East Palo Alto, CA

East Palo Alto has a long history of providing affordable housing to low-income residents who work on the Peninsula. In fact, they incorporated specifically to prevent Menlo Park and Palo Alto from annexing all the land thereby raising property values and housing prices beyond the reach of the existing residents. In doing all this, the City of East Palo Alto has also spent decades violating state housing and development laws all in the name of being fair. What the city council doesn't seem to understand is that their efforts to prevent ongoing development actually hurt the city in the long run.

I've tried to develop residential housing in East Palo Alto. I ran development of an 8-lot subdivision in 2005 and a 3-lot subdivision in 2008. In both cases, the city exceeded the state mandated deadlines for reviews and approvals, imposed Draconian fees to support non-existant parks/schools, and failed to inform us of critical missing infrastructure that made the cost of development substantially higher than it should have. The general policy of the city is that builders are not welcome. While there have been several major projects completed, they've taken many years to finish and much longer than any other city. The view of politicians and resident advocates is that building or improving housing means higher prices that the low-income residents can't afford.

What those people don't understand is that their low tax base, a result of low housing values, doesn't generate enough income to properly fund their schools, parks, roadway improvements, and other aspects of the city. The quality of life is lower because of their refusal to let developers build. Sure, it could cut the number of low-income housing units but the improvements for those that do live there would be huge. One developer owns a multi-acre lot that could have been a major shopping center with housing - ala Santana Row. However, the city's unreasonable demands on displaced tenants makes it cost prohibitive to develop.

Read this article in this San Jose Mercury News to get an idea of the issues facing developers in the city.

A new developer and landlord is coming to East Palo Alto. They have the experience and money needed to break cities and get them under control to allow development. I sincerely hope this company will get East Palo Alto under control so that developers can build and the city becomes a nice compliment to the surrounding towns.

There is another conflict brewing between investors and first time home-buyers, and this time the home buyers may win. In the more affordable areas of the Silicon Valley distressed properties, ie short sales and reos have been popular with investors and first time buyers. Many would be owner occupiers lose out on great opportunities to investors who have all cash. Since condos are the least expensive properties, have the fewest maintenance issue, and tend to bring in more rent per dollar spent they are popular with investors. Coupled with the more restrictive lending practices on condos, many bay area developments are now in a position where the number of owner occupied units has fallen to a critical level. Owners of these properties are having trouble refinancing and buyers trying to get loans are being rejected by the lenders. As a result, many complexes are starting to pass new HOA regulations limiting the number of rentals allowed in the condo development.

These restrictions can be a double edged sword. If they occur in a building where the delinquency rate on the HOA dues is too high then a buyer will not be able to get a loan anyway and it will effectively cut off all sales. In the future when the market has settled down the rental restriction could put a damper on future sales. However, if they are not instituted it may become impossible for anyone but investors to purchase in some condo complexes, which in itself will lower values not to mention make things harder for the first time home buyer. It will also make it impossible for current homeowners to ever refinance in some of these buildings.

I do not have the answer here as to what is right or wrong here. I can only give some advise on what to do if you want to purchase or sell a condo and want to get the information about potential rental restrictions.

1. Ask your agent to find out if the HOA docs are available yet. If it is an reo they most likely will not be and a

short sale very likely not

2. If the docs are not available before you make an offer ask your agent to ask the listing agent for the number of the HOA management company

3. Call the management company and ask about any current or contemplated rental restrictions

It is not that hard to find out and can save a lot of time and possibly money.

If you have any questions about short sales in San Mateo or Santa Clara Counties please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E. 01191194