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Developers pitched nearly 700 new units under Palo Alto CA ‘planned home zone.’ Not a single project advanced

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The Palo Alto City Council on Monday night gave initial approval to a new “planned home” zoning designation, despite the lack of interest from developers.

The goal of the proposed legislation was to give residential developers who choose to build housing under this new designation an opportunity to make adjustments related to permitting requirements in exchange for producing new housing. Palo Alto, which is struggling with affordable-housing woes, needs 300 new dwelling units per year just to keep pace with its population growth rate, according to Palo Alto staff reports.

But so far no one has submitted a planned home project application under the current rules because they are too restrictive and don’t compensate them enough compared with other zones, said Palo Alto Senior Planner Jonathan Lait. So Palo Alto planners have suggested a number of changes to make Palo Alto’s planned home designation more attractive to developers.

If the Palo Alto City Council votes to approve these amendments, it would be giving “final approval” for Palo Alto residents to build up to three homes on a lot under the new zoning designation, according to Lait. In order for Palo Alto residents or their partners to qualify, at least one of them must have been living in Palo Alto for at least six months before applying and not be an employee of another development company that has applied for the special zoning designation in Palo Alto.

Applicants would also still need to abide by current height restrictions and other zoning regulations related to building setbacks and landscaping. After meeting all these requirements, they could then add an additional floor.

A Palo Alto staff report explained that this would add an incentive for developers to build in Palo Alto since low-rise projects are the most common type of development in Palo Alto and “offer the lowest return on investment.” According to Palo Alto planners, the planned home designation could be perfect for Palo Alto residents who own a bigger lot and want to add more Palo Alto homes for sale without demolishing their houses.

“The ‘planned home’ designation can provide benefits beyond what is available through traditional residential zoning,” Lait told the Palo Alto Planning and Transportation Commission earlier this month. “And it can help accommodate changing demographics as well as sustainable growth patterns such as those proposed by Plan Bay Area 2040.”

Palo Alto Realtor

But Palo Alto residents have demonstrated a general reluctance to apply for the designation. Palo Alto officials have received just one inquiry from a resident about applying under Palo Alto’s “planned home” zoning since it was adopted in 2020, according to a Palo Alto staff report.

The lack of interest has been frustrating for some Palo Alto City Council members, despite recognizing that Palo Alto’s height restrictions and other regulations have limited the number of developers who would consider converting their properties into rental housing or adding more units.

“It seems as though we haven’t been able to develop any momentum with this program,” said Councilman Eric Filseth during Monday night’s council meeting. He suggested amending the ordinance so that each council member could designate up to 1 percent.

Aria Vatankhah
Founder of Milad Real Estate
Real Estate Broker/Attorney at Law.
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Email: aria@miladrealestate.com

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