CITY OF PALO ALTO
ANALYSIS OF IMPEDIMENTS
TO FAIR HOUSING CHOICE

For the Period
July 1, 2000 to June 30, 2005

The Department of
Planning and Community Environment
250 Hamilton Avenue
Palo Alto, California 94301
Steve Emslie, Director

For Information, contact:
Jennifer Coile, Contract CDBG Coordinator
Planning Division, City of Palo Alto (650) 329-2170

City of Palo Alto
Analysis of Impediments to Fair Housing Choice, 2000-2005

Table of Contents

I. Introduction

General Summary

Definitions

Methodology and Coordination

II. Palo Alto Background Data

Demographic Data

Housing Market Conditions

Provision of Housing Brokerage Services and Financing Assistance for Dwellings

Zoning and Site Selection

III. Palo Alto's Current Fair Housing Profile

Nature and Extent of Housing Discrimination

1995 County-Wide Fair Housing Survey Summary

2000-2002 Santa Clara County Fair Housing Study

MCFH Surveys - Families with Children

Hate Crimes

IV. Identification of Impediments to Fair Housing Choice

V. Assessment of Current Public and Private Fair Housing Programs and Activities

VI. Policies and Programs in the Amended Housing Element That Address Fair Housing Impediments

VII. Conclusions and Recommendations

VIII. Signature Page

IX. Appendix: Sources and Consultations

I. Introduction

General Summary

The U.S. Department of Housing and Urban Development (HUD) has a long-standing commitment to the elimination of racial and ethnic segregation and other discriminatory practices. Based on its obligation under section 808 of the Fair Housing Act, HUD has strongly encouraged the adoption and enforcement of State and local fair housing laws, and the reduction of separation by race, ethnicity or disability status in all of its housing and community development programs. Through its community development programs, HUD seeks to further its goal of increasing equal and free access to residential housing in order to achieve equality of opportunity for all persons regardless of race, color, religion, sex, national origin, disability, or familial status.

This document and the related Action Plan are designed to address and fulfill the fair housing requirements of the Consolidated Plan (24 CFR Part 91.21(e) and the Community Development Block Grant (CDBG) Program (24 CFR Part 570.303d). Federal regulations require participating communities to certify that they are affirmatively furthering fair housing and conducting fair housing planning by:

• Conducting an analysis of the impediments to fair housing choice
• Taking appropriate actions to overcome the effects of any impediments identified through the analysis, and
• Maintaining appropriate records of the analysis and actions

The Analysis of Impediments (AI) and any future updates are generally required to be conducted in conformance with the Consolidated Plan time frame. This AI updates and replaces the City's AI of 1995-2005. Action Plans must respond to the impediments identified in the AI and include milestones, timetables, and measurable results for each of the four years following the completion/update of the AI.

This updated AI was not prepared according to the usual cycle because in 1999, the City entered an agreement with Santa Clara County and the other CDBG entitltement jurisdictions within the County to jointly undertake a comprehensive regional study of County fair housing programs. With the concurrence of HUD, the County and five cities delayed the update of the AI in order to incorporate the findings and recommendations of the Countywide Fair Housing Study. The Study was scheduled to be completed in June 2002 but became final in January 2003. The Study's analyses and recommendations were included in this AI where possible.

It was also strategic for the City to use data from the 2000 Census, which was not released until late 2001 and summer 2002. Also, throughout 2001, the City was updating the City's Housing Element of the General Plan with adoption by the City Council on December 3, 2002. Policies and programs that relate to fair housing in the "Housing Element: January 1999-June 30, 2006" are incorporated in this AI.

The AI was prepared by the City of Palo Alto's Department of Planning and Community Environment, and was funded through the City's CDBG Program as an eligible administrative expense. All records and supporting documentation pertaining to the AI and the Action Plan are kept for public review in the City's Planning Division, 5th Floor, City Hall, 250 Hamilton Avenue, Palo Alto, CA.

Definitions

Fair housing is defined by HUD in 24 CFR 570.904 (c)(1) to mean the ability of persons of similar income levels to have the same housing choices regardless of race, color, religion, sex, handicap, familial status or national origin. Discrimination in the sale or rental of housing is prohibited against these protected classes (See the Fair Housing Act, 42 Untied States Codes, Section 3601, et seq.; also see California Government Code Section 12955 and the Unruh Civil Rights Act, Civil Code Section 51, et seq.). Fair housing laws are intended to further equal opportunity in housing, mortgage lending, and the purchase of mortgage insurance.

For purposes of this report, impediments to fair housing choice are defined as:

Any actions, omissions, or decisions taken because of race, color, religion, sex, disability, familial status or national origin that restrict housing choice; or

Any actions, omissions or decisions that have this effect.

Methodology and Coordination

As part of fair housing planning, and the preparation of the AI, entitlement jurisdictions were encouraged to seek input and cooperation from community and business organizations, and other governmental agencies. To this end, in 1995, CDBG staff from the Santa Clara Urban County and the entitlement cities of Palo Alto, Mountain View, Sunnyvale, Santa Clara, and Gilroy convened a working group to insure a coordinated, regional approach to the development of the individual analyses. The working group conducted a countywide survey in 1996 of community agencies regarding impediments to housing choice in Santa Clara County as a whole, and for the individual entitlement jurisdictions. In 1999, the CDBG Coordinators working group pooled funds to hire consultants, the Empirical Research Group at UCLA School of Law, to assess fair housing conditions and programs throughout Santa Clara County.

In addition to these County studies, information specific to Palo Alto is routinely provided by Palo Alto's local fair housing organization, Mid-Peninsula Citizens for Fair Housing (MCFH). MCFH has been a CDBG subrecipient of the City to provide fair housing services for a number of years. MCFH submits performance reports that contain data, such as the nature and extent of housing discrimination complaints in Palo Alto together with the results of testing and any special fair housing surveys or audits. In connection with this AI update, MCFH was consulted regarding their opinions or observations regarding impediments to housing choice regionally, and in Palo Alto specifically; suggested actions to remove or alleviate identified impediments; and any other information which they deemed to be helpful or appropriate for this report.

II. Palo Alto Background Data

Demographic Data

Palo Alto's population has increased only slightly during the last 30 years. The number of residents increased by 4.7% from 55,966 in 1970 to 58,598 in 2000 with most of this growth occurring between 1990-2000. While the average number of persons per household declined from 2.7 in 1970 to 2.3 in 2000, the number of housing units increased.

Although 72.8 percent of Palo Alto's population is white, the City is becoming more ethnically diverse. Asians and Pacific Islanders increased their share of the City's population growing from 10 percent to 17.3 percent between 1990 and 2000 while 4.6 percent are Hispanic, 2 percent are black and 3.3 percent identify themselves as other.

Housing Market Conditions

The 2000 Census indicated that there were 26,048 housing units in Palo Alto. This was an increase of 860 units from 1990. About one-third of the City's homes were built during the 1950's, the period of greatest housing construction in Palo Alto's history. Since 1970, the rate of production has generally declined. From 1970 to 1980, homes were added at a rate of about 240 units per year. By the 1990's, the annual rate had decreased to about 86 units per year as a result of economic factors and the limited availability of residential land.

The Consolidated Plan provides a complete discussion of the housing market conditions in Palo Alto, based on research and data provided in the 2000 census. Those conditions can be summarized as follows:

1) There is a greater demand for housing in Palo Alto than can be met, particularly affordable housing for households with very low and low incomes.
2) There is scarce land available for new housing development. The City is essentially built out. This contributes to the high cost of land, and therefore high housing costs.
3) There is a significant affordability gap in both the owner and rental housing markets for low and very low-income households.
4) The housing ownership rate in 2000 was 57%.
5) The City has a total of 11,105 units of rental housing, 1,082 of which are subsidized. Two-thirds of the rental stock is comprised of smaller units (studio, one and two bedroom units).
6) Census information shows an overall rental vacancy rate (apartments and homes) of 3.17%. The City Planning Division conducts it own periodic determination of the rental apartment vacancy rate pursuant to the City's condominium conversion ordinance. This data indicates that as of July 2002, the vacancy rate for rental housing was 1.86%. This extremely low vacancy rate further pushes up the cost of rental housing and allows landlords to be very selective in choosing tenants.

Many long-term tenants in Palo Alto experienced a significant escalation in rental rates during the 1990's, due at least in part to the low vacancy factor. Rents have been dropping in 2000-2002. Contributing to the affordability problem for lower income renters with federal housing subsidies, HUD has reduced the fair market rental reimbursement rate from the 45th percentile to the 40th percentile. This means that tenants with Section 8 subsidies are paying more out of pocket by bearing an increased share of rent. There is no public housing in the City besides Section 8 tenants and landlords; the City contracts with Santa Clara County Housing Authority to administer the Section 8 program.

High housing prices continue to exclude persons of middle and lower incomes from residing in the City. Not only is it difficult for people who move here to afford housing, it is often difficult for those born and raised here to do the same. Many long-term residents are finding that their grown children cannot afford to live in Palo Alto which creates a hardship for those trying to maintain extended family ties.

Provision of Housing Brokerage Services and Financing Assistance for Dwellings

There is no evidence available to indicate discrimination in the provision of housing brokerage services. There are no mortgage-deficient ("red-lined") residential areas where brokers or banks will not lend within Palo Alto nor are any areas singled out for more careful review or required to pay higher than standard rates.

Home Mortgage Disclosure Act (HMDA) 2000 data is available for either the San Francisco or San Jose Metropolitan Statistical Area but is based on 1990 Census data. Staff believes it is unlikely to serve as an accurate indicator of Palo Alto trends. With no city-specific data available and in the absence of complaints, staff concluded that there is no evidence of differential treatment or discriminatory lending practices within Palo Alto. However, the City lies in a subregion with patterns of home mortgage discrimination and the City supports efforts to analyze and combat it. Countywide analyses, such as the June 2002 study "Fair Housing in Santa Clara County: An Assessment of Conditions and Programs, 2000-2002" conducted by the Empirical Research Group of UCLA Law School indicates some discrimination among different racial groups seeking home mortgages within the County. A ten-year lawsuit against a bank practicing "redlining" by systematically refusing to issue home mortgages to African-Americans in East Palo Alto was settled in the Fall of 2002. A Santa Clara County Anti-Predatory Lending Working Group, comprised of a number of organizations such as Mid-Peninsula Citizens for Fair Housing, East San Jose Community Law Center, Bay Legal Aid, HUD, FDIC, East Palo Alto Community Law Project, Consumers Credit Counseling and the California Reinvestment Committee, has been working since the summer of 2001.

Zoning and Site Selection

Palo Alto is essentially a built-out city. Changes in zoning from commercial to residential could potentially provide more available housing sites, although single family and multiple family housing is a permitted use in all commercial and industrial zones. Increased residential density in Palo Alto would help provide more housing units at more affordable prices. Although City ordinances provide for the densities necessary to create more affordable housing, development has been occurring at the low end of the allowed density range.

A review of public policies in the City's Consolidated Plan determined that overall, local public policies do not constitute barriers to affordable housing or pose impediments to fair housing choice. The City's zoning ordinance contains a variety of zoning districts which allow a range of housing types; single room occupancy developments are permitted; there is a large supply of multi-family rental housing; affordable housing is encouraged; minimum lot sizes, setbacks, floor area ratios and height requirements are not a barrier to affordable housing and permit a variety of housing types to be developed; there are no restrictions, other than the State standards, regarding the number of unrelated individuals who can occupy a dwelling, and group homes for special needs groups are permitted as long as they comply with State requirements.

The City developed an amended "Housing Element of the Comprehensive Plan, 1999 -2006" which was adopted on December 2, 2002. In the course of adopting the Housing Element, the City Council reviewed the City's current zoning and land use policies and practices as they affect the creation of affordable housing and housing choice. The Zoning Ordinance will be updated over the next two years to reflect the recommendations from the Housing Element. These recommendations and their potential impact on fair housing are discussed in Section VI.

III. Palo Alto's Current Fair Housing Profile

Nature and Extent of Housing Discrimination

According to MCFH and fair housing experts nationally, a great deal of under-reporting of discrimination occurs since the act of reporting is a commitment of time and attention which many people cannot or chose not to make. Therefore, the following statistical information can only give an indication of the prevalence of discrimination rather than a definitive account. According to the information received, the most reported category of discriminatory conditions in both Palo Alto and Santa Clara County as a whole, is discrimination based on familial status and disability.

The San Francisco HUD office of Fair Housing and Equal Opportunity (FHEO) provided information on the number and types of discrimination cases filed at HUD and the State of California's Department of Fair Employment and Housing (DFEH) between October 1, 1999 to December 31, 2001. In that period, 5 cases were filed with Palo Alto as the originating address: 1 on the basis of race and 4 on the basis of disability. All 5 were filed with DFEH and none at HUD.

Title VIII fair housing discrimination cases originating in Palo Alto that were closed in the same period included 4 closed by HUD and 9 closed by DFEH. The basis of the closed complaints included: 7 on the basis of disability, 5 on family status and 1 on race. 9 of the cases were conciliated or resolved and 4 complaints were determined to have no cause.

HUD also reports Housing Discrimination Complaint Charges and Conciliations for Recipients of Federal Financial Assistance. The report for October 1, 1999 to December 31, 2001 complaints states that in September 2000, Mid-Peninsula Citizens for Fair Housing charged Lytton IV Housing in Palo Alto with discrimination against persons with disabilities in the design of a new housing development. The case was settled in the fall of 2002.

A case is opened by MCFH when there is reason to believe that a client's housing rights have been violated. Cases are investigated and possibly resolved by MCFH through the use of legal research, testers, counseling, etc. If evidence of discrimination can be corroborated, the complainant is referred to an enforcement agency (such as FHEO), or direct legal counsel. Complainants can also contact HUD directly and HUD may refer the complaint to the state FHEO.

The tables on the following pages report statistics for Palo Alto cases handled by MCFH for the period July 1, 1998 through December 31, 2002.

MCFH also provided information on the ethnicity of complainants and their income levels. 72% of all local discrimination cases were filed by Whites, 14% by Blacks, 3% by Hispanics, and none by Asians. The rest of the cases were categorized as Not Applicable or Other. Low-income persons/households were 24%, very low income 58%, with the balance categorized as Not Applicable or Other. MCFH statistics for 1991-95 demonstrate similar patterns.

Mid-Peninsula Citizens for Fair Housing
Fair Housing Consultations and Cases: Basis of Discrimination

PALO ALTO: July 1, 1997 - December 31, 2000

Note: Consultations that become cases are not duplicated in the statistics but are listed only as cases.

Source: MCFH: CDBG Program Performance Report to the City of Palo Alto

* 12/01/01 to 01/08/02 only

** Does not include July 1, 1997 to June 30, 1998

Mid-Peninsula Citizens for Fair Housing
Fair Housing Case Clients: Income/Race

PALO ALTO 1998 - 2000

Source: MCFH: CDBG Program Performance Report to the City of Palo Alto

Summary of 1995 County-Wide Fair Housing Survey

Respondents to a Santa Clara Countywide survey included Asian Law Alliance, Tri-County Apartment Association, Mid-Peninsula Citizens for Fair Housing, and Miramonte Mental Health Services. Mid-Peninsula Citizens for Fair Housing noted that in the rental of housing, restrictive occupancy policies in Palo Alto, while improved, are still a fair housing impediment, and are the basis for many inquiries to their office. Tri-County Apartment Association noted that occupancy is rarely limited by landlords of privately owned rental housing as a means of discrimination against a protected class, but that landlords often set occupancy standards for legitimate business purposes, to prevent overcrowding and the associated impacts on the property's condition and the community as a whole.

The Asian Law Alliance reported that their agency received 52 complaints in Santa Clara County involving discrimination in rental housing over a 12-month period. None of the cases reported, however, were from Palo Alto. The Asian Law Alliance also noted that, based on discussions at agency staff meetings, they have noticed the plight of recent immigrants and refugees who are unaware of their rights relating to discriminatory treatment. These same immigrants and refugees also face language barriers in accessing housing.

Miramonte Mental Health Services reported that neighborhood discrimination against tenants with mental illness is a problem in accessing and keeping housing. Neighborhoods will often put pressure on landlords to terminate leases of tenants with psychiatric disabilities because they believe the tenants are detrimental to the neighborhood.

Information gleaned from a summary of an April 20, 1995 fair housing forum "Access to Housing for People with Mental Health Disabilities" sponsored by the Mental Health Advocacy Project and Project Sentinel, describes a lack of resources available for people with mental health disabilities in accessing affordable housing. Identifying and being able to access available resources, overcoming the ignorance and fear associated with the stereotypes of people with mental disabilities, and promoting community awareness and sensitivity of mental health disabilities were seen as reasonable accommodations.

2000-2002 Santa Clara County Fair Housing Study

The purpose of this study, "Fair Housing in Santa Clara County: An Assessment of Conditions and Programs, 2000-2002," is to assess the current extent and nature of fair housing problems in Santa Clara County, and to propose ways to improving current programs that relate to fair housing. Each of the Community Development Block Grant jurisdictions in the county completed fair housing assessments but the Study represents the first attempt to look comprehensively at conditions throughout the County and to use systematic data to evaluate several different dimensions of fair housing - demographic change, lending patterns, residential attitudes, land use practices, and the performance of fair housing agencies.

Chapter One, Demographic Setting and Racial Trends in Santa Clara County, reviews the changes in major racial groups over the decade. Migration from India - fueled by strong links between Silicon Valley and the Indian computer industry - leapt during the past decade. The total Asian population rose 83% between 1990 and 2000. The Hispanic population also grew substantially, though less dramatically, while the White and Black populations modestly declined.

Although economic segregation in the County is marked and though specific racial and ethnic groups have areas of concentration within the region, Santa Clara County remains one of the best examples of diversity mixed with integration in the United States.

The interaction of rapid economic growth and modest population growth implies a strong emphasis in local government policy to limit new development. While there are good policy reasons behind many of these anti-growth policies, they naturally create conditions where housing costs steadily increase, low-income workers are gradually squeezed out of the housing market, and the affluence of the County steadily increases even while the quality of life stagnates or even declines for a significant portion of the population.

Black segregation has historically been less in Santa Clara County than in the rest of California. The study indicates there has been some increase in the County in the last ten years, although there is still less than in the rest of the state.

The moderate levels of segregation Hispanics experience in Santa Clara County is fairly typical of levels Hispanics face throughout the nation, and appears to follow very much the classic pattern observed elsewhere - that is, Hispanic segregation appears to result from three principal factors: lower incomes, ethnic clustering and discrimination.

While there are almost no neighborhoods in Santa Clara County where a specific Asian nationality constitutes even a majority of residents, there are identifiable neighborhoods for each of the major Asian groups. In the absence of any systematic testing data, it is hard to conclude that discrimination is not contributing to this segregation. However, research in other cities suggests that these levels of segregation are consistent with voluntary clustering.

Chapter Two, Fair Lending in Santa Clara County: An Analysis of Home Mortgage Data, contains Empirical Research Group's analysis of reports mandated by the Home Mortgage Disclosure Act and found that approval rates are relatively high for all groups of loan applicants in Santa Clara County, looking at lender behavior in the aggregate. However, there is enough evidence of disparate treatment to warrant serious attention to the possibility of discriminatory treatment and underwriting by area banks.

Chapter Three, Fair Housing Experiences and Perceptions: A Survey of Santa Clara County Residents describes the results of a survey of 250 Santa Clara County residents. The people sampled were asked to identify the most important problem facing the County. The dominant answers were "traffic" (32%) and "housing" (31%). The dominant housing problem was considered high cost; 60% of respondents believed that area "families being priced out of apartments due to rising rents" is a "very serious problem."

Empirical Research Group compared this survey to one done in Los Angeles County. Blacks and Hispanics in Santa Clara County reported higher levels of discrimination than did these same groups in Los Angeles County. Yet Santa Clara County residents of all races tended to perceive their own neighborhoods as more welcoming of racial diversity than Los Angeles County residents perceived of their communities included in that study.

The survey attempted to measure residents' awareness and perception of fair housing organizations. Project Sentinel and Mid-Peninsula Citizens for Fair Housing, funded by the city of Palo Alto as well as the other County jurisdictions, produced very little name recognition. According to the consultant, the two fair housing organizations, though exemplary in many ways, are clearly failing to make themselves known to their constituency.

Chapter Four, Fair Housing Services in Santa Clara County, reports on Empirical Research Group's visits to fair housing providers. They assessed operational details and general achievements of these groups - how successful is their testing, how cost-effective and productive their services are, how well-known the groups are, and how much they are doing to reduce the volume of discrimination in Santa Clara County. ERG concluded that Santa Clara County has two capable and substantial groups that focus on fair housing - Project Sentinel and Mid-Peninsula Citizens for Fair Housing - and a cluster of other organizations that work actively on fair housing issues and that have highly knowledgeable and capable staffs. By any comparative standard, the jurisdictions in Santa Clara County are, in the aggregate, putting their fair housing dollars to good use.

However, the strength of the County's fair housing presence means that local jurisdictions are in a position to ask more challenging questions, such as how well these groups actually serve the fair housing needs of the region, and develop more ambitious strategies for addressing these needs. For example, there is no decent information on how widespread any form of discrimination is in Santa Clara County. No one knows how much of a deterrent the existing threat of enforcement activity poses for Santa Clara County housing providers.

The study found that fair housing complaints from families with children are more common than race-based complaints. Disability discrimination complaints are also common. Most of these are from in-place tenants seeking reasonable accommodation.

A number of jurisdictions supplement CDBG expenditures with appropriations from general funds, particularly for landlord/tenant services. Some of the funding that is reported for fair housing is actually for tenant/landlord services, and this can give an inaccurate picture of what is actually going for fair housing. The consultant recommends that jurisdictions develop uniform standards for accountability on which services are funded.

Chapter Five examines Santa Clara County Land Use and Zoning Issues. The 1988 amendments to federal fair housing law and the 1994 amendments to California fair housing law both explicitly extended the protection of anti-discrimination laws to persons with disabilities. Builders of new housing must comply with new requirements aimed at making multifamily housing more accessible to persons with walkers or wheelchairs. Local governments cannot put undue obstacles in the path of developers or operators of group homes that aim to provide housing for the disabled.

In addition to the two amendments mentioned above, the study notes the California Community Care Facilities Act, the California Anti-NIMBY Law, and the Americans with Disabilities Act (ADA), and comments that an elementary step for all jurisdictions to take in promoting fair housing is to make certain that their zoning codes and land use practices comply with the letter and spirit of these laws.

In Santa Clara County most jurisdictions have two-sided policies towards the development of affordable housing. On the one hand, most jurisdictions have zoning regulations that have exclusionary effects - substantial lot size requirements, significant restrictions on multifamily development, and so on. On the other hand, nearly all jurisdictions have some incentives built into their zoning rules (incentives strongly encouraged by state policies) that encourage or require developers of multifamily housing to make some of that housing affordable. Many jurisdictions have policies that tend to restrict the development or rental of "guesthouses" (sometimes called "granny flats") in single-family neighborhoods.

Fair housing advocates interviewed for the study generally felt that local officials behaved reasonably in the processing of applications for the siting of group homes and in other zoning issues.

Chapter Six's Conclusions and Recommendations states that fair housing conditions in Santa Clara County are generally very good. Although this report does identify important problems that should be addressed, it is important not to overlook Santa Clara County's achievements: an exceptional level of integration in most parts of the County; an unusually strong and generally well-funded network of fair housing providers; a generally responsive and concerned group of officials working on land use, housing supply and fair housing issues; and many signs of tolerance of diversity and support for fair housing across the general public community.

Santa Clara County has two fundamental fair housing problems. The intractable problem is affordability. The region's economic transformation may have reached a plateau, but the County will almost certainly continue to be an extraordinarily difficult place to create affordable housing for some time. To the degree that the market remains very expensive, many parts of the County will become less economically integrated, families will frequently encounter restrictive practices, and the County's high level of racial integration will be threatened. The second problem is that fair housing programs are largely reactive rather than proactive.

Specific recommendations for regional collaboration are presented in Section VII of this Report, "Conclusions and Recommendations."

MCFH Surveys and Audits - Families with Children

Due to the fact that discrimination based on familial status is the most often reported basis for reported discriminatory acts, Mid-Peninsula Citizens for Fair Housing conducted several local surveys and audits. These surveys focused on multi-family rental properties in Palo Alto to ascertain compliance with federal, state and local fair housing laws, especially as they impact families with children. The first telephone survey was conducted in May, 1992 and was designed to elicit information regarding acceptance of families with children as residents, and the occupancy standards applied by property owners. Twenty properties were contacted representing 2,110 housing units. The findings of that survey indicated that although all the properties allowed families with children as tenants, 24.8% of the properties were overly restrictive in their occupancy policies, exposing families with children to higher rents, and less choice in housing.

MCFH conducted follow-up telephone surveys in 1994 and 1995 that indicated that all of the complexes tested had policies which complied with fair housing laws regarding occupancy and rentals available to families with children. However, further surveys of four apartment complexes in 1999 and four in 2000 by tester applicants revealed a possible bias against families with children in 1 out of 4 cases. Continued vigilance and educational outreach efforts are considered necessary to insure ongoing compliance.

Hate Crimes

The City's Human Relations Commission monitors hate crimes within the City. The California Department of Justice's Statistics Center (CJSC) publishes an annual report on Hate Crime in California. In Palo Alto, 9 hate crime events/offenses were reported in 2000 perpetrated by 3 known suspects, 7 crimes in 1999 by 5 known suspects, and 4 crimes in 1998 by 3 known suspects.

IV. Identification of Impediments to Fair Housing Choice

"Impediments" to fair housing are determined either because of their intent (any actions, omissions, or decision taken because of race, color, religion, sex, disability, familiar status or national origin which restrict housing choices or the availability of housing choices) or effect (any actions, omissions or decisions which have the effect of restricting housing choices or the availability of housing choices because of race, color, religion, sex, disability, familial status, or national origin).

The largest impediment of fair housing for low income people in Palo Alto is one of supply and demand. The demand for affordable rental and ownership housing far exceeds the supply. Fair housing is defined as the ability of persons of similar income levels to have housing choices regardless of race, color, religion, sex, handicap, and other constitutionally protected classifications. Housing cost and supply negatively affect the ability of persons of low income to obtain housing in Palo Alto, but the issues of race, gender or color do not regularly factor into it.

1. The Lack of Affordable Housing restricts people in their ability to purchase or rent housing. Census data show that the primary groups affected by the lack of affordable housing are low and moderate-income people. People of color, families with children, and persons with disabilities have a disproportionate problem in finding housing in Palo Alto and Santa Clara County when compared to young, white, higher income, able-bodied purchasers and renters without children.

2. The Lack of Available Housing creates an inadequate pool of housing stock. The predominance of single family residences compared to the amount of multi-family housing in Palo Alto also affects the availability and affordability of housing choice.

3. Lack of Land Available for Housing Construction - This has been identified as the primary obstacle for both nonprofit and for profit developers trying to develop housing. Only .5% of the urban area is vacant (less than .5%). Because of the lack of vacant parcels, it is anticipated that under-utilized sites or sites zoned for commercial/industrial uses will become more feasible for re-use to residential designations.

4. Price of Land Suitable for New Housing - This obstacle is related to the scarcity of land. When land is available in Palo Alto, the price is too high for the construction of low to moderate income housing without costly subsidies. Residentially zoned (multiple-family zoning districts) property has more than doubled in value since 1996 and can sell for $150-$167 per square foot or more depending on its location and development potential. Commercially zoned land outside of the downtown core may have also doubled in price to over $150 per square foot. Thus, a one-acre site would be worth in excess of $6.5 million.

5. Discrimination in Housing - This continues to influence who may find housing in Palo Alto and who may not. Families with children and persons with disabilities remain the largest single classes affected by discrimination in Palo Alto, and in Santa Clara County. In the county, persons of minority races or of national origin outside the U.S. are also affected by discriminatory actions. Although there is no readily available information on the accessibility of housing in Palo Alto for persons with disabilities, it is likely that many units (and projects) do not meet current standards of accessibility as mandated by the Americans with Disabilities Act (ADA) since most of the City's housing stock was built prior to the adoption of ADA in 1991.

6. Complex Federal Requirements - Application processes for the limited amount of federal and state housing funds available are highly complex and competitive. The myriad of federal requirements such as prevailing wage, property acquisition regulations, environmental standards, relocation, etc., also add considerably to the cost of creating affordable housing.

7. Insufficient Funds Available - Federal reductions in the already insufficient supply of funding for housing, along with the need for increased subsidies in high cost areas, results in fewer affordable units being created in Palo Alto. The distribution of tax credits for developing affordable housing is problematic because the priorities set at the State level typically limit the eligibility of projects in Palo Alto.

In the following sections, each of these impediments will be examined in terms of ongoing public and private fair housing programs and activities to further progress in fair housing in the City of Palo Alto.

V. Assessment of Current Public and Private Fair Housing Programs and Activities

The City of Palo Alto has a number of current policies and programs, which encourage fair and equal housing choice. The City also maintains a strong commitment to the creation of affordable housing opportunities; the City Council in 2002 reaffirmed that it is one of the Council's top five priorities for the City. These ongoing programs are grouped according to the fair housing impediments discussed in the previous section; some may be valid for more than one impediment but are listed only once in the area where they have the greatest impact.

Lack of Affordable Housing

• Palo Alto has employed a Housing Coordinator since 1992 to facilitate the production of affordable housing in Palo Alto through nonprofit partnerships and technical assistance.

• Palo Alto has a Below Market Rate (BMR) Program, which in 2002 consisted of 152 below market home ownership units and 101 below market rate rental units. The units are located throughout the City in privately constructed residential developments. They are provided by the private market under the City's inclusionary zoning policies in the Housing Element, which have been in effect since 1974. The City contracts with the Palo Alto Housing Corporation to administer the Program.

• The City developed an Affirmative Marketing Procedures Guide for owners and managers of affordable housing units assisted with federal HOME funds. The guide describes the requirements and practices owners must adhere to in order to affirmatively market the HOME assisted rental units.

• The Palo Alto Housing Corporation (PAHC) created and distributed a resource guide to affordable (and assisted) housing in Palo Alto and the vicinity in June 1994. The booklet was funded with CDBG funds, and is currently available online in addition to paper copies that are periodically updated and reprinted.

• The City provided CDBG funds to the Palo Alto Housing Corporation to research and complete an Asset Management Plan and a Property Management Procedures Manual. The purpose of the Plan and Manual are to increase the capacity of the organization to plan and administer an ever-increasing number of assisted/affordable housing units within the City.

Lack of Available Housing

• The City provides general fund support to Project Sentinel to provide Information and Referral services about landlord/tenant laws and conduct a citywide tenant/landlord mediation program. This frequently helps tenants to resolve disputes and remain in their housing.

• Palo Alto's Rental Housing Stabilization Policy (Palo Alto Municipal code 9.68.030) requires Palo Alto landlords to annually offer one-year written leases to tenants. The purpose of the ordinance is to provide tenants with some assurance of stability under the terms of a written lease and to minimize displacement in a rental housing market which affords them few and expensive options.

Lack of Land Available for Housing Construction

• The update of the "Housing Element of the City's Comprehensive General Plan, 1999 - 2006" together with the update of the City's Zoning Ordinance 2000 - 2005 is studying alternative housing sites and ways to accommodate additional housing density without compromising neighborhood quality.

Price of Land Suitable for New Housing

• The City maintains a local "Housing Reserve Fund" to be used for acquisition, rehabilitation, new construction, and predevelopment expenses of low-income housing. The Commercial Portion of the Fund is funded with housing mitigation fees required from developers of commercial and industrial space. The residential portion of the Fund is supplied by in-lieu fees under the "Below Market Rate" Housing Program from residential developers.

Discrimination in Housing

• The City has contracted with Mid-Peninsula Citizens for Fair Housing for a number of years to provide fair housing services including information and referral, community outreach and education, discrimination complaint checking and investigation, legal referrals and assistance in resolving complaints. In fiscal year 2002/03, MCFH was awarded $25,800 in CDBG funds. In a typical year, MCFH offers telephone consultations, complaint investigations, conducts tester training and an annual meeting for participating attorneys. MCFH audits rental housing for families in Palo Alto and has conducted special projects such as production of an educational video about discrimination against people with disabilities. MCFH was a successful plaintiff with the U.S. Government in a lawsuit against Lytton Gardens development at Lytton Courtyard for violations in ADA resulting in discrimination against applicants and tenants with disabilities.

• Activities of MCFH to increase public awareness about fair housing include widespread advertising, i.e., daily in the San Jose Mercury News, weekly in the Palo Alto Weekly, monthly in Peninsula Parent magazine and El Observador; frequent radio Public Service Announcements; distribution of brochures, annual workshops for apartment owners and managers; production of two videos about fair housing shown on community cable access as well as education presentations; listings on websites, such as the City of Palo Alto Family Resources database; articles in Disabled Dealer magazine, booths at events such as the Tri-County Apartment Owners Association Expo, Northern California Abilities Expo, Foothill College Volunteer Fair, DeAnza College Multicultural Fair.

  MCFH frequently makes presentations to organizations such as the Mental Health Association, Palo Alto Tenants Housing Forum, North County Social Service Agency case workers, Fair Housing Rights Seminar, Deposition Workshop at San Francisco HRC, Women's Rights conference, Housing Action Coalition meeting of Silicon Valley Manufacturers Group, Stanford University Housing Service Center, Martin Luther King Day celebration, Catholic Charities Shared Housing staff, Palo Alto Housing Information and Referral collaborative, Silicon Valley Faith-Based Coalition, and Sheraton Apartments residents.

  MCFH also collaborates with regional fair housing advocates and service providers by participating in meetings such as the Bay Area Annual Fair Housing Leadership Conference, Northern California Fair Housing Coalition, Annual Conference of the National Fair Housing Alliance, State Department of Fair Employment and Housing Legislative Update Workshop, and the Santa Clara County Housing Task Force. MCFH collaborated with Project Sentinel, Mental Health Advocacy Project and Asian Law Alliance in organizing an accessibility workshop at Stanford University.

• The Palo Alto Human Relations Commission (HRC) investigates, reviews, advocates for and advises the City Council on matters relating to maintaining a non-discriminatory atmosphere in Palo Alto. The HRC, in collaboration with police officials, investigate and document any instances of local hate crimes.

• Chapter 9.74 of the Palo Alto Municipal Code prohibits discrimination against families with minor children in housing. The ordinance lists specific prohibited rental practice activities including the application of restrictive occupancy standards.

• The City Attorney's Office handles cases brought to their attention involving discriminatory rental practices.

• The City annually celebrates Fair Housing Month in April.

• The City utilizes utility mailers to inform citizens about fair housing rights and services.

Complex Federal Requirements

• The City participates in a Santa Clara County CDBG Coordinators Working Group that periodically advises the Department of Housing and Urban Development about housing regulations and their impact on the local level.

Insufficient Funds Available

• As mentioned previously, the City maintains a local "Housing Reserve Fund" to be used for acquisition, rehabilitation, new construction, and predevelopment expenses of low-income housing. The Commercial Portion of the Fund is funded with housing mitigation fees required from developers of commercial and industrial space. The residential portion of the Fund is supplied by in-lieu fees under the "Below Market Rate" Housing Program from residential developers.

• The City contributed funds to create a Santa Clara County Housing Trust Fund as a public/private initiative dedicated to creating more affordable housing in Santa Clara County using a revolving loan fund and grant-making program to complement and leverage other housing resources. The City's contribution of $500,000 towards the initial $20,000,000 investment capitalization is available to help leverage new affordable housing projects in Palo Alto.

VI. Policies and Programs in the Amended Housing Element that Address Fair Housing Impediments

The January 1999- June 2006 Housing Element Amendment for the City of Palo Alto modifies the 1998-2003 Housing Element. The Housing Element is part of the City's Comprehensive Plan required by State Law. Upon adoption of the amended Housing Element on December 2, 2002, the proposed changes in land use and zoning policies will be incorporated into a revision of the City's Zoning Ordinance, which is scheduled to be completed in 2005. Palo Alto's City Council discussed the draft Housing Element at length and stressed the importance of providing affordable, attainable housing. The Housing Element has a section on Fair Housing; Goal H-4 states "An End to Housing Discrimination on the Basis of Race, Religion, National Origin, Age, Sex, Sexual Orientation, Marital Status, Physical Handicap, or Other Barriers that Prevent Choice in Housing." Policy H-24 is "Support programs and agencies that seek to eliminate housing discrimination." Programs H-61 to H-66 include:

• Work with appropriate state and federal agencies to ensure that fair housing laws are enforced.

• Continue to support groups that provide fair housing services, such as Mid-Peninsula Citizens for Fair Housing.

• Continue the efforts of the Human Relations Commission to combat discrimination in rental housing, including mediation of problems between landlords and tenants.

• Continue implementation of the City's Ordinances prohibiting discrimination in renting or leasing housing based on age, parenthood, pregnancy or the potential or actual presence of a minor child.

• Continue the City's role in coordinating the actions of various support groups that are seeking to eliminate housing discrimination and in providing funding and other support for these groups to disseminate fair housing information in Palo Alto, including information on referrals to pertinent investigative or enforcement agencies in the case of fair housing complaints.

• Continue to interpret and apply the City's land use regulations in a manner that does not deny to persons with disability the access to housing and public accommodations that are guaranteed under state and federal law.

Additional goals and policies in the Housing Element that support fair housing are presented below. Many of them relate to more than one of the fair housing impediments identified in Section III, so the relevant impediments are listed according to the following code:

A. Lack of Affordable Housing
B. Lack of Available Housing
C. Lack of Land Available for Housing Construction
D. Price of Land Suitable for New Housing
E. Discrimination in Housing
F. Complex Federal Requirements
G. Insufficient Funds Available

• Policy H-2: Consider a variety of strategies to increase housing density and diversity in appropriate locations. Emphasize and encourage the development of affordable and attainable housing. [A, B, C, D]

Programs H-1 to H-12 include encouraging development densities at the higher end of allowed density ranges and consider increasing minimum density requirements; encourage the conversion of non-residential lands to residential; allow for increased flexibility in application of development standards, new zoning districts for Transit-Oriented Residential and Village Residential land use designations, high residential density under Mixed Use, zoning incentives that encourage development of diverse housing types such as smaller more affordable units and two- and three-bedroom units suitable for families with children; modify standards to encourage the production of second dwelling units, amend regulations to permit residential lots of smaller size.

• Policy H-3: Continue to support the re-designation of suitable vacant or underutilized lands for housing or mixed uses containing housing. [A, B, C, D]

  Programs H-13 to H-15 recommend implementation of the "Housing Opportunities Study" that identifies vacant and underutilized sites and sites with existing non-residential uses that are suitable for future housing or mixed use development, rezoning sites identified on the Housing Sites Inventory, and studying the El Camino Real transportation corridor to assess the feasibility of developing higher density housing.

• Policy H-4: Encourage mixed use projects as a means of increasing the housing supply while promoting diversity and neighborhood vitality. [A, B, C, D]

  Programs H-16 to H-19 propose zoning ordinance regulations and incentives that encourage the development of housing above and among commercial uses and over parking lots in mixed use projects.

• Policy H-5: Discourage the conversion of lands designated as residential to nonresidential uses and the use of multiple family residential lands by nonresidential uses, such as schools and churches, unless there is no net loss of housing potential on a community-wide basis. [A, B, C, D]

• Policy H-6: Support the reduction of governmental and regulatory constraints to the production of affordable housing. [A, B, G]

• Policy H-7: Monitor, on a regular basis, the City's progress in increasing the supply of housing and monitor the preservation of BMR rental units for very low and low-income residents. [A, B, C, D, E]

• Policy H-8: Promote the rehabilitation of deteriorating or substandard residential properties. [B]

• Policy H-9: Maintain the number of multi-family rental housing units, including BMR rental and ownership units, in Palo Alto at no less than the number of multi-family rental and BMR units available as of December 2001 and continue to support efforts to increase the supply of these units. [A, B, C, D, E]

• Policy H-10: Preserve the existing legal, non-conforming rental cottages and duplexes currently located in the R-1 and R-2 residential areas of Palo Alto, which represent a significant portion of the City's affordable housing supply. [A, B, C]

• Policy H-12: Encourage, foster and preserve diverse housing opportunities for very low-, low-, and moderate-income households. [A, B, E]

• Policy H-13: Provide for increased use and support of tenant/landlord educational mediation opportunities. [A, B, E]

  Programs H-36 to H-41 recommend policies to further encourage the development of the BMR units and preservation of the Buena Vista Mobile Home Park.

• Policy H-14: Support agencies and organizations that provide shelter, housing and related services to very low-, low- and moderate-income households. [A, B, E]

  Program H-44 supports the development and preservation of group homes and supported living facilities for persons with special housing needs.

• Policy H-15: Pursue funding for the construction or rehabilitation of housing that is affordable to very low-, low- and moderate-income households. Support financing techniques such as land banking, federal and state tax credits, mortgage revenue bonds and mortgage credit certificates to subsidize the cost of housing. [A, B, C, D, F, G]

• Policy H-16: Encourage the preservation, rehabilitation and construction of a Single Room Occupancy (SRO) hotel and SRO housing. [A, B]

• Policy H-17: Support opportunities for shared housing and other innovating housing forms to promote diversity and meet the needs of different household types and income levels. [A, B]

• Policy H-18: Support housing that incorporates facilities and services to meet the health care, transit or social service needs of households with special needs, including seniors and persons with disabilities. [A, B, E]

• Policy H-19: Support family housing that addresses resident needs for childcare, youth services, recreation opportunities and access to transit. [A, B, E]

• Policy H-20: Support legislation, regulatory changes, federal funding, and local efforts for the permanent preservation of HUD-assisted very low- and low-income units at risk of conversion to market ratehousing or loss of federal rental assistance. [A, B, C, D, E, F, G]

VII. Conclusions and Recommendations

Fair housing issues in Palo Alto do not appear to be severe, and the records of MCFH reveal a fairly consistent level of fair housing complaints filed annually in the past decade: 20 fair housing consultations and 15 to 20 cases. It is clear that although discrimination in housing cuts across all racial, ethnic and economic lines in the region, in Palo Alto it falls most heavily on single parent households, persons with disabilities, and lower income persons and families. Housing cost and supply negatively affect the ability of persons of low income to obtain housing in Palo Alto but the issues of race, gender or color do not regularly factor into it.

There is a greater demand for housing than can be met. This is because Palo Alto is a desirable place to live, there are many jobs, and there is little land available for new housing development. This leads to high housing costs, low vacancy rates, and a shortage of affordable housing opportunities. Decreases in the already insufficient supply of federal and state housing funds, along with existing overly-complex and burdensome regulations at the governmental level, also severely restrict the amount of affordable housing which can be created.

The lack of housing options in the region affordable to persons of low and moderate income disproportionately affects people of color, families with children the elderly, and persons with disabilities. Discrimination cases involving families with children and persons with disabilities are the most prevalent cases in Palo Alto and Santa Clara County. Property owners with restrictive occupancy policies, and other subjective rules regarding children, expose families with children to higher rents, and fewer housing choices.

The City of Palo Alto shares HUD's commitment to fair housing practices, and places a high priority on promoting and ensuring open and free choice in housing for all persons. The City recognizes that free and equal access to residential housing (housing choice) is fundamental to meeting essential needs and pursuing personal, educational, employment or other goals. It is the City's intent to maintain and promote a nondiscriminatory environment in all aspects of the private and publicly funded housing markets within Palo Alto, and to foster compliance with the nondiscrimination provisions of the Fair Housing Act.

The City intends to continue its strong support of the ongoing fair and affordable housing programs and policies outlined in Section V. The actual amount of funding each year for focused fair housing activities will need to be balanced with other community needs including the development of affordable housing and the provision of supportive services for low-income residents. The City's ability to achieve measurable objectives within a given timeframe is subject to the funding available and within the context of prohibitive costs for developing and preserving affordable housing resources in this area.

The amended Housing Element identifies potential sites for future housing development with an aggressive schedule of proceeding with rezoning in order to ensure the sites are ready for development. The City has been successful in the past with assisting non-profit organizations to buy subsidized rental properties from for-profit owners, but acknowledges that one complex with a for-profit owner (the Terman Apartments) remains that may be at risk of future increases in rent or conversion to market rate housing.

Measuring the impact of fair housing activities can be elusive: for example, if the number of fair housing complaint cases filed goes up, can that be attributed to increasing discrimination or perhaps that the fair housing public outreach program has become more visible so that more people are aware of their rights and know where to file a complaint? Periodic monitoring and comprehensive fair housing audits should offer insights into the nature of fair housing conditions and the effectiveness of the City's approach. Increased publicity about the outcome of audits can be an effective means of educating landlords about illegal discrimination and encouraging responses from victims of discrimination. Reports by the Human Relations Commission and the U.S. Department of Housing and Urban Development's San Francisco Office of Fair Housing and Equal Opportunity, the Palo Alto Housing Corporation's reports on the Below Market Rent unit program, and performance reports by organizations such as Mid-Peninsula Citizens for Fair Housing yield regular and accessible data.

The following actions are recommended in addition to maintaining the current ongoing programs and policies in Section V. According to the data in Section III, the highest priority target groups for advocacy and services are people with disabilities and families with children, particularly female-headed households.

• Participate in Santa Clara Countywide and regional (e.g. North County region of Palo Alto-Mountain View-Sunnyvale) collaborative efforts on Fair Housing that seek to implement the recommendations of the Empirical Research Group/UCLA Law School study "Fair Housing in Santa Clara County: An Assessment of Conditions and Programs, 2000-2002." Example of recommendations for possible joint implementation include:
  - creation of a regional task force, coordination at the local government level and establishment of proactive goals
  - develop new sources of fair housing funding
  - measure forms of discrimination and deterrent impact of existing enforcement activity by developing an annual testing program to build data on discrimination levels, trends, distinctions between racial groups, and family/non-family
  - better public education through regional approaches to public outreach to publicize the services of fair housing organizations
  - maximize effectiveness of fair housing providers through measures such as monitoring and refining testing procedures by retaining outside experts from other parts of the U.S. to conduct site visits at fair housing providers and strengthening in-house litigation capacity of fair housing organizations
  - support investigation and litigation aimed at predatory lenders
  - monitor compliance with protection for the disabled

• Support the activities of the Santa Clara County Anti-Predatory Lending Working Group.

• Continue to expand public outreach and information about fair housing policies and services in Palo Alto, including website information. Develop additional means of reaching people with disabilities and families with children.

• Follow through on the Housing Element policies and proposals for updating the Zoning Ordinance Update that will facilitate the development of additional housing units generally and affordable housing specifically.

VIII. Signature Page

This Analysis of Impediments to Fair Housing Choice has been prepared on the ___th day of ________, 2003 by:

Julie Caporgno, Advance Planning Manager

And is approved by:

Lisa Grote, Chief Planning Official

Steven A. Emslie, Director
Planning and Community Environment

Frank Benest, City Manager
Certifying Officer for the CDBG Program

IX. Appendix: Sources and Consultations

Sources

- Housing Element for the City of Palo Alto: January 1999 - June 2006
- "Fair Housing in Santa Clara County: An Assessment of Conditions and Programs, 2000 - 2002" prepared by the Empirical Research Group, UCLA
- U.S. Department of Housing and Urban Development
- California Department of Justice Statistics Center
- FFIEC HMDA online database
- Performance Reports of Mid-Peninsula Citizens for Fair Housing

Consultations [Draft to be circulated Feb-April 2003]

- Human Relations Commission of the City of Palo Alto
- Mid-Peninsula Citizens for Fair Housing
- Palo Alto Housing Corporation
- Clara-Mateo Alliance
- Shelter Network
- Palo Alto Board of Realtors

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