As housing crisis grows, Palo Alto turns to below-market-rate program

PALO ALTO — The Hernandez family used to share a single bedroom in a cramped two-bedroom apartment. Because of affordable housing programs, not anymore.

On a warm autumn night, Job (pronounced Hob) Hernandez, 34, sat smiling at the kitchen table in his apartment, pointing out family photos on the walls. His wife, Betsabetz, 27, nestled on the cream-colored couch nearby with their five-year-old daughter, whose eyes were glued to the cartoons on television. At the sound of faint cries coming from a side bedroom, Betsabetz got up to check on their one-year-old son.

“We never imagined – in this area – we were going to have our own place,” Hernandez said. “Seriously.”

The family lives in a two-bedroom unit at Park Plaza Apartments in Palo Alto. On Park Boulevard among startups and tech companies like Groupon and Cloudera, the mixed-use complex has 82 apartments ranging from one to three bedrooms and was completed in 2016. A statue of Dione, the Greek goddess of water, adorns the front parking lot entrance.

“What I pay right now is what I used to pay for a single room, and now I have two bedrooms, two baths, a kitchen. My own kitchen,” Hernandez continued, pointing excitedly around his apartment currently decorated with holiday poinsettias.

Hernandez found affordable housing through Palo Alto’s below-market-rate (BMR) program at a time when the city has struggled to address the growing affordability problem. According to 2016 polling by the city, 76 percent of Palo Alto residents consider housing an “extremely serious” problem. The BMR program, which began in 1974, is less controversial than suggested alternatives like rent stabilization measures, which the city council voted against at meeting in October.

At a November meeting, the council agreed with a proposal to explore raising the percentage of BMR units that developers have to provide from 15 to 20 percent. According to the city’s planning website, there are three pending developments that, if approved, would provide 24 more housing units – four of which would be BMR. The memo also suggested incentivizing developers to include more BMR units than required by law by allowing additional height or space for projects.

The average price of rent in Palo Alto increased by about $200 between January and December 2017, with the average two-bedroom unit rising from $3,364 to $3,670 monthly, according to Yardi Matrix, a real estate data firm.

The Hernandez family pays about $1,565 per month for their apartment. The owner of Park Plaza Apartments, Hohbach Realty, advertises the market rate for a two-bedroom, two-bathroom unit at $3,900 monthly.

Prior to living in Park Plaza, the family lived in a cramped two-bedroom, one bathroom apartment in Mountain View that cost close to $3,000 monthly. To reduce the cost, they split the rent with another couple. The three Hernandez family members stayed in one bedroom while the couple stayed in the other. All five people had to share the single bathroom.

And then Betsabetz became pregnant with their second child.

“That was hard,” Hernandez said. “It’s not very good but [there’s] not another way to do it,” he continued. “I saw a lot of people do those things and are still doing it, [three people] living in one room… Rent is crazy.”

Finding solutions

Local cities including Redwood City, Los Altos, Mountain View and Menlo Park participate in BMR programs, though eligibility requirements differ. These programs are largely funded by fees that developers pay when constructing new properties. When developers build a residential property of three or more units in Palo Alto, they are required to set aside 15 percent of those units as BMR, though they can request to pay in-lieu fees instead of providing the BMR units, according to city guidelines.

  • Stanford West apartments, located next to Sand Hill Road in Palo Alto. It has 154 below-market-rate (BMR) units ranging from 1-3 bedrooms, and BMR prices range from $1,004 to $1,699 monthly. The waitlist is closed and no applications are being accepted currently. Normal rates range from $2,412 to $4,683 monthly for 1-3 bedrooms. (Anthony Miller/Peninsula Press)

Lauren Bigelow, the BMR Administrator at Palo Alto Housing, said in a phone interview that BMR programs are key to helping residents.

“There’s no one solution that’s going to take care of everyone. And so you need multiple solutions that help different folks at different income levels and that way you can house more people,” Bigelow said.

Palo Alto has both rental and purchase BMR programs. There are 237 units for purchase in Palo Alto and currently all of them are occupied, according to Bigelow. Since Palo Alto hasn’t provided any more purchase units since 2008, Bigelow says the current waitlist for the purchase program is approximately 15 years.

Waitlists for properties in the rental program vary based on location. There are currently 328 rental BMR units, according to Eloiza Murillo-Garcia, senior planner with the city of Palo Alto. Applicants apply to the properties directly, and some waitlists are closed. Preference is given to those who live or work in Palo Alto.

Evelyn Stivers, executive director of the San Mateo Housing Leadership Council, says inclusionary housing policies, like the BMR program, help provide options especially in fast-growing communities.

“Inclusionary policies are critical for providing a wider range of housing options than what the market would naturally provide,” Stivers said in a phone interview. “I don’t think Palo Alto would have any affordable housing if it weren’t for their inclusionary program.”

The target income range for participants in the BMR program is 35 to 70 percent of average median income (AMI) in Santa Clara County, which is $106,300 as of September. To qualify, a household of four would need to make between $37,205 and $74,410.

Hernandez must provide yearly income and other financial information in order to qualify for the program.

The city also maintains an Affordable Housing Fund comprised of commercial and residential development fees. The city used affordable housing funds to save Buena Vista Mobile Park from being sold, which would have displaced the nearly 100 low-income families.

Affordable Rents, Better Success

The prospect of work attracted Hernandez to the area, but the quality of life and education entices him to stay.

“The schools – wow,” he said, looking to his daughter on the couch. “The quality is so different [than] other schools… She knows so much.”

Hernandez works doubles during the week, doing construction work in the day and working at a gym near downtown Palo Alto at night. Betsabetz recently completed her schooling to be a medical assistant and is looking for work in the field.

Whereas Job used to commute approximately 45 minutes to work each way, now he can get to work in ten minutes.

Once Betsabetz finds work, Job hopes to enroll in English education classes and eventually be able to cut down to one job. But in the meantime, he is happy with his situation.

“I have the weekends off, it’s pretty good especially to spend some time with the family,” Hernandez said. “It’s much better [than] the other place because I had to work every single day – no time for family. Right now I think it’s much, much better.”

“It’s a blessing to live here,” he added.

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