We are sailing further into the sea of success. How long can we surf on the Peninsula’s 10-year old economic wave? Our first two newsletters in May will be cautionary about shoals ahead. There is no lack of capital for the next three years. The construction sector is at capacity. Will all of us surf smoothly into what may become a 13-year economic wave? We are noting uncertain weather advisories from banking experts across the world. Don’t fret! We have a sunny weather forecast at the end of this newsletter.
Cloudy with a Chance of Downfall
Regional Measure 3, the bridge toll hike on the June ballot that would raise tolls across seven state-owned bridges in the Bay Area, hasn’t attracted the support of a couple local political heavyweights.Santa Clara County Board of Supervisors President Joe Simitian of Palo Alto and Mountain View Mayor Lenny Siegel both said they don’t support the measure raising tolls $3 over the next seven years to between $8 and $9
Palo Alto Daily Post
Ed. Comment: Political sailing against the tide is not easy, but favorable winds seem to be pushing RM3 ahead. In general, we are skeptical about massive pooling of capital and geo-political bureaucracy allocating assets in era of accelerating inflation. We adhere to the adage that when the pie gets smaller, table manners change. We see the future as cloudy with chance of food fight.
Stanford GUP is a Big Gulp
Significant development fees are being proposed to mitigate impacts of Stanford developments during the next 2-3 decades. Situated between two counties Stanford will be responding to counties’ development fees ranging from $20 to $143 per square foot.
Ed Comment: This debate is long overdue. We ask our readers, their friends and neighbors to join the debate. We suggest three points. First, Stanford does not deserve to be singled out as not paying its fair share. Development fees are hardly rational for anyone. Quaint city councils have pot pourri exceptions, exemptions and waivers to fees. He or she who has the gold often wins. Second, impacted cities must honestly state negative impacts. Stanford is not a bottomless pit to remedy structural faults in city and county finances. Third, the Stanford Big Gulp is a narrow debate at this time. Negative impacts go far beyond capital for subsidized housing. We urge newspapers to cover what Menlo Park and Palo Alto City Councils are saying to SC County Supervisors.
Redwood City continues to grow and its construction boom shows no signs of slowing down. Residential development appears to be keeping pace with demand — but not for all levels of affordability.
San Mateo Daily Journal
Ed. Comment: Redwood City is our poster child for the economic boom and dense market rate housing. We can’t get our heads around the many achievements and risks undertaken by its City Council. We can’t find data to “prove” that RWC’s jobs to housing ratio (J2H) is favorable. Every city council would benefit from kicking the tires of its housing policies. If RWC is so successful, they should brag about it….loudly. RIP: The little blue home above had historical significance but it could not be saved. A new 7 -story, 175 unit residential development incorporated site with 6 other properties.
The Redwood City Council is concerned that a new federal tax benefit designed to boost investment in low-income communities will actually displace local residents.
After two census tracks including portions of Friendly Acres, Redwood Village, Stambaugh-Heller and North Fair Oaks were designated as “opportunity zones,” the council voted at a meeting April 9 to send a letter to Gov. Jerry Brown requesting those parcels be removed from consideration.
San Mateo Daily Journal
Ed. Comment: This is one of the most important stories on the SF Peninsula. It is a prime example of critical thought and conscience. It will be a strong candidate for our 2018 Council Leadership Awards in January.
Mighty Storm Cloud
New housing costs are not for faint-hearted developers. Even with apartment rents near record highs, rising construction costs and city fees are slowing down housing development around the Bay Area. In San Francisco, 4,500 new units were completed in 2017, down 14 percent for the year. Completions are expected to fall further.
Developers are grappling with construction costs that have risen by 10 percent a year by some estimates, largely in part because of a shortage of labor. San Francisco has the second-highest development costs for all sectors in the world at $330 per square foot, behind only New York.
Silicon Valley Business Journal
Ed. Comment: Inflation risk goes well beyond housing. Will hyper-inflation hit shovel-ready private and public projects? It seems inevitable for the next 6-18 months. If so, those projects will have higher cost basis with long-term implications. Higher ROI expectations mean steeper rents in current housing market. Housing affordability is a term used much too loosely by elected officials. Dozens of county and city infrastructure projects may become iffy as bids are opened.
Talking to Congress is “Worse than Trip to Dentist”
Who said that? VM Ware CEO. He added “The idea of sitting in a Senate hearing and educating a senator on how these technologies really work….. That’s probably worse than going to the dentist but it is our incumbent responsibility.”
Silicon Valley Business Journal
Ed. Comment: Let’s be objective. This is not just a painful trip to the dentist. It is the euphoria of our modern gold rush. We commend CEO Pat Gelsinger’s voice of reason in the midst of tech products and services rushing to market. But rush to market is wearing thin on social, legal and political norms.
We have one word for Tech Titans: INTERNALIZE!How about adding business historians to your cadre of advisors? What would they say about durability of company towns? Rushed services and product designs? History’s litany of unintended consequences. Pogo was correct!
Another Next Best Thing
A new affordable housing project replacing Taco Bell received enthusiastic support from a Mt. View Council subcommittee. The $41 million project would create 71 badly needed affordable apartments, but it could require the largest city subsidy to date for a project of its kind.
“Land costs are at an all-time high; construction costs are at an all-time high,” so said developer. Mountain View would need to pay about half that price, $22.7 million, which would deplete most of the city’s affordable housing fund. But city staff suggested they could raise this amount from market-rate project development fees. A good market-rate candidate is the Prometheus project to build 471 apartments. The apartment developer offered to “prefund” the fees.
Mt. View Voice
Ed. Comment: How does this really work? We only know what we read in the newspaper so here is housing finance 101.
“By taking the money, city officials emphasize they are not agreeing to a quid pro quo to approve a developer’s project. Under this agreement, if Prometheus’ project was denied, the city would need to repay any money that was prefunded.” We hope this works out for everyone. What’s next for Mt. View? Elixir of life? Fountain of youth?
Common Sense and Sense of Community
are Alive and Well!
There are dozens of citizens and organizations dedicated to the well-being our Peninsula communities. Here is an inspiring affordable housing story in Redwood City.
Confronting Our Housing Crisis
Ed. Comment: Everyone associated with this project deserves an A+ for putting a capital A in Affordability. Wonderful to see sunny days and sheltering seas for a few citizens in greatest need.
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Editors, Neilson Buchanan and John Guislin, are unpaid, private citizens on the SF Peninsula and have no ties to developers or government organizations.