The Affordable Housing Fund is a local housing trust fund established by the City Council of the City of Palo Alto, California to provide financial assistance for the development of housing affordable to very low, low and moderate-income households that live or work within the City. While rental and owner units may be assisted, in practice all units assisted have been rental units and almost all have been affordable to very low or low-income households. The Affordable Housing Fund is made up primarily of two sub-funds composed of local sources of housing monies: the Commercial Housing Fund and the Residential Housing Fund.
The Commercial Fund is composed solely of housing mitigation fees collected from commercial developers under Chapter 16.47 of the Municipal Code. This ordinance was adopted in 1984. Fee revenue varies greatly from year to year. However, over a ten-year period from 1998 to 2008, over $5.4 million was collected in fees at an average of $542,000 per year. During that period the fee rate ranged from about $3.00 to $4.00 per square foot. In May 2002, the housing impact fee was increased to $15.00 per net new square feet of commercial space and as of May 2008 it gone up to $17.06 with annual CPI adjustments. The Commercial Fund monies are used only to assist in the development of new housing units. Since initiation of commercial housing impact fees through June 2008, seven new housing projects have been constructed with City financial assistance from the Commercial Fund producing 377 new affordable rental units.
The Residential Fund is primarily composed of fees received from developers of market-rate residential projects in-lieu of the provision of on-site or off-site below market rate units. These fees are collected pursuant to the City of Palo Alto's Below Market Rate (BMR) housing program (Program H-36) of the Housing Element of the City's Comprehensive Plan. The BMR program was initiated in 1974. Over the ten-year period from 1998 to 2008, almost $5.8 million in fees were collected, for an average of about $580,000 per year in revenue. Residential Fund monies may be used to assist new housing development or the acquisition, rehabilitation or the preservation of existing housing for affordable housing. All housing assisted has been rental and most of the units have been affordable to very low and low-income households. Through 2008, a total of nine housing projects with 379 units have been acquired, rehabilitated or constructed with City assistance from this Fund.
In all cases, the housing projects assisted by the City have been developed, owned and managed by local non-profit housing organizations. Many housing types have been developed serving different housing needs. Examples include: senior apartments, SRO units, family apartments, units for persons with disabilities, studio units and large family units. Typically, the developer has also used state of federal housing subsidies such as the housing tax credits in addition to the City's financial assistance.
The City provides its funds through long-term loans with low interest rates and usually deferred payment. All loans must be approved by the City Council and the City restricts the projects under long-term regulatory agreements. Any cost necessary to develop the housing can be funded by the City. Developers are encouraged to apply through the funding cycle for the CDBG program, but may apply at other times, if necessary.
