PALO ALTO — As cities across California fight lofty state-mandated housing goals, many are relying on the research of a nascent housing policy think tank run by Palo Altans with deep pockets and a record of donating to local slow-growth leaders.
From Pasadena and Santa Monica in Southern California to Marin County and affluent Peninsula cities, research by the Palo Alto-based Embarcadero Institute has been cited to counter the legislature’s demands for more housing amid a dire affordability crisis.
Though its founders reject that the institute has any political bent, pro-housing advocates say it is a vocal part of a NIMBY agenda attempting to restrict housing construction in suburban cities.
The state has asked more than 350 cities to prepare the way for more than 2 million homes by 2030 to accommodate population growth by focusing construction on “high opportunity areas” close to jobs, like Palo Alto and other Peninsula cities. The state says the Bay Area must build 441,000 homes in that time, about 10,000 of which will be built in Palo Alto.
But the Embarcadero Institute — founded by slow-growth political donors and Palo Alto residents Gab Layton and Asher Waldfogel — suggests the state’s math is wrong.
In its latest report, the institute says that SB828, a housing bill authored by Democrat Sen. Scott Wiener of San Francisco in 2018, inflated regional housing goals using incorrect data.
The report says the use of inaccurate vacancy rates and “double counting,” inspired by Wiener’s bill, caused the state to exaggerate the number of housing units needed in Southern California, the Bay Area and the Sacramento Area by over 900,000.
Layton and Waldfogel — who said the institute’s goal is to analyze government housing numbers and not to make policy — said the state’s numbers are the result of “politicizing data” and want to use accurate numbers to reach non-political conclusions.
“There’s no question there’s a shortage of affordable housing in California,” Waldfogel said. “But it’s important for the state methodology to be sound and agnostic of politics. It shouldn’t give artificially high or low results.”
But for Sen. Wiener, raising housing goals for cities like Palo Alto was exactly the bill’s point.
During an interview, Wiener said the bill was an attempt to reform the 50-year-old regional housing allocation process which gave cities goals that were “way too low” and “not in any way related” to future housing need.
Wiener also said the housing goals process had been politicized so that “wealthier cities could reduce their RHNA goals,” and cited the “extreme example” of Beverly Hills, which in its 2019 housing allocation was required to zone for just three housing units.
Wiener said he crafted SB828 to do two things: impose more accurate housing goals and put guardrails in place to prevent abuse.
And so far, Wiener said, the results have been “fantastic” with the Bay Area allocation going up 2.5-fold and the Southern California allocation three-fold. Beverly Hill’s allocation went from three units to over 2,000, a more accurate figure, Wiener said.
“The bill had the intended result,” Wiener said, so he did not find it surprising that slow-growth groups have coalesced to oppose it. He said fights around housing allocations are ultimately “political ones.”
“We’ve seen opponents to pro-housing legislation rely on analysis from the Embarcadero Institute to oppose housing bills,” Wiener said. “What’s happening now with the housing goals process is no different. They trot out what looks on its face to be credible analysis but of course it’s not credible.”
Wiener isn’t alone in contesting the institute’s data. University of California Davis professor Chris Elmendorf said in an interview the institute is akin to oil company-funded think tanks publishing anti-climate change research.
He explained that the institute relies on projected household growth to reach its conclusions, a forecast that “bakes in” the housing crisis: shortages of housing mean high rents which mean slow growth. With those projections, Elmendorf said, cities that haven’t grown in decades won’t have to grow in the future.
For Elmendrof, the bill’s core idea is that California housing targets should be adjusted to mirror the conditions of “healthy housing markets” elsewhere in the country that can produce housing middle-income families can afford.
“The state has been doing what’s it’s always done, it’s just that the legislature is saying what it has been doing is inadequate and we need bigger numbers,” Elmendorf said in an interview. “It shouldn’t seem like an accident or a surprise. Places like Palo Alto and Los Altos Hills are squarely in the legislature’s sights.”
Despite claiming no political bent, Waldfogel, Layton and their families have donated large amounts of money to “residentialist” candidates advocating slow-growth policies in Palo Alto.
In 2016, Gab Layton and her husband Thomas Layton gave $25,000 to the campaigns of Arthur Keller and current councilwoman Lydia Kou. Though he was a Planning and Transportation Commissioner at the time and did not make a contribution, Waldfogel’s wife Helen MacLean also contributed $25,000 to both campaigns.
In 2020, the two founders and their families also contributed thousands to the campaigns of political allies Ed Lauing, current councilman Greer Stone — who is an advisor for the Embarcadero Institute — and current Vice Mayor Pat Burt.
Both Waldfogel and Layton rejected the notion that the Embarcadero Institute is a slow-growth or NIMBY organization. Most people who work with the institute are volunteers, the organization doesn’t have an office or land and it is is largely self-funded by its two wealthy founders along with contributions of over $185,000 from donors since 2015, according to documents from Pro Publica.
“We weren’t thinking of creating material that was somehow going to influence certain candidates,” Layton said. “The institute is separate from our personal interests. The goal of the institute was always to publish government data that supports policy-making. I guess my hope is that the data, regardless of where you stand on the issues, will inform the decisions.”
Waldfogel said the institute isn’t promoting any agenda but they can “help identify the problems.” Layton said there’s no way cities can rezone to the level needed and that a dedicated source of state funding to build affordable housing should be identified.
“When you look at the numbers, it’s very clear we have a serious affordable housing deficit, no one can dispute that” Layton said. “It seems that’s the most pressing problem we have. I don’t think the state needs to create inflated metrics of market rate housing to fix the housing issue. It undermines the accuracy of the information we have.”
