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Eager to see more housing, Palo Alto’s elected leaders approved on Monday a series of zone changes that relax height, density and parking restrictions for residential developments at major commercial strips.
In a move that fulfilled one of the pledeges that the city made in its recently approved housing plan, the City Council voted 6-0, with Council member Julie Lythcott-Haims absent, to both expand and beef up the city’s “housing incentive program.” The city adopted the program in 2018 but limited it to downtown, California Avenue and the El Camino Real corridor.
Since then, the council modified the HIP three times to capture additional areas, including portions of the Ventura neighborhood and the commercial and industrial corridor around San Antonio Road, where the city hopes to encourage construction of about 2,000 new dwellings by 2031.
The fourth adjustment, which the council adopted on March 3, is the most significant one yet in that it both expands the program to other areas and enhances the bonuses that it provides to potential builders. With the changes, the zoning designation can now apply to multi-family zones in neighborhoods such as Downtown North and University South, and to commercial zones around Fabian Way and West Bayshore Road, near U.S. Highway 101.
Also eligible for the program would be previously excluded parcels around El Camino Real, including near Curtner Avenue and El Camino Way.
Developers in these areas can also now rely on the “affordable housing incentive program,” which applies exclusively to deed-restricted, below-market-rate housing projects in transit-friendly areas. To date, the program has only been used once: to enable construction of the 59-apartment Wilton Court development at 3705 El Camino Real. By extending the program to all parts of the city that are covered by the housing incentive program, the council hopes to see more such proposals.
Both the HIP and the AHIP, as the programs are commonly known, grant builders significant density bonuses, which vary by zone. In general manufacturing zones around Fabian Way and certain stretches of El Camino, the floor-area-ratio for certain housing sites would be as high as 3.25, which in some cases is more than double of what current zoning regulations allow. Both programs are available to builders who agree not to lean on the State Density Bonus Law, which similarly grants them zoning enhancements and waivers from regular design rules.
The revised program also relaxes height limits for eligible projects. In the past, maximum heights in these areas ranged from 30 feet to 60 feet, depending on the underlying zoning. With the changes, projects in some of these residential districts would retain height limits of 40 feet. But in some of the commercial districts, the ceiling for new developments would now be 50 or 60 feet.
To further sweeten the deal for potential builders, the council also agreed to streamline the approval process for developments in both programs. These projects would now be able to advance after a single hearing in front of the Architectural Review Board, provided their design is consistent with Palo Alto’s recently adopted objective standards.
“We need to find how we’re creating an incentive for developers to play by our rules and not by the state’s,” Council member Greer Stone said.
Council members also agreed that dawdling is not an option. The city’s Housing Element, which won state approval last August, calls for the city to expand the HIP and AHIP programs by the end of last year. Stone raised concerns that failure to comply with the housing plan could make the city once again vulnerable to “builder’s remedy” projects, which apply to jurisdictions without approved housing plan and allow projects in these areas to effectively ignore zoning laws.
The council’s more immediate concern, however, was ensuring that program won’t accidentally diminish the neighborhoods in which it’s implemented. One area that generated significant discussion is the city’s requirement for projects in certain commercial zones to include retail on the ground floor. The proposal presented by planning staff would have waived this requirement for most properties on El Camino Real. The only exceptions would be special designated “retail nodes” where the ground-floor retail requirement would stand.
The proposal from planning staff calls for two such nodes along El Camino Real, one near El Camino Way and another in Barron Park, just south of Page Mill Road. It did not, however, including the auto dealership on El Camino and Charleston.
Council member Pat Burt found this problematic.
“It’s basically a proposal to get rid of our auto dealerships,” Burt said. “It’s just one of the ramifications that we haven’t fully digested.”
Burt called the zone changes on the table – along with other amendments that the city is adopting to comply with its Housing Element – the most significant revisions that the city has done in 60 years.
“So much is coming at us and staff at once with deadlines we’re trying to meet that we’re being pushed to make decisions on the things that we haven’t understood the ramifications of,” Burt said. “That’s a tough situation but it makes me not want to go further than we need to go at this time.”
To address this concern, the council agreed to protect the dealerships by carving out the properties on which they are located from the housing incentive program. And even as they approved the zoning changes, council members agreed that the retail nodes need additional protection.
Under a proposal from Council member Keith Reckdahl, the entire stretch of El Camino between Page Mill Road and the southern edge of the city would be considered a retail node on an interim basis – a protective measure to ensure new applications without retail won’t get filed for these sites. The Planning and Transportation Commission will be charged with refining it and identifying permanent node locations for El Camino Real over the next two months.
“We believe we can come back relatively quickly on that,” Planning Director Jonathan Lait said.
By advancing the changes, Palo Alto council members and staff hope to boost two programs that have underwhelmed in their brief existence. The housing incentive program has only been used for two projects, which total 105 dwellings. The affordable housing incentive program generated one project: the 59-apartment complex known as Wilton Court at 3705 El Camino Real.
The largest project to rely on the HIP program to date is a 102-unit condominium development at 788 San Antonio Road that was approved but never built. Ted O’Hanlon, who represented the applicant in the approval process, said the project is no longer feasible because of rising costs, high interest rates and the city’s recently raised development impact fees.
O’Hanlon suggested during the March 3 meeting that the council go even further and allow an FAR or 4.0, as well as exclude above-ground parking from floor area calculations.
But council members and the city’s staff and consultants suggested that with the enhanced density and height limits, the program can now mount a formidable challenge to the State Density Bonus Law. This would particularly be the case at properties that the Housing Element identifies as “housing opportunity” sites, which get additional zoning bonuses under the new rules.
“Depending on whether the site is a Housing Element site and, depending on what district it’s in, the HIP can actually allow for more density than what developer can get under State Density Bonus Law,” said Jean Eisberg, a consultant with Lexington Planning who worked on the program revisions.
The zoning changes received a warm reception from local housing advocates. Amie Ashton, executive director of the nonprofit group Palo Alto Forward, which lobbies for more housing, called the changes before the council an “amazing start” and presented the council with a petition signed by 150 people who shared her feelings. She also suggested going even further when it comes to relaxing zoning limits to encourage new developments.
“To deliver the 550 units we are committed to under the HIP program, it needs to be robust enough to really be an incentive,” Ashton told the council.
