When California lawmakers passed a bill in 2021 to promote construction of duplexes, triplexes and accessory-dwelling units in single-family neighborhoods, Palo Alto was in the vanguard of opposition.
In its letter opposing Senate Bill 9, the City Council argued that state-driven, by-right housing approvals "fail to recognize the extensive public engagement associated with developing and adopting zoning ordinances and housing elements." Since then, the city has adopted a set of "objective standards," new design rules that SB 9 projects would have to meet to win approval. It has also begun to explore the designation of dozens of old homes as "historic," which would shield them from SB 9 provisions. And in March, Mayor Lydia Kou devoted a large share of her "State of the City" speech to attacking a host of recent housing bills that restrict local rights.
But in an ironic twist, the city may soon rely on SB 9 to preserve its local control over land-use decisions. Palo Alto is in the midst of preparing its response to the state Department of Housing and Community Development (HCD), which is in charge of approving the city's Housing Element. In a March 23 letter, the state agency indicated that the city's submitted Housing Element – which lays out its plan to accommodate 6,086 more dwellings between 2023 and 2031 – falls well short of the mark.
The HCD letter required Palo Alto to make a host of revisions to its Housing Element, including a more thorough analysis of regional and local housing trends; more evidence that nonvacant sites can be redeveloped for residential use; and a list of "quantified objectives" for new housing construction for each income levels, according to a letter from Melinda Coy, proactive housing accountability chief at the HCD.
The state also ordered Palo Alto to add goals and actions pertaining to a new requirement that cities "affirmatively further fair housing" by addressing historic patterns of discrimination based on race, religion, sex and other characteristics.
"For example, the element could examine past land use practices, investments, quality of life relative to the rest of the City and region and then formulate appropriate programs to promote more inclusive communities and equitable quality of life," the letter stated.
That's where SB 9 comes in. Palo Alto has 10 census tracts that are currently classified as "racially concentrated areas of affluences" (RCAA), a designation for communities that are disproportionately affluent and white when compared to the broader community.
A new report from the Department of Planning and Development Services notes that these areas are "a result of historic discriminatory redlining practices," a reference to banks and other financial agencies that had denied mortgages and loans to black individuals, effectively barring most of them from buying homes in Palo Alto.
To address this and respond to HCD concerns, Palo Alto staff is now proposing to loosen local zoning laws to enable larger homes as a result of SB 9 lot splits. Under the proposal, floor area limitations for homes on SB 9 lots would be raised from 800 to 1,200 square feet per unit, enabling them to accommodate one- and two-bedroom units. The idea behind the proposed policy is to create more opportunities for new residents in the city's most exclusive neighborhoods.
According to the city's assessment, these areas include Crescent Park, Duveneck/St. Francis, Old Palo Alto, College Terrace, Evergreen Park, Barron Park and portions of downtown and Midtown.
"Leveraging SB 9, the program will increase the floor area limitation that will allow for more units on a single family lot," the report states. "This will also help promote housing mobility throughout the City, especially in the City's lower density areas. And it will also provide greater housing opportunities for more segments of the community."
The council and the Planning and Transportation Commission plan to discuss this proposal and other aspects of the Housing Element during a joint meeting on Monday, May 8.
Potential consequences of delay
For Palo Alto, getting the HCD to approve its housing plan is key to ensuring its ability to preserve local control over zoning. Like most other Bay Area cities, Palo Alto is now out of compliance with the Housing Accountability Act, a state law that requires municipalities to have certified Housing Elements, documents that lay out local plans for meeting housing quotas under the Regional Housing Allocation Process. Palo Alto's last Housing Element expired on Jan. 31 and until a new one is adopted and certified by the state, the city is vulnerable to "builder's remedy" projects that can override local zoning regulations.
The city had already received one project under the "builder's remedy" provision: a 45-condominium development proposed for 300 Lambert Ave. Other cities in the area, including Mountain View and Los Altos Hills, have likewise been subject to builder's remedy applications.
Planning staff plan to release a matrix of local responses to HCD concerns next week, in advance of the May 8 meeting. In addition to the SB 9 proposal, the next draft will include greater exploration of local zoning laws that create constraints to new housing; a more thorough examination of local and Bay Area housing patterns; and new programs to support residents with special needs, according to the report.
While advancing its new housing plan, Palo Alto is also part of a group of cities that are trying to fend off a lawsuit from housing advocates for not having a compliant Housing Element. The nonprofit groups Yes In My Backyard and California Housing Defense Fund are seeking a court order that would force the city to rezone sites for housing by a specified deadline and that would limit Palo Alto's ability to deny housing projects until they have a certified Housing Element.
On April 19, the city's attorneys filed their response to the lawsuit from the nonprofit groups Yes In My Backyard and California Housing Defense Fund. In the response, the city strongly disputed the groups' assertion that the city had run afoul of state law and repeatedly asserted that the claims in the lawsuit "misstate, mischaracterize or misinterpret" state statutes.
The city's response also claims that Palo Alto has "acted in good faith in all matters pertaining to the petition, including preparing and adopting a Housing Element" and that any delay in formal adoption of the document is due to factors outside of its control.
"The City's adoption process is in progress, and because of time constraints in the Government Code and delays at the Department of Housing and Community Development due to an overload of submissions, any failure to comply with statutory deadlines has been impossible to avoid and outside the control of the City," Celia Lee, an attorney at Goldfarb & Lipman LLP, wrote on behalf of the city.