East Palo Alto council directs staff to draft temporary housing incentive program after heated study session

The East Palo Alto City Council voted on March 24 to ask staff to draft a temporary Housing Development Incentive Program that would reduce some inclusionary requirements for a limited time while the city participates in a countywide feasibility study.

The council's action followed a study session in which city staff and consultants from Street Level Advisors reviewed the structure of the city's inclusionary housing ordinance (IHO), the economic trade-offs those policies create and examples from other Bay Area cities. Housing project manager Yahaira Morales summarized the current IHO: it applies to new construction (accessory dwelling units are exempt), requires 20% of units on-site for projects of five or more units for both rental and ownership product types, and specifies deep affordability tiers for rental projects down to about 35% of area median income (AMI). Morales also noted the city is participating in a countywide nexus and feasibility study requested by the State Housing and Community Development Department (HCD).

Rick Jacobus, principal at Street Level Advisors, told the council inclusionary policies must be calibrated to market feasibility. "Inclusionary sort of piggybacks on market-rate housing," Jacobus said, urging the council to balance requirements against incentives such as density bonuses, fee waivers and streamlined permitting. He placed East Palo Alto at the high end among San Mateo County jurisdictions, citing the combination of a 20% requirement and deep affordability levels as comparatively costly to developers.

Consultants reviewed temporary approaches used elsewhere: San Francisco's limited temporary relief for entitled projects, Redwood City's deadline-tied across-the-board reductions and San Jose's targeted waivers that paired inclusionary relief with broad fee and tax reductions. Jacobus said the experience varies: San Jose reported several projects moved forward after incentives; San Francisco's program had more limited measurable effect.

Council members debated whether to adopt a short-term change now or wait for the county study. One council member warned a premature reduction could "shortchange low-income working class folks" while others argued that high requirements have prevented projects from progressing and that targeted, temporary relief could get shovels in the ground. Several members expressed preference for a temporary program that applies to shovel-ready or entitled projects; others favored exemptions for small-site developers.

Council members discussed two consultant's options presented as roughly financially equivalent for rental projects: 15% of units at 80% AMI, or a smaller share (about 6%) at 50% AMI. Some members said 80% AMI is near market in East Palo Alto and would not serve many local households; others warned that deeper affordability expectations could make many projects infeasible.

Public commenters were similarly split. Developers and project proponents argued current requirements and added local obligations make small and large projects financially infeasible. Gia Li of AlphaXR Capital said her entitled 20-unit project is "financially infeasible" under the current IHO and asked the council to apply temporary relief to entitled but unbuilt projects, projects of 20 units or fewer, and set affordability at no less than 120% AMI for for-sale projects. Duane Bey and other community speakers urged the council to wait for the county nexus study and preserve the IHO, saying the city's inclusionary policy has produced permanently affordable ownership units and is essential to retaining low- and moderate-income residents.

After the discussion the councilmember who had argued for an expedited change moved for staff to prepare a draft ordinance establishing a temporary Housing Development Incentive Program (TDHIP). The motion was seconded and carried; staff will return with a proposed ordinance and options for the council to consider in a noticed public process. The council directed staff to present alternative thresholds for applicability (project size and status), affordability targeting options, and whether alternative compliance or in-lieu fees should be tilted to favor on-site units.

The study session was explicitly presented as preliminary direction; staff and consultants said they would return with more detailed analyses and a formal draft ordinance for public hearings and formal readings. The council did not adopt permanent changes on March 24.

What happens next: staff will draft the TDHIP ordinance and return to the council with specific, jurisdiction-tailored options, analysis of which pipeline projects would qualify, and the public-noticing schedule required for any ordinance or ordinance reading.

Quotes that capture the divide include consultant Rick Jacobus: "When the policies require too much, we don't get anything; the programs work when we calibrate them with attention to feasibility," and a council member who urged speed: "We need to be aggressive about incentivizing, building housing'we have a housing shortage."