless

4
/9 Tax

Credits Affordable Ownership Target Income Level(s) AMI All All 0 30 0 30 0 30 0 50 0 30 0 30 0 30 30 50 80

Tagged Passions:taxes, Taxes, and grocery

Target Population(s)

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All All Homeless Homeless Homeless, Youth

Homeless, Families

Tagged Passions:youth and homeless

Homeless Homeless Single Adults, Youth

Families, individuals , seniors Families Eligible City Sources Housing In Lieu Fees N N N Y Y Y Y Y Y Y Y
Tagged Passions:youth, housing, seniors, and homeless

965 Weeks (land) N N N Y Y Y Y Y Y Y Y

TOT Set Aside N N N Y Y Y Y Y Y Y Y Silicon Valley CF/CZI Water Fund Repayment Funds N N N N Y Y Y Y Y Y ??? Housing Assistance Funds N N N Y Y Y Y Y Y Y Y
Tagged Passions:Utility, funding, utility, housing, and water

Low Mod Successor Housing Funds

N N N Y Y Y Y Y Y Y Y Commericial Linkage Fee N N N Y Y Y Y Y Y Y Y
Tagged Passions:funding and housing

Catalyst Housing Fund (Facebook Settlement)

N N N N Y Y Y Y Y Y Y
Tagged Passions:social media law, settlement, and housing

Measure O/General Fund Y Y Y Y Y Y Y Y Y Y Y

Other Housing Programs Housing Development

Tagged Passions:development, Development, program, and housing

15
Background Reports

No additional detail provided

City of East Palo Alto

16
jprado Typewritten Text Attachment 2

jprado Typewritten Text jprado Typewritten Text jprado Typewritten Text DAVID PAUL ROSEN ASSOCIATES D E V E L O P M E N T, F I NA N C E A N D P O L I C Y A DV I S O R S

Summary of Existing Housing Conditions

Tagged Passions:housing

City of East Palo Alto March 16, 2018

Public Review Draft

17
jprado Typewritten Text Attachment 2a

jprado Typewritten Text

City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions

P R E P A R E D F O R :
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City of East Palo Alto

P R E P A R E D B Y : David Paul Rosen Associates

3527 Mt. Diablo Blvd, 361 Lafayette, CA 94549 510-451-2552 david@draconsultants.com www.draconsultants.com

No additional detail provided

3941 Hendrix Street Irvine, CA 92614 949-559-5650 nora@draconsultants.com www.draconsultants.com

No additional detail provided

Tagged Passions:streets

18
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions

No additional detail provided

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TABLE OF CONTENTS

A.
Affordable Housing Income Levels, Rents Home Prices .................................................... 1

No additional detail provided

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1.
Target Income Levels .......................................................... 1 2. Affordable Rents and Home Prices ...................................... 2

No additional detail provided

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a.
Affordable Housing Cost Definitions ........................................... 2 b. Occupancy Standards .................................................................. 3 c. Utility Allowances ........................................................................ 3 d. Affordable Rents and Sales Prices ................................................ 3

No additional detail provided

Tagged Passions:Utility, utility, sale, and housing

B.
Demographic Trends and Conditions ........... 5

C.
Existing Affordable Housing Needs and Supply ............................................................. 8

No additional detail provided

Tagged Passions:housing

D.
Housing Market Conditions .......................... 9

No additional detail provided

Tagged Passions:market and housing

E.
Housing Subsidy Requirements (Affordability Gap) .............................................................. 12

No additional detail provided

Tagged Passions:housing

F.
Existing Local Financial Resources for Affordable Housing ........................................ 22

No additional detail provided

Tagged Passions:finance and housing

19
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions

No additional detail provided

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LIST OF TABLES

1.
Affordable Housing Income Limits by Percent of Area Median

No additional detail provided

Tagged Passions:housing

Income (AMI) and Household Size ........................................ 2

No additional detail provided

2.
Affordable Net Rents by Percent of AMI and Unit Bedroom Count ................................................................................... 4

No additional detail provided

3.
Affordable Home Prices by Percent of AMI and Unit Bedroom Count ................................................................................... 4

No additional detail provided

4.
Comparison of Average Market and Affordable Rents .......... 11 5. Per Unit Affordability Gaps, Rental Prototypes, With and

Without Low Income Housing Tax Credits, Highest Competitive Income Targeting, No Land Costs .................... 13 6. Estimated Sources and Uses, New Construction Rental Housing Prototypes with Low Income Housing Tax Credits, Highest Competitive Income Targeting, No Land Costs ....... 14

Tagged Passions:taxes, Taxes, rental, market, construction, and housing

7.
Per Unit Affordability Gaps, Rental Prototypes, With and Without Low Income Housing Tax Credits, Lower Income Targeting, No Land Costs .................................................... 15

8. Estimated Sources and Uses, New Construction Rental Housing Prototypes with Low Income Housing Tax Credits, Lower Income Targeting, No Land Costs ............................. 16

Tagged Passions:taxes, Taxes, rental, construction, and housing

9.
Per Unit Affordability Gaps, Rental Prototypes, With and Without Low Income Housing Tax Credits Highest Competitive Income Targeting, Land Costs at 40/SF .......... 17

10. Estimated Sources and Uses, New Construction Rental Housing Prototypes with Low Income Housing Tax Credits, Highest Competitive Targeting, Land Costs at 40/SF .......... 18

Tagged Passions:taxes, Taxes, rental, construction, and housing

11.
Per Unit Affordability Gaps, Rental Prototypes, With and Without Low Income Housing Tax Credits, Lower Income Targeting, Land Costs at 40/SF ........................................... 19

No additional detail provided

Tagged Passions:taxes, Taxes, rental, and housing

20
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions

12. Estimated Sources and Uses, New Construction Rental Housing Prototypes with Low Income Housing Tax Credits, Lower Income Targeting, Land Costs at 40/SF .................... 20

Tagged Passions:taxes, Taxes, rental, construction, and housing

13.
Owner Per Unit Affordability Gaps, Townhome Prototype .. 21 14. Available City Funds for Affordable Housing, City of East Palo

Alto, June 30, 2017 ............................................................. 22

Tagged Passions:funding and housing

15.
Annually Recurring City Funds for Affordable Housing, City of East Palo Alto ...................................................................... 23

16. Section 8 Housing Choice Voucher Program, Housing Authority of the County of San Mateo ................................. 24

Tagged Passions:funding, program, and housing

LIST OF CHARTS

1.
Race and Ethnicity, East Palo Alto and San Mateo County .... 5 2. Income Distribution, City of East Palo Alto .......................... 10 3. Income Distribution by of AMI, City of East Palo Alto ..... 12 4. Cost-Burdened Households by Income Level ...................... 17 5. Distribution by Rental Housing Units by Rent Paid .............. 23

No additional detail provided

Tagged Passions:rental and housing

21
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 1

No additional detail provided

Tagged Passions:housing

Summary of Existing Housing Conditions

Tagged Passions:housing

DRA was retained by the City of East Palo to prepare a Comprehensive Affordable Housing Strategy for the City. This report summarizes the analysis of existing housing conditions in East Palo Alto prepared by DRA as the basis for developing recommended policies and programs to further the production and preservation of affordable housing to best meet the City s needs within existing resource and land constraints. The analysis of existing conditions is detailed in a series of Appendix Reports presented under separate cover. These Appendices are as follows:

Affordable Housing Needs Assessment Affordability Gap Analysis Homelessness Analysis Residential Real Estate Market Conditions Key findings from the analysis of existing conditions are summarized below.

Tagged Passions:strategic, preservation, market, program, and housing

A.
Affordable Housing Income Levels, Rents Home Prices

This section defines affordable housing income levels, rents and home prices in East Palo Alto.

Tagged Passions:housing

1.
Target Income Levels

This study uses income limits as commonly defined by the Department of Housing and Urban Development (HUD), the Low Income Housing Tax Credit (LIHTC) Program, and most affordable housing assistance programs. These definitions as a percentage of Area Median Income (AMI) are as follows:

Tagged Passions:taxes, Taxes, development, grocery, Development, program, and housing

Extremely low income: Less than 30 Very low income: 30 to 50 Low income: 50 to 80 Moderate income: 80 to 120

All of these income limits are adjusted by household size using HUD s household size adjustment factors.

Table 1 shows 2017 household income limits by percentage of the City s AMI by household size, using the HUD income categories defined above. The 2017 HUD

22
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 2

No additional detail provided

Tagged Passions:housing

median household income for the San Francisco HUD Metro FMR Area (HMFA)1 is 115,300 for a four-person household. However, the extremely low (30 AMI), very low (50 AMI) and low income (80 AMI) limits have been adjusted upwards because the Bay Area is a high housing cost area. These limits are effectively based on a median income of about 131,600.

For a single person household earning 30 of AMI, the annual income limit translates into an hourly wage of approximately 13.30 on a full-time basis.

Tagged Passions:Public Transit and housing

Table 1 Affordable Housing Income Limits by Percent of Area Median Income (AMI)

Tagged Passions:housing

and Household Size1 City of East Palo Alto

2017 Household Size Income Category

1
Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons

30
AMI 27,650 31,600 35,550 39,500 42,700 45,850 50 AMI 46,100 52,650 59,250 65,800 71,100 76,350 60 AMI 55,320 63,180 71,100 78,960 85,320 91,620 80 AMI 73,750 84,300 94,850 105,300 113,800 122,250

No additional detail provided

100 AMI 80,700 92,200 103,770 115,300 124,500 133,750 120 AMI 96,850 110,700 124,500 138,350 149,400 160,500

Source: San Mateo County 2017 published income limits; DRA.

2. Affordable Rents and Home Prices

a.
Affordable Housing Cost Definitions

No additional detail provided

Tagged Passions:housing

Calculation of affordable rents and home prices requires defining affordable housing expense for renters and owners. For this study, affordable housing expense for renters is defined to include rent plus utilities, which is standard for affordable housing programs and practice. For owners, affordable housing expense is defined to include mortgage principal and interest, property taxes, homeowner s insurance, homeowners/condominium association fees, and utilities. Affordable housing expense is calculated at 30 of household income for renters and owners.

Tagged Passions:taxes, property, Taxes, Utility, program, insurance, utility, housing, and property tax

1FMR stands for Fair Market Rent. The San Francisco HMFA as defined by HUD includes San Francisco, Marin and San Mateo Counties.

Tagged Passions:market

23
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 3

No additional detail provided

Tagged Passions:housing

b.
Occupancy Standards

Because income definitions for affordable housing assistance programs vary by household size, calculation of affordable rents and sales prices requires the definition of occupancy standards (the number of persons per unit) for each unit size. For the purposes of this analysis, affordable housing cost renters is based on an occupancy standard of 1.5 persons per bedroom (1 person for studio units) or, for example, 3 persons in a two-bedroom unit. This definition is consistent with the Low Income Housing Tax Credit and tax-exempt bond programs, which are the most valuable leverage sources for affordable rental housing. For owner housing, affordable housing cost is calculated based on an occupancy standard of one person per bedroom plus one or, for example, 4 persons in a three-bedroom unit.

Tagged Passions:taxes, Taxes, rental, program, sale, housing, and bond

c.
Utility Allowances

Affordable net rents are calculated by subtracting allowances for the utilities paid directly by the tenants from the gross rent (or renter affordable housing cost). For purposes of the gap analysis, we incorporated utility allowances effective November 1, 2017 from the Housing Authority of the County of San Mateo. d. Affordable Rents and Sales Prices

Tagged Passions:Utility, rental, utility, sale, and housing

Table 2 summarizes affordable monthly net rents by income level and unit bedroom count.

Table 3 shows affordable home prices by income level and unit bedroom count.

24
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 4

Affordable Net Rents by Percent of AMI and Unit Bedroom Count1 City of East Palo Alto Housing Affordability Gap Analysis 2017 Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom

Tagged Passions:housing

30
of AMI 644 685 812 927 1,024

No additional detail provided

50
of AMI 1,105 1,179 1,405 1,612 1,787

60
of AMI 1,335 1,426 1,701 1,954 2,169

80
of AMI 1,795 1,919 2,293 2,638 2,932

100 of AMI 2,256 2,413 2,885 3,323 3,695

120 of AMI 2,717 2,906 3,477 4,007 4,459 1San Mateo County published 2017 income limits. Assumes an occupancy standard of 1.5 persons per bedroom. Net rents are calculated assuming 30 of gross income spent on rent and then deducting apartment utility allowances from the Housing Authority of San Mateo County of 47 for a studio, 55 for a one-bedroom unit, 76 for a two-bedroom unit, 99 for a three-bedroom unit, and 121 for a four-bedroom unit (assuming electric heating, cooking and water heating plus other electric). 2017 HUD median income was 115,300. Sources: HUD; San Mateo County; Housing Authority of the County of San Mateo; DRA.

Tagged Passions:Utility, utility, electric, housing, and water

Table 3 Affordable Home Prices by Percent of AMI and Unit Bedroom Count1

City of East Palo Alto Housing Affordability Gap Analysis 2017

Unit Size 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom
Tagged Passions:housing

50
of AMI 118,200 135,900 153,000 165,300

60
of AMI 156,000 178,500 200,300 216,200

80
of AMI 231,600 263,500 294,800 318,200

100 of AMI 307,000 359,300 401,400 536,900

120 of AMI 413,000 466,300 517,500 688,400 1Affordable mortgage principal and interest calculated by deducting the following from affordable owner monthly housing cost: annual property taxes and assessments at 1.20 of affordable home price; HOA dues of 200 per month, property insurance of 100 per month, and utilities of 132, 168, 208 and 249 for one- through four-bedroom units, respectively. Affordable mortgage calculated assuming 5 owner downpayment, 5.0 mortgage interest rate and 30-year mortgage term and amortization. Source: HUD; San Mateo County; DRA.

Tagged Passions:taxes, property, Taxes, Utility, insurance, utility, housing, and property tax

25
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 5

No additional detail provided

Tagged Passions:housing

B.
Demographic Trends and Conditions Key findings from the analysis of demographic trends and conditions are summarized as follows:

The populations of East Palo Alto and San Mateo County declined between 2000 and 2010, but have increased since 2010. The population of East Palo Alto has grown at a slightly lower rate than surrounding communities since 2010 (4.6 annually for East Palo Alto; 6.26 for San Mateo County). East Palo Alto s population has grown since 2010 even though the City added no new housing over this period, due in large part to the moratorium on new development resulting from a lack of available water. The result is an increase in the household size in East Palo Alto from 4.04 persons per household in 2010 to 4.25 persons per household in 2017. This compares to an average household size of 2.90 persons countywide in 2017. The high persons per household in East Palo Alto is an indication of overcrowding, as households double up to reduce housing costs. East Palo Alto has a higher proportion of Hispanic, Black, and Hawaiian/Pacific Islander residents and a smaller proportion of White and Asian residents than the County as a whole. (See Chart 1). Chart 1: Race and Ethnicity, East Palo Alto and San Mateo County
Tagged Passions:Utility, development, Development, utility, housing, and water

Source: Census 2010; City of East Palo Alto; DRA.

65

25
16

No additional detail provided

3
6

42
7

No additional detail provided

1
4

25
3 4

East Palo Alto San Mateo County

Other Asian Hawaiian/Pacific Islander White Black Hispanic

26
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 6

East Palo Alto is comprised of 65 renter households and 35 owner

Tagged Passions:housing

households. The City has a 20 to 25 higher proportion of renter households and a correspondingly lower proportion of owner households than Palo Alto, Menlo Park and San Mateo County as a whole.

East Palo Alto households have much lower incomes than those of surrounding communities and San Mateo County as a whole. Nearly one quarter (22 ) of East Palo Alto s households have incomes less than 24,999, which equals only 28 of the San Mateo County median household income in 2015. Another 47 of East Palo Alto s households earn between 25,000 and 75,000. The remaining third of households (31 ) have incomes of 75,000 or more. (See Chart 2).
Tagged Passions:parks

Source: 2015 ACS 5-year estimates; DRA

East Palo Alto s renter households have significantly lower incomes than its owner households. Over one-third of renter households in East Palo Alto had incomes at or below 30 of area median income, placing them in the extremely low income category, compared to only 12 of owner households. Nearly another third (31 ) of renter households are very low income, with incomes below 50 of AMI. Less than 17 of the City s renter households have incomes above 80 AMI, compared to 28 of owner households. (See Chart 3). 22.40 14.9 15.6 16.0 10.1 21.2

0
5

10
15

20
25

No additional detail provided

< 24,999 25,000 to 34,999

35,000 to 49,999 50,000 to 74,999 75,000 to 99,999 Chart 2 Income Distribution City of East Palo Alto 2015

27
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 7

No additional detail provided

Tagged Passions:housing

Source: 2013 HUD CHAS data; DRA.

East Palo Alto is primarily a residential community with a relatively small base

of jobs and modest projections of employment growth. In 2014, the City contained about 2,700 jobs, or less than 1 of total employment in the market area comprised of East Palo Alto, Menlo Park, Redwood City, Palo Alto, Los Altos and Mountain View. This market area is projected to add about 80,000 jobs between 2010 and 2035. The City of East Palo Alto is expected to add about 880 jobs over the same time period.

East Palo Alto has 0.23 jobs per employed resident the lowest jobs per employed resident ratio in the Bay Area. The City s tax base is shallow and lacks diversity. Both of these factors reflect East Palo Alto s limited economic development. East Palo Alto s poverty and uninsured rates are about three times higher than those of Palo Alto and Menlo Park. The unemployment rate in East Palo Alto is nearly double those of these other two cities, though it is still low at 5 .

Tagged Passions:taxes, Taxes, poverty, development, rates, diversity, employment, jobs, market, parks, Development, growth, and economic development

28
City of East Palo Alto March 16, 2018 Summary of Existing Housing Conditions 8

No additional detail provided

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C.
Existing Affordable Housing Needs and Supply

Key findings from the housing needs assessment are summarized as follows:

Tagged Passions:housing

According to the Department of Housing and Urban Development s (HUD s) standard, households paying more than 30 of their gross income on housing costs are considered to be cost-burdened (paying more than they can afford for housing) and households paying more than 50 of gross income on housing are considered severely cost-burdened. Nearly all of the City s households earning less than 30 of AMI are cost burdened (95 ) and three-quarters are severely cost-burdened. (See Chart 4).

For households earning between 30 and 50 of AMI, three-quarters are cost- burdened and almost one-third are severely cost-burdened. The City has a total of 1,695 renter households paying more than half of their income on housing. (See Chart 4).
Tagged Passions:development, Development, and housing

Source: 2013 HUD CHAS data; DRA.

93.80 74.80 51.20 74.10 33.60 12.50

0
10

20
30

No additional detail provided


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