Palo Alto mayors talk about everything that’s wrong with Bay Area housing

If any city besides San Francisco is the unwilling poster child of the Bay Area housing crisis, it’s Palo Alto, the bucolic Peninsula town with fewer than 67,000 people in the cold heart of Silicon Valley.

Not just because of the crushing pressure of finding and keeping housing or because of the high stakes of trying to create new development in the tony enclave that Mark Zuckerberg and Larry Page call home, but also because of the tectonic divisions in the conversation about how to resolve them.

Case in point, Palo Alto City Councilmember Eric Filseth served as the city’s mayor in 2019, while Adrian Fine assumed the mayor’s role this year; both mayors agree that the cost of housing in Palo Alto has strangled diversity in the community, and both agree that the city has underinvested in critical infrastructure like housing and transit.

But when it comes to the roots of and solutions to the problem, the two mayors agree on little at all.

Most recently, both split over Senate Bill 50, SF-based State Sen. Scott Wiener’s sweeping (and divisive) transit-housing bill that faces a looming deadline in the California Senate.

After Filseth scourged the bill in an op-ed earlier this month, Curbed SF talked to him about the hazards of housing in Silicon Valley, and with Fine about why he’s putting faith in Sacramento to help break the impasse in his city.

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Curbed SF: We have some follow-up questions about your recent op-ed about SB 50 in the Daily Post.

Eric Filseth: Well, I think most of what I’ve got to contribute, much of which I suspect Curbed doesn’t agree with, is in the Post piece: Until cities balance their jobs and housing growth, they put people into tents.

In the mid-Peninsula, office space leases for [up to] $12 per square foot, high-end housing for maybe $4.00, and affordable housing well under that. So no surprise, we get a lot of investment in the first of those, much less in the second, and none in the third unless we subsidize it.

Cities like business tax revenues and hate spending money. Basically the formula has been: green light every commercial project, and let somebody else worry about the increasingly expensive housing, transportation, and infrastructure. Coming out of the recession the whole Bay Area was guilty of this—including us.

I’m aware Curbed believes suburbs are white NIMBY bourgeois who don’t want to live near low-income earners and so don’t deserve to vote. That’s nutty. Everybody in town here knows that only 10 percent of our teachers and seven percent of city staff actually live here, and it’s a huge issue. You can’t have a functional community comprised only of software engineers and patent attorneys.

In 2015-16 we got off the merry-go-round [and] slapped on serious annual office-space caps, which constrained jobs growth so far that it no longer outstripped our housing production The real estate people obviously hated it, we worried about revenue, but we did it and the result was balance.

I don’t believe SB 50’s upzoning will overcome the economics of commercial versus housing investment. That means its impact will be limited, and not remotely close to keeping up with state job growth.

You bring up all the people who can’t afford to live in Palo Alto. The thing is, that is also the problem that people cite when they promote things like SB 50.

It fits on a bumper sticker.

To them it sounds like madness to say, “Working people can’t afford to live here, so don’t build more housing.” And yes, I realize that’s not strictly what you’re saying—but it is what they hear. Can you address that?

Correct, that’s not what I’m saying. Sure, like everywhere there are people in town who think we’re completely full, but they’re a minority. And, of course, there are people who intentionally distort it that way, in order to support their own political narrative—standard political stuff, alas, sort of like Hillary’s email server.

As for educating everybody, I’ve found it’s tough enough just staying in alignment with our local community. Even harder to do that with the larger region. Even harder with the state level. And harder yet at the national level. If you figure out the answer, tell me, especially with this stuff that’s too complicated to fit on a bumper sticker.

You say Palo Alto “got off the merry-go-round” by capping office construction, but this is a regional economy; offices you don’t build have to be built somewhere else. I guess everyone could say no, but then don’t we pay a price economically?

Which do we prioritize: max new jobs, or no more people in tents? “I can have both for free if I just do X” is a cop-out. We also pay an economic price for environmental and child-labor laws too, and do so happily.

It’s not a no-jobs argument. It’s an argument that if benefits do outweigh costs, then the people who get the benefits ought to cover the costs, not slough them onto the city next door. It doesn’t help that these costs have escalated as the region has densified. But you can’t have it both ways: If it’s not worth doing anywhere, it probably shouldn’t be done. If it is worth doing, then somebody must pay.

Underinvestment in the housing, transportation and infrastructure necessary to sustain our economic success is the foundation of the Bay Area’s woes. Who should fund that investment is our region’s existential question. And it needs to be answered by government setting the rules; corporations are not charities, it’s not fair to ask them to decide on their own.

How to pay for the region’s economic expansion is the seminal issue here. All this NIMBY-YIMBY stuff, and squabbling over who sets parking ratios, is a waste of time.

A jobs/housing balance is still not really relieving housing shortages, it’s just freezing them. Surely the goal should be producing more housing than job/population growth; otherwise aren’t we preserving an interminable status quo?

But you have to live in the real world—at least we do in cities. What you just described is, for the moment, a fantasy. None of these Sacramento initiatives even comes close to matching future job growth let alone exceeding it.

All that these bills [change] is zoning, and there’s no evidence that zoning can close a gap that produces jobs six times faster than housing. Why would anybody think SB 50, another zoning bill, will magically get there? In reality, SB 50 would do the usual: fall back on, “Well, surely every little bit helps.” That’s okay for state politicians, but in cities [people end up living in] tents.

Job one is surely to stop digging the hole deeper now, and there’s proof it’s achievable. Sacramento should—and can—hold cities accountable for balanced growth, not just design their zoning. Because it can actually work in the real world; the latter won’t, and pretending it will just makes more tents.

Well, SB 50 on its own can’t solve everything, but if you say we’re building too many offices and not enough homes, then how is the solution to that not to build more homes? Even if we call that an incomplete solution on its own, it is difficult to see a downside to it in material terms?

You speak of building homes like it’s a choice, that it’s boolean. It’s neither. First, the time you can actually mandate [terms] is when somebody’s seeking approval for a mixed-use project, and you can tell them: “No approval unless there’s more housing in here.” The rest of the time you’re at zone-and-wish, and subject to all the other factors like construction costs, who owns which parcels et cetera. So, it doesn’t just happen. Zoning is not housing.

Second, it isn’t yes or no. SB 50’s authors try to claim it’s a litmus test: Are you for housing or against? You kind of phrased it that way too. But it just isn’t true. How many homes are we talking about? What kind, where are they, and who lives in them? What are the costs and who pays them? How much parking do they need? What services? And who should decide? All the stuff we wish wasn’t complicated, but it is. We don’t even treat that stuff uniformly across our town, and for good reasons; I can’t imagine mandating it for the whole state.

Are there ever times when not building homes is the right answer? Sure. We don’t allow them out in the Baylands, which is environmentally sensitive and soon to be underwater. Calling that anti-housing would be a pretty extreme extrapolation.

You say more housing is just a cover for not addressing what you consider the root of the problem. How do you distinguish housing policy as an agenda from housing policy that really does think more housing will help?

I think there’s a lot of addiction to theater among career politicians and that theater can work at odds with problem-solving. I also think the influence of money in politics is corrosive. Delegate the problem-solving to local jurisdictions, and their voters will usually hold them accountable for results—it’s a lot closer feedback loop than Sacramento, or Washington DC. Not perfect, but better than the alternatives.

Wait, you say—-what about when local voters don’t agree the problem is a problem? It happens, but in my opinion less often than people think, especially in faraway places. And do you think Senator Wiener has ever in his life asked, “Gee, I wonder if there’s something these local voters might know, that I don’t?”

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Curbed SF: So why do you back SB 50?

Adrian Fine: Certain cities have proven themselves incapable of creating the market conditions to produce abundant, affordable, and secure housing. In Palo Alto our population is about 65,000. We’ve been that way since the 1960s, and we’re supposed to build 300 new homes every year. Instead we’re approving about 50-60 units annually.

For decades Palo Alto has been offloading its affordable housing and market housing to other cities. If we’re not willing to build four- and five-story buildings next to the Caltrain station, where should they go? If we can’t build a mile away from the train, are we serious about this housing crisis?

But is low-density zoning near transit really the biggest problem driving up housing costs in Palo Alto?

Well, the cost of land is extraordinarily high, as is the cost of construction—those are things SB 50 isn’t going to fix. But other bills can address the process; the output is the question of who is going to buy that land and pay for the labor to begin with? It’s more attractive if we can offer them larger housing prospects instead of smaller.

And our regulations are stuck in the 1950s. We require two parking spaces per unit of housing—that is a punitive level of parking requirements. The highest you can build anywhere in Palo Alto is 50 feet, but in most of the city it’s 35 feet or 17 feet. And our jobs-to-housing ratio is like 3-1.

Well, it’s funny you mention that ratio because your colleague Eric Filseth says that’s the whole problem. He argues that if you cap office growth to match housing growth that solves the problem—and that does seem to make sense up to a point?

Sure, if you’re not doing anything then you’re not contributing to the problem—and in Palo Alto right now, we’re doing absolutely jack shit. We’re not making the problem better, but we’re not making it worse—that’s what my colleagues argue.

But Palo Alto is taking a lot of punitive steps toward business—and it’s starting to hurt us. We’re losing some big business. There’s not business and commercial growth. And there’s not housing growth happening, either. I try to push for more housing and they kill that too; it’s a farce.

That attitude assumes that each marginal square foot of office we build creates housing demand—that’s so wildly inaccurate. It’s not like you build a new office building and 50 new people move to Palo Alto, that’s now how it works. In fact, we’re actually losing population.

My parents raised six kids in Palo Alto. I’m the only one left, and a lot of it has to do with housing costs. I graduated here with 400 other kids—there’s only two or three of us left. We’re a graying city—and in some respects there’s nothing wrong with that, but I go outside of Palo Alto and I see strollers and mothers and I think “whoa.” It’s weird. And if the population goes away, then there goes your tax base—these things aren’t in a vacuum.

What about these counterarguments that—I was just reading a piece in World Economic Forum arguing that appreciation and inflation happen so fast in places like SF that we just can’t build fast enough to keep up no matter what?

Look, there’s good research on the urban economics of housing supply coming out of places like Stanford and Berkeley—just look at other markets, look at Portland, they built thousands of new homes and their prices are starting to come down. It makes sense.

They throw these Reagan-esque terms at me, saying we want trickle-down housing policy. But if we don’t build any housing, we get the opposite, the housing supply just trickles up because only rich people can pay the higher costs. That’s a formula for gentrification.

Even with what they call “luxury housing,” these new condos sell for $2 million, a single-family home for $3 million, but over time these units age and their prices come down, that’s absolutely true. If you want to see how today’s luxury home becomes tomorrow’s more affordable home, just go to Daly City.

And on top of all of that, there’s an emotional quality of life issue. When you have four or five young people sharing a two-bedroom house or renting closets or RVs or tents—just build more housing. It’s not that hard.

Another point Filseth argues is that SB 50 has garnered new support in large part by exempting communities from its most aggressive provisions, and that’s often true. What happens if the bill passes but it’s not muscular enough anymore to make real growth?

SB 50 is not the only bill in the legislature. There’s funding bills. And there’s one that came up just the other day that says any building that includes affordable housing can bypass CEQA, which would be huge.

If the half mile to quarter mile provisions in this bill get through, I think that makes a major difference no matter what. And this is not going to be our last shot, there is no silver bullet solution to this.

For people who really are classic Bay Area NIMBYs—you know, we can try to motivate them with the “Brotherhood of Man” approach, but when that doesn’t work, what can you really offer? Democracy is largely about voting your interests, so what’s in it for them to build more?

We want a diverse, vibrant community. It’s good for us to have retirees serving the community, but it’s also great to have kids at Stanford. My dad went to the hospital the other week and they say we’re going to have to schedule you for eight months out because they don’t have enough phlebotomists.

And it’s all, you know, “Why can’t I get a gardener anymore? Why does my coffee cost $6? Why did my favorite store close?” And the Palo Alto school district is having a really hard time getting teachers—this crunch is affecting everyone’s quality of life.

So is this something politics can really fix through cooperation, or are we stuck just being adversarial?

I can’t speak for the legislature. I’m always in favor of partnering for solutions. But in Palo Alto we’re probably still going to be pretty partisan on this issue. I try to be data-driven about it.

You know the data says that data is not usually a very good way to persuade people.

I get that. But what else am I going to do? This is the system we have.

Probably a smaller city like Palo Alto really can decide to put off its housing obligations and the rest of the region will make up the difference. How do you counter the math on that?

You have good actors like Oakland, San Jose, and to some degree SF. Then you have Cupertino or Los Altos that are not doing good, they’re externalizing their housing demand. That’s why SB 50 has the variable about jobs-rich communities, that’s targeted at cities like mine that don’t pull their weight.

I don’t know how to counter that attitude, but you can counter the behavior with action.