Facebook Pledges $20 Million to Affordable Housing

Last week, Facebook announced they will spend $20 million to help alleviate the housing shortage in their neighbor cities of Menlo Park and East Palo Alto. About $18.5 million will go towards building new housing, mostly targeted at low/middle income families, while the rest will go towards job training programs and providing legal assistance to tenants facing eviction. This announcement comes as Facebook and other tech giants have been facing growing pressure to partner with local governments and community organizations to find solutions to the region's housing shortage - a problem which many feel has been exacerbated by unchecked tech growth.

Bird's eye view of Facebook's recent campus expansion.  Chilco Street is the only thing separating it from East Menlo Park's Belle Haven community (visible in the top left)

Facebook's rapid expansion into East Menlo Park, a historically low-income region, has been a point of contention as of late.  Early in 2015, they opened up a brand new 430,000 S/F Frank Gehry designed campus expansion within shouting distance of East Menlo Park's Belle Haven community.  Almost immediately after they cut the ribbon on that building, they submitted plans to the City of Menlo Park to redevelop an adjacent property into roughly 1 million square feet of additional office space.  That project - also Frank Gehry designed - was promptly approved, and construction has been underway for over a year now.  With all of this new office space to put to use, Facebook has estimated that they will bring 6,500 new employees to the area in the coming years.

A coalition of local community organizations had planned to sue Facebook over the stress 6,500 new employees could put on an already overburdened housing market.  However, after a series of meetings with Facebook representatives, they agreed not to.  Tameeka Bennett, executive director of Youth United for Community Action, one of the groups in the coalition, said she is convinced that Facebook is committed to partnering with the community to address the housing shortage.  And more so than any of their Silicon Valley peers, their actions have demonstrated as much.

Facebook's recent $20 million announcement isn't the first commitment they have made to combat the housing crisis.  Last year, in partnership with St. Anton Development, they broke ground on a 394-unit apartment complex at 3639 Haven Avenue.  Those units will be offered to non-Facebook employees, and 15 of them will be subsidized by Facebook for low-income families.  They extended their commitment to constructing publicly available housing earlier this year, when they unveiled a proposal to build 1,500 total units, 15% of which would be reserved for low to middle income families.  This hands on approach to tackling the housing shortage is completely breaking the mold of how Silicon Valley tech companies offer support to communities impacted by their growth.  While it is fairly common for companies to pay "impact fees" to help fund affordable housing, it is unprecedented for them to actually build the housing themselves.

To be fair, this isn't a completely altruistic effort on the part of Facebook.  Housing costs in the Bay Area have made it increasingly difficult for companies like Facebook to recruit the talent they want, so adding to the supply of housing serves their interests by driving those costs down and making it easier for them to recruit.

Perhaps others will follow Facebook's lead.  There are certainly plenty of eyes on Google in Mountain View, and Apple in Cupertino, hoping they will make similar efforts.  Stay tuned

New Redevelopment Proposal Submitted for Old Redwood City Theater

SyRes Properties, LLC - the company that owns Redwood City's defunct Century 12 Theater - recently submitted plans to redevelop the 15-acre property into 336 residential units and a 100,000 S/F luxury sports club.  This is a revision of a plan they submitted to the city last year which originally proposed 550 residential units.  At the time, city officials told SyRes that 550 units needed further review and would require the land the be rezoned for high density development.  Previous attempts to redevelop the land into rental units and auto dealerships have all fallen through.

“We've received a revised application and it's currently considered conceptual at this point", said Lisa Cost-Sanders, the city planner assigned to the project.  "We'll be providing the developers with additional comments and will be restarting the Environmental Impact Report process shortly.”

SyRes is the real estate branch of the Syufy family, who are known for their chain of Century Theaters.  In recent years however, the family has begun redeveloping their older cinemas into luxury VillaSport athletic clubs, as they are in the process of doing with an old theater in San Jose, and are currently hoping to do in Redwood City.  They currently operate three active VillaSports in Texas, Colorado, and Oregon, with single adult monthly dues ranging in price from $92 - $138 (expect that to be higher at Bay Area locations).

Follow this link to view a Villasport marketing video.

Other than serving as extra parking for neighboring auto dealerships, the property formerly occupied by Century 12 Redwood City has remained mostly vacant since the theater closed in 2003.  Should the recent SyRes proposal pass, it will become the second major development along Redwood City's bayfront, with One Marina Homes just a stone's throw away. However, even with the reduction in proposed residential units from 550 to 336, this project is sure to be put under heavy scrutiny by city officials for it's potential to further congest the Highway 101/Whipple junction.  It also comes at a time when city hall is facing growing pressure from the community to put the brakes on development.

This proposal is by no means a slam dunk for the Syufy family, who have had no luck getting anything approved for their property at 557 East Bayshore.  Stay tuned to our blog for further updates on this project.

New Wine Bar & Cafe Open at Box HQ, Redwood City

Donato Scotti, owner of Donato Enoteca in downtown Redwood City, has opened a wine bar, retail store & cafe at the new Box Headquarters at 900 Middlefield Road.  Cru Wine Bar & Merchant offers hard to find wines from around the world, as well as an international and domestic craft beer selection.  A European style menu featuring charcuterie plates, pizza by the slice, sandwiches and other treats are served as well.

The first day of service was November 2nd.  The cafe opens at 8am, and lunch service begins at 11am - stop by and check it out!

Redwood City Council Shoots Down Moratorium on Steep Rent Increases

Redwood City councilmembers reaffirmed their opposition to any form of rent control at Monday night's meeting when they shot down a proposed moratorium on rent increases.

The Housing and Human Concerns Committee was tasked to meet with residents and stakeholders before making recommendations to City Council Monday about how to address the city's affordable housing crisis.  One of the proposals they put forth was a temporary freeze on rent hikes greater than 7-10%.   The proposal was met with general unease from the council, as 4 members voted against it outright, and the remaining 3 voted for more research to be done before proceeding.

“I don’t see a distinction between a moratorium on rent increases and rent control. And, rent control is proven not to work. It doesn’t treat everyone fairly, including everyone on the tenants’ side fairly, and doesn’t treat everyone on the landlords’ side fairly", said Redwood City Mayor John Seybert.  "Our council across the board has spoken in opposition of rent control, this isn’t something new".

City council did show interest in other alternatives to addressing affordable housing.   They instructed staff to continue studying the viability of a relocation assistance program, and discussed possibly requiring longer lease terms in order to limit the frequency of rent increases.

With rent control on the November ballot in both Burlingame and San Mateo, it will be interesting to see what effect the results of those elections will have on rent control's momentum in Redwood City.  Even without the backing of city council, rent control could make it on the next ballot if community activists obtain enough resident signatures.

Wells Fargo Scandal Shines Light on Benefits of Loan Advisors

As many of you have probably heard, Wells Fargo is currently embroiled in a cross-selling scandal involving millions of fraudulent accounts being made without their clients’ knowledge (cross-selling is when a different product/service is sold to an existing customer). Wells Fargo’s abuse of this practice – which is standard in the banking industry - was the result of bankers cutting corners to meet ridiculous product per customer quotas passed down by company executives.

While we'd like to think that most bankers aren’t subject to the same quotas that Wells Fargo employees were, most bankers are incentivized in one way or another - through bonuses, promotions, pay raises - to open up as many accounts per client as possible. If you’ve ever opened an account or taken out a loan with a major bank or credit union you’ve probably been at the receiving end of aggressive cross-selling before - “We recommend you move your car loan over to us”, or “While you’re here, can I interest you in opening up a savings account?” In the case of Wells Fargo, the pressure put on bankers to open these extra accounts was enough to lead many to fraud.

This is one of the advantages to working with a loan advisor rather than going to straight to a bank/credit union for your mortgage.  They have no financial incentive to do anything other than to make sure you are satisfied and feel comfortable referring them more business later on down the road. Just some food for thought!

If you're thinking about buying a home and you'd like to be put in contact with one of my preferred loan advisors, feel free to reach out - I'd be happy to make the introduction.

Commuter Ferry Service From East Bay to Redwood City Approved

East Bay commuters inching their way to the Peninsula every morning through bumper-to-bumper traffic will have an alternative come 2017.  Last week, the California Public Utilities Commission voted to allow two private ferry companies, PROP SF and Tideline Marine Group, to operate scheduled public ferries from Berkeley and Emeryville to San Francisco and Redwood City.  Tideline will actually begin limited service to San Francisco by the end of this month and expand as demand grows, but PROP SF plans to roll out their Redwood City routes by the first week of 2017.

In April, Redwood City's Port Commission penned a letter to the Bay Area Water Emergency Transportation Authority expressing disappointment that they had not included Redwood City in their long-term strategic plans for expanding their public ferry service.  At the time, the WETA  (the government agency tasked with expanding ferry service across the Bay Area) cited concerns that ridership in Redwood City would not be sufficient to make the program economically viable just yet.  The ferries WETA currently operate from SF to the East Bay carry 300 passengers, and they rely heavily on rider fares to cover costs.   Both Tideline and PROP SF operate much smaller vessels, ranging in size from 36-100 passengers, so they are less limited by ridership goals.

Take a look at the short video below showing one of Prop SF's 36 passenger vessel:

and one of WETA's much larger vessels:

WETA gave the Redwood City Port Commission a 7 point plan to follow in order to initiate service, part of which suggested that the city partner with a company like Google or Facebook to fund the program.  Currently, both companies use small private ferry services to shuttle employees to Redwood City from the east bay, but there has been talk for some time that RWC could form a public/private partnership with Google to fund WETA's expansion into RWC.  That talk intensified when Google purchased about a million square feet of office space at the Pacific Shores Center near the Port of Redwood City back in 2014.

Even with a Google partnership, I'd imagine the introduction of Tideline and PROP SF into the equation has just cast further doubt on WETA's future in Redwood City.  They were already concerned about ridership, and now their 300 passenger vessels would have to compete for ridership with two other companies.  I've reached out to the Redwood City Port Commission for comment and am awaiting their response.  You can check into my blog for updates.

Two SM County Cities Moving Forward With Rent Control Initiatives

Come November, residents of San Mateo and Burlingame will have their say on rent control.  In San Mateo, community activists were able to obtain well over the 11,000 signatures required to place their proposed rent control measure on the ballot, and in Burlingame city officials put forward their own measure.  Should either pass, it could set a precedent for the rest of San Mateo County.

The pro-rent control movement gained a lot of momentum over the past year and a half, fueled by several widely circulated "evict, renovate, and increase rent" stories.  The case that probably garnered the most media attention, and helped catapult the rent control debate into the public discourse, was that of the 18-unit apartment complex at 910 Clinton Street in Redwood City.  The complex was sold, and the new owners promptly served all tenants a 60-day notice to vacate so they could proceed with renovations.  However, instead of vacate, many tenants chose to stay and rally in front of the building for more time - a demonstration that quickly took the form of a protest for rent control.  One of the tenants, a 14-year old high school student, became the spokesperson for the evicted tenants, and his pleas for rent control were run on virtually every major public news outlet - NBC Bay Area, Kron 4, ABC 7.  Ultimately, the issue was resolved when the owners agreed to assist the evicted tenants with relocation costs.  910 Clinton Street, now called "Velocity at Clinton", currently offers 1 bed, 1 bath apartments at roughly $2,500/month.

Since the evictions at 910 Clinton, rent control proponents in Redwood City have done everything in their power to make their voices heard by lawmakers - from organizing roughly 200 people outside of City Hall, to marching down El Camino.  The issue was eventually taken up in City Hall, but rather than put forth a rent control initiative, city officials agreed to pass a per square foot impact fee on new development that will go towards building more affordable housing.  However, if either measures pass in Burlingame or San Mateo, tenant advocacy groups in Redwood City could take up rent control again with a renewed sense of confidence.

I won't get too deep into my own views on rent control, but everyone should hear the case against it - especially since that side is rarely covered in the media.  Rent control essentially creates a subsidy paid for by a small group of private citizens (rental property owners).    These people are paying the subsidy through the money they are losing by not being able to rent their property at market value.  Let's look at it this way: if affordable housing is a viewed as a right that should be afforded to ALL citizens, is it fair to levy the burden on providing that right on a minority group within the population?  And if it's fair to set a price ceiling to protect renters, is it then also fair to set a price floor to protect property owners in the event the rental market bottoms out?

Another factor to take into consideration is that rent control could actually serve to decrease the supply of rental units.   Short term, rent control could constrict the rental supply by scaring some landlords out of the business.  This has actually already begun in Burlingame, where the owner of a 10-unit apartment building recently served his tenants notice to vacate, citing that he did not want to run the risk of having to operate his building under a rent control ordinance.  In the long run, it could slow the construction of new rental units, as many developers would likely shy away from building in a city with a rent control ordinance.  Let's remember, it's a shortage of available rental units fueling the affordability crisis in the first place.  Anything that would further tighten supply could exacerbate the issue.

No one would argue that families being displaced by rising rents isn't an issue.  The question is:  is rent control the practical solution to the affordable housing crisis, or the emotional one?

If you own rental property in Mateo County, take note.  If a rent control ordinance is established in San Mateo or Burlingame, it could become the standard bearer for similar ballot initiatives elsewhere in the county.  Read below for a brief synopsis of each

Burlingame - Measure R
Measure R would accomplish three things:  repeal Measure T, which currently prohibits the City of Burlingame from regulating real estate sale/rental prices; establish a rent control ordinance; enact just cause for eviction provisions.

The rent control ordinance would apply to all multifamily residential buildings with initial certificates of occupancy before February 1, 1995.  It excludes single-family homes, condominiums, owner-occupied duplexes or secondary dwelling units, hotels, motels, hospitals, certain nonprofits, dormitories and certain governmental facilities.  The ordinance would establish a base rent for each tenancy based off the amount paid on March 30,2016.  Under this ordinance, rent increases would be limited to once per year, and will be restricted to an amount proportional to the rate of inflation (but no more than 4%).  Tenants would be able to petition for lower rents if their landlords provide substandard housing, decrease housing services, or increase rent above what is allowed under the ordinance.  Conversely, landlords would be able to petition for rent increases under some circumstances to ensure a fair rate of returns.

The just cause eviction provision would apply to all units under rent control as well as single family homes, condominiums, and most multi-family residential units regardless of date of construction.  Reasons for a just eviction include: failure to pay rent, breach of lease, nuisance, criminal activity, and failure to grant reasonable access.  Landlords must pay relocation assistance to tenants for evictions based on necessary repairs, owner move-in, removal of unit from rental market, and demolition of unit.  Relocation assistance under this provision would constitute 3 months rent for a similar unit.

San Mateo - Measure Q
Measure Q is very similar to Measure R, with the key difference being that no existing law needs to be repealed to allow for rent control.

Like Burlingame's Measure R, Measure Q would set a base rent for each tenancy and limit subsequent rent increases.  Base rents would be determined by the amount the tenant paid on September 21, 2015.  For tenancies beginning after that date, base rents would be the rate paid upon initial occupancy.  The limits on rent increases are the same as Measure R - once annually, in an amount equal to the increase in Consumer Price Index (but no greater than 4%).  Landlords and tenants can petition for higher/lower rents for reasons similar to those described in Measure R.

The just cause eviction provision in Measure Q is almost identical to what is described in Measure R, except that the amount of relocation assistance paid to a tenant when applicable has not yet been determined.  It will be decided by City Council within 6 months of the Measure passing.