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What it will take to make Silicon Valley affordable again

Hewlett-Packard Adds Thousands In Addition To Previously Scheduled Mass Layoffs Photo by Justin Sullivan/Getty Images

Silicon Valley has a major housing crisis. The median price of a home in Palo Alto, home to Stanford University, has reached $2.5 million — twice as much as five years ago. Housing in the region has grown so expensive that it’s hard for young families to get their start there.

Adrian Fine chairs the Palo Alto Planning and Transportation Commission, and he is running for the city council to try to address the city housing shortage. He has a simple plan to deal with the problem: Roll back regulations that currently make it too difficult to expand housing. He would use the added property tax revenue to upgrade city infrastructure like roads, schools, and parks.

Fine is also a Palo Alto native who wants to start a family in the city with his fiancée, Jane. They’re renting in Palo Alto now, but he says that purchasing a house — or even a condo — in the area is too expensive for them.

Fine’s position is not universally popular in Palo Alto. Many longtime residents like the city’s suburban character and don’t want to see a flood of new people in the city. But Fine argues that Palo Alto has little choice if it doesn’t want to become an exclusive enclave for the superrich.

We spoke by phone last week. The conversation has been edited for length and clarity.

Timothy B. Lee: How did you get involved in the issue of housing affordability?

Adrian Fine: I was born in Palo Alto. My parents moved there in the late 1970s. At the time, my father bought a home that cost roughly five times his salary. It was expensive but reasonable.

I've lived in Palo Alto my entire life. I studied urban planning at the University of Pennsylvania. I applied to work at the planning commission because I saw a notice in the newspaper. It seemed interesting.

Adrian Fine and his fiancée Jane.
Adrian Fine

I graduated in a class of 400 from my high school in Palo Alto in 2004. There are maybe five of us left in town. We've really lost income and age diversity in the city and frankly it's increasingly become a wealthy homeowners' community. That's not good in my opinion.

I recently got engaged, and my fiancée and I want to start our family here. We don't need a big house, but even condos are hard to find. I looked a month ago for condos, and there were only two on the market.

TBL: The average home in Palo Alto now costs $2.5 million. How did Palo Alto’s housing shortage get so severe?

AF: Palo Alto has a history as a suburban college town. But as Silicon Valley grew and became this center of innovation and dynamic companies and success, more people wanted to move there. Yet over the last 30 or 40 years, we've added increasing zoning regulations and really limited the production of both market-rate and affordable housing.

This is a story that's shared by a lot of American cities: In the 1950s and 1960s we built tract homes and suburbs. Then we ceased building and increased regulation.

These regulations are at fault. As is frankly the attitude of folks who have their single family homes. They're happy with them; they don't want more people. Some folks are talking about reducing and limiting jobs.

There are also folks who tell me to get out of town. That hurts. I was born and raised here. I pay a hell of a lot, and I work my butt off to live here.

There's been a number of stories of hacker hotels in Palo Alto where 10 to 15 young professionals all live in a two-bedroom house. That's bad for the neighborhood, bad for neighborhood impacts, and bad for the professionals. But they don't have any other choice. If they're going to work here, they need to live near here too.

TBL: What kind of regulations are contributing to the housing shortage?

AF: We are predominantly zoned R1, which is the classification for single-family detached homes. We have minimum parking requirements and minimum lot sizes. There are a number of rules that really limit the diversity of housing production, not only as a matter of affordability but also as a matter of housing types.

Between 2007 and 2014, the city only allowed people to build 38 percent of its projected housing needs — and that projection was probably too low to begin with. If you keep building a fraction of the housing you plan for, you’re going to have housing shortages and affordability issues.

Palo Alto has the worst job/housing imbalance in the country. Given our transportation history, the only way to get to Palo Alto is by driving — unless you happen to live on the Caltrain corridor.

TBL: Making Palo Alto affordable is going to take a lot more than just housing, right? What needs to happen to make sure that there’s adequate infrastructure to support a larger population in the city?

AF: I think that's where we have a bit of an opportunity. The land in Palo Alto is so valuable that if you are able to bring the community together for a plan, you mark off an area and say, “in this area we want to add 100 housing units, we need to do this with the zoning, this in terms of parks, and pay for it by the profits the landowners will make.” You tax the increment of property value, and that is used to fund transit improvements, parks improvements, school impact, and things like that.

We have two downtowns in Palo Alto. There’s one along University Avenue and another one along California Avenue. Both of those areas are ripe for new housing. We could put two or so stories of housing above retail shops, and use the value of these new developments to fund parking improvements, traffic mitigation measures, and public art. There's a whole range of things you can do, but we’re stuck in this cycle of not doing them.

TBL: In the long run, Palo Alto is going to need some pretty major changes to accommodate growing demand, right? Are there any good models that city leaders should follow?

AF: The general model is increased densification along Caltrain and near job centers.

There are a few places that have done this. San Francisco had the South of Market district which was right near the train station and has really grown up as a community. Redwood City, not far from Palo Alto, has built a lot of new housing units.

Another model is the main line in Philadelphia. At each train station, there's a little more urban density in those areas, with shops, restaurants, and retail. The density goes down into residential neighborhoods a mile or two from the station — sometimes closer.

But I also think that's a bit of a false question because we're in such a deep hole right now. There's not much of a point of imagining the long-term future until we begin addressing the current problem. In the last five years in the Bay Area, there were 531,000 new jobs and 94,000 residential housing permits. And that's just the past five years — we've been under-building for 40 years.

TBL: Is one of the problems here that too many decisions get made at the local level? A lot of these housing and transportation issues we’ve been talking about seem too big to be solved by any single municipality.

AF: One argument you often hear from local governments is “it's a regional problem and we're not going to be the first to deal with it.” I think we have 24 transit agencies, so there's a lot of coordination problems.

There is a law the governor is trying to shepherd through the legislature right now about ensuring production of housing if it meets the code. It's essentially saying if a project meets general zoning requirements, local planning processes can't get in the way.

The reaction here is basically, “Okay locals, you guys are not doing your job, so we're devolving authority back to the state.” I'm not sure that's right in terms of local context in Palo Alto or Fresno. But it's indicative of the fact that local municipalities have not done an adequate job of planning for housing.

There's a lot of backlash against regional planning groups. There are two of them: the Association of Bay Area Governments and the Metropolitan Transportation Commission. Those are the funding mechanisms by which municipalities get their federal grants for things like roads, bus service, and social services.

Some people feel this is a top-down mandate by Big Brother, but they’re just saying you have to plan for the level of growth you expect. Cities say, “Okay, we'll plan for it begrudgingly, then restrict it and strangle it wherever we can.”

The cost of making housing is very high. Cost of stopping new housing is exceedingly low because you see projects getting killed because a small group of residents object to it based on their specific issues. Cumulatively the whole region misses out.