Palo Alto committee recommends $6.6 million fund for affordable multifamily electrification

The City of Palo Alto Climate and Sustainability Committee on March 21 unanimously recommended that the City Council approve a staff proposal to create an affordable multifamily housing electrification grant program and a $6,600,000 budget amendment from gas utility cap-and-trade reserves.

The recommendation, presented by Jonathan Aubanshine, Assistant Director for Climate Action, would establish grants to help property owners replace aging gas equipment — including space heating and water heating — with electric heat-pump systems and related electrical upgrades. Aubanshine said the program is designed to be used as local matching funds to leverage state incentives and to act quickly where gas equipment is nearing end of life.

The pilot stems from a city study of multifamily buildings that surveyed five sites and found widespread gas equipment approaching the end of its useful life. Aubanshine said that equipment affects roughly 400 units, about 25% of the city’s affordable housing stock identified in the study, and that the program is sized to electrify the equipment identified in the study plus one or two additional projects that come forward.

Rachel DeFranco, the program lead, told the committee that the most likely state funding source, the Low-Income Weatherization Program (LIHWIP) from California Climate Investments, generally covers “maybe a quarter to half of the project costs on average,” depending on project scope. Staff emphasized the city funds would be intended to fill the remaining gap after providers pursue available state incentives.

Committee members pressed staff on cost-effectiveness, grid impacts, and eligibility. Council Member George Liu asked whether central equipment or in‑unit measures are more cost-effective; staff said in‑unit space-heating retrofits and centralized water heaters are the largest cost drivers and that costs vary significantly by building. Staff said a range of alternatives remain under consideration — including starting smaller, focusing only on central equipment, or requiring a partial provider contribution — and that the program could be designed so the city’s funds pay only the incremental cost after other grants.

Staff recommended using gas cap-and-trade reserves for the program and noted prior council guidance that these funds be prioritized for greenhouse-gas reductions. Brad Englestone, Director of Public Works, said staff plans to bring the item to full Council on consent if the committee forwards a recommendation, and that the Council would review the broader use of the gas funds as part of spring budget work.

The committee motion recommended the Council approve the staff proposal and the $6.6 million amendment; the committee vote was unanimous. The committee discussion identified several follow-up actions staff will take if the Council approves the program: refine provider contribution options, coordinate program eligibility with state grant rules (e.g., LIHWIP eligibility thresholds), include electrical service-upgrade planning in project budgets, and pursue outreach to affordable housing partners and potential philanthropic funders to stretch city dollars.

The committee also highlighted the public-health and equity rationale for prioritizing low-income multifamily housing, and the program’s potential to generate data the city can use to scale future electrification work and to inform regional air-district efforts and state regulators as local compliance deadlines approach.

Votes at a glance: the committee recommended forwarding the staff proposal and the $6,600,000 budget amendment to Council; the committee vote was recorded as unanimous in favor. The item will be scheduled for Council consideration with accompanying program design details and alternatives for budget sizing.

Background: staff described this effort as the second stage of the city’s three-part SCAP (Sustainable Climate Action Plan) strategy: early pilots and studies, “advanced pilots” to build a cohort of early adopters, and then scaling to the broader community. Staff said the program would both reduce greenhouse-gas emissions and provide practical data on contractor capacity, electrification costs, grid impacts, and resident-level outcomes that the Bay Area Air Quality Management District and the Northern California Power Agency can use in regional planning.