State Density Bonus Law incentivizes more affordable housing

Town Crier File Photo
Multifamily complexes like the Colonnade, seen here under construction, could continue to proliferate on El Camino Real after Los Altos folds state Density Bonus laws into the city’s development regulations.

As the Los Altos Planning and Transportation Commission reviewed California’s new Density Bonus Law last week, members agreed that additional housing is needed because of what Commissioner Ronit Bodner referred to as the “crisis” of affordable housing.

“The reason these density bonus regulations have gone into effect,” Bodner said, “is because we as a community are failing to provide enough affordable housing. So the state is taking it out of our hands and imposing this regulation on us to force these communities to do more than the status quo.”

The new statewide mandate allows housing developers to build larger projects if they include affordable units, according to Jon Biggs, Los Altos’ community development director.

“A density bonus project can receive a bonus of up to 35 percent market-rate units, on a proportional scale,” he said. “It allows for up to three concessions or incentives, provides for waivers from development standards and alternatives to parking requirements. The more affordable units included in the project, the more incentives the project is entitled to.”

Incentives may include greater height, less parking and diminished setbacks that leave less space in between buildings.

The incentives concerned several Los Altos residents, who told commissioners at their June 1 meeting to do what they could to stymy state laws.

Fred Haubensak, who collected more than 200 signatures on a petition to lower height limits along El Camino Real, wants to limit building heights to 45 feet, no matter what.

“Lets keep the current height at 45 feet as a maximum and reject anything that surpasses this limit,” he said. “If you have to reset the height to 30 or 35 feet to get to 45 feet in practice, let’s achieve that.”

David Walther concurred, calling affordable housing a “zero-sum game.”

“Forty-five feet should be a limit, not a starting point,” he said.

Counting profits

Walther also asked what an acceptable profit margin was for a developer, something Biggs said neither the state nor Los Altos had a hard figure for.

“We don’t really have an answer for that question,” Biggs said. “We’ll have to come up with some standard requirements that an applicant will have to include.”

A 2016 California Economic Summit study reported that approximately 6 percent of the cost of a multifamily housing project goes toward developers’ fees, and 11 percent into contractors’ pockets.

According to Real Estate Reports, multifamily real estate values in Santa Clara County appreciated by 7.2 percent in the past year (comparing May 2017 with May 2016).

Single-family housing values in Santa Clara County appreciated by 7.4 percent in the same time frame. Home prices have increased 63 percent in the past four years, from May 2013’s median sale price of $649,500 to May 2017’s $1.025 million.

Meanwhile, a 2015 study by RealtyTrac noted that rental property owners in Santa Clara County can expect a 4.31 percent annual return – one of the lowest in the country. The same study revealed that owners of rental property in Baltimore can anticipate a nearly 25 percent annual return on their investments.

Density on El Camino

Commissioner Alex Samek suggested that the city look into prioritizing certain incentives over others. Yard setbacks should be more difficult to obtain, he added, because that “is where people really start to feel the impacts of buildings being closer.”

Commissioner Phoebe Bressack agreed.

“We need to set it up in such a way that whatever the incentives are, or waivers are, that community value is preserved,” she said. “There’s a subtlety here that is not present in, say, Mountain View. Be aware that the bar is higher, and in order to get those off-menu (incentives), you’re going to really have to show something.”

Bressack also recommended providing incentives for green building standards and alternative transportation options to attract higher-density development to the Los Altos area.

Commissioner Anita Enander requested that city staff draft a report pointing out where such plots abut single-family homes to get a better understanding of the city’s “tension points.”

Sally Meadows, chairwoman of the commission, said the city should address density bonus regulations when staff is ready to combine them in a discussion of El Camino Commercial Thoroughfare zone ordinances, to better understand the future shape of Los Altos’ El Camino Real corridor.

“That will be a pretty meaty discussion,” she said.

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