With Palo Alto falling far short of its housing goals for the year, city officials approved on Monday a slew of zone changes that they hope will ramp up residential production in 2019 and beyond.
The effort, which kicked off on Nov. 26 with public testimony, shifted into the next phase on Monday night when the City Council made a series of significant changes to the zoning code. These changes were the first phase of what promises to be a contentious process that will likely to spill over into next year.
The process got off on a fortuitous note on Monday night, when the council voted 6-0, with Councilman Greg Tanaka absent and Vice Mayor Eric Filseth and Councilwoman Karen Holman recused, to change several rules pertaining to multifamily developments. Seven hours later, an exhausted and frustrated council concluded the hearing by approving a host of other citywide changes, including ones that allow developers to create rooftop gardens to meet the city's requirement for "private open space" and give developers of affordable housing more flexibility to request reduced parking standards, provided they can convince the city that they can actually achieve those standards.
One change that the council approved early in the evening was the transformation of the RM-15 district, which currently allows developers to build 15 residential units per acre, into a RM-20 district, which will allow 20.
An even more significant move, which also advanced without dissent, was the creation of a "minimum density" provision for multifamily zones. The requirement effectively prohibits a developer from constructing a single-family home in such a zone, which is something they can do under the existing code.
With the new provision in place, a new project in the RM-20 district would have to provide at least 11 units.
Other multifamily zones would also see minimum-density requirements. A project in an RM-30 zone would have to have at least 16 units, while in an RM-40 zone, the minimum density would be 21 units.
One point of contention came over single-family homes that currently exist in high-density zones. Under the staff proposal, a property owner who demolishes such a home and wishes to rebuild it would have to comply with the new "minimum units" standard. Council members Tom DuBois and Greg Scharff pushed back against the provision and argued that single-family homes and duplexes should be exempt from the new law.
"If you have a single-family home or a duplex, you should be able to demolish the single-family home and rebuild a single-family home," Scharff said.
Councilman Adrian Fine, the lead author of the memo that first suggested a "minimum density" requirement, pushed back and suggested that such a change would undercut the intent of the ordinance, which is to promote more housing. Ultimately, he joined the rest of his colleagues in advancing the proposal with the exemptions proposed by DuBois.
While this particular change applies to multifamily residential zones throughout the city, other revisions targeted specific areas. Some of the most significant ones would occur downtown, where a new "Housing Incentive Program" would allow residential developers to build at three times the current density.
The program aims to both boost downtown's housing supply and to give developers an incentive not to rely on recently adopted state laws such that streamline the approval process and in many cases waive parking requirements. Specifically, the city wants to give residential developers an alternative to Senate Bill 35, a bill that allows developers who dedicate 50 percent of their projects to affordable housing to forego the Architectural Review Board reviews and (if the project is near transit) to avoid providing parking.
Unlike SB35, Palo Alto's newly approved "Housing Incentive Program" would not force developers to dedicate 50 percent of their projects to affordable housing or to waive the ARB review. Instead, it would allow them to build at far greater densities than they would under existing law.
In downtown, developers who participate in the local program would be allowed to build with a floor-area ratio of 3.0, three times the density of what is normally allowed. They would also be able to do this without dedicating half of their projects to below-market-rate units.
Interim Planning Director Jonathan Lait said the goal is to create a program that a developer will see as more advantageous in terms of producing more units than Senate Bill 35.
"What we're saying is that we're making it more attractive to potential developers to take advantage of this process while also ensuring the city retains its design review aspect, which you don't get under SB35," Lait said. "We're giving a little bit more unit density and floor area but we're also preserving our design-review process."
Not every proposal proved as popular. Councilwoman Karen Holman and Councilwoman Lydia Kou both chafed at the prospect of allowing developers to use rooftop gardens to meet their "private open space" requirement, something that is not allowed under the current code.
Such a policy, Holman said, can bring "persistent and disruptive" noise impacts to neighboring properties. She suggested including a special provision requiring code enforcement officers to investigate any complaints about noise from these sites, though her colleagues ultimately concluded that noise complaints require a separate discussion.
Another idea that generated significant debate on Monday was a proposal to remove an existing provision that allows commercial developers to pay "in-lieu parking fees" to avoid the cost of actually providing parking. Housing developers don't have that option. By proposing to scrap the "in-lieu parking fee" program, planning staff intended to level the playing field and remove one incentive for commercial development.
Fine and Councilman Cory Wolbach both pushed back against it, with Fine arguing that such a change should not be made without more outreach to downtown's stakeholders. Though Fine said he would be interested in exploring the removal of the in-lieu fee, which he acknowledges "puts the thumb on the scale" to encourage commercial over residential, he argued that policy should be further analyzed by the planning commission.
Wolbach concurred and said the housing ordinance should focus on providing carrots to residential developers, not hitting commercial ones with sticks.
Vice Mayor Eric Filseth and Councilman Tom DuBois disagreed.
"I think we need both carrots and sticks," DuBois said. "We can make all these changes but not see any additional housing because commercial remains attractive."
Filseth argued that the in-lieu fee program fails to build actual parking and instead creates "ghost spots for ghost cars," given that the city hasn't been building parking facilities with these funds. Having the program in place for commercial developers exacerbates the problem.
"We have pretty significant parking issues now and we're making it worse," Filseth siad.
After some debate, the council reached a compromise and agreed by a 6-1 vote — with Kou dissenting, Scharff recused and Tanaka absent — to suspend the program for a year to give the planning commission to further analyze the issue.
By the same vote, the council also directed the commission to explore other mechanisms for incentivizing housing, including changes to density limits for hotels and for mixed-use projects, which could see an increase in allowed residential density and a decrease in commercial density.
The zoning revision is the centerpiece of the Housing Work Plan that the council adopted early in this year, a document that includes a list of initiatives to promote more housing. City Manager James Keene highlighted the difficulty of the task at the onset of the discussion when he pointed out the city's meager output in recent years. So far this year, the council has only approved one significant multifamily project: a 57-unit apartment building on El Camino Real and Page Mill Road that the city has characterized as "workforce housing."
"We've lost ground on building housing over the past three years," Keene said. "We're falling far short on your adopted goals. ... You have made housing one of your top priorities every year for the past two years and we've failed."
Among the most contentious subjects that the council took up was parking requirements for affordable housing. Scharff argued that rather than specifying the types of requirements that would be granted to below-market-rate developments, the city should allow developers to make the case for size reduction. Under the approved change, developers can request up to 100 percent reductions, provided they can demonstrate their ability to achieve the target.
Current code allows developers to request between 20 percent and 40 percent reductions in parking, based on income levels (with greatest reductions for lowest incomes). The council adopted the change by a 5-2 vote, with Fine and Mayor Liz Kniss dissenting.
Scharff and other supporters of the change argued that it's critical for the city to convince the community that when it builds affordable housing it "won't dump parking on them." He cited the 2013 citizen referendum over a housing development on Maybell Avenue, where neighborhood concerns about "externalities" — namely, parking — spurred opposition and doomed the project.
The best way to do it, he said, is to allow developers themselves to demonstrate the maximum demand they would see.
The discussion lasted close to seven hours and concluded well after midnight with council members sparring over a host of issues, including rooftop gardens and retail requirements for affordable housing along El Camino Real. While Holman and Kou suggested that the discussion be continued to a future meeting where these issues could be vetted further, the rest of the council agreed to plow ahead and approved a wide-ranging motion with a host of citywide changes, including the elimination of a "site and design" review for housing projects with 10 or more units and the removal of a requirement for ground-floor retail from projects on El Camino Real that consist entirely of below-market-rate units.
Holman protested the process and called the final motion "clear as mud." But despite some confusion over the ordinance, an exhausted council voted 5-2 to adopt it, with Holman and Kou dissenting and Tanaka and DuBois absent.
"We're not going to agree on this even if we're here to 6 a.m.," Kniss said just before the final vote.