Palo Alto's plans to create a new housing hub on a stretch of El Camino Real, south of Oregon Expressway, received rave reviews this week from area developers, though one major builder suggested on Oct. 11 that it may still rely on state laws to override local zoning laws.

The city is in the midst of changing the zoning standards in its new El Camino "focus area" between Page Mill Road and Matadero Avenue, a segment that has seen several major development proposals over the past year. It also contains Palo Alto Square, a business park that is considering an addition of housing on its parking lots, according to city officials.

The goal of the new zoning effort is to both add housing and to convince the state Department of Housing and Community Development (HCD) that Palo Alto has the capacity to accommodate its goal of 6,086 new dwellings between 2023 and 2031. The state agency has rejected the city's Housing Element twice, including the version that the City Council formally adopted last May. The city hopes that by relaxing development standards such as height, density and parking, it will remove existing constraints to housing construction.

The Planning and Transportation Commission advanced this effort on Oct. 11 when it recommended a series of zone changes that would implement the city's new policies. During a marathon session that featured tense debates and a flurry of votes, commissioners struggled to reconcile the city's housing goals with the need to ensure that the code changes don't overwhelm existing neighborhoods or create substandard living conditions for new residents.

The plan for the new El Camino Real focus area was among the initiatives that moved forward, with the commission voting 5-1, with Commissioner Cari Templeton dissenting, to support the strategy (Commissioner George Lu, who lives in this area, recused from the commission's discussion of this policy). In doing so, however, commissioners raised concerns about the need to protect Matadero Creek, which flows through the development site at 3400 El Camino Real, and to ensure that the housing complex at this site isn't built too close to single-family homes.

The zoning debate, which started on Wednesday and spilled into Thursday morning, comes with a sense of urgency. Under state law, Palo Alto and other cities have until Jan. 31 to implement the zoning changes required to implement Housing Element policies. Assistant City Attorney Albert Yang told the commission that a failure to do so would make the city's legal position even more precarious when it comes to housing laws.

"Right now, the city position is that, notwithstanding the HCD's position, we think our Housing Element complies with the minimum requirements of state law," Yang said. "We won't be able to take that position after Jan. 31 if we haven't adopted an implementing ordinance."

Fueled by this sense of urgency, the commission recommended a series of zone changes. At the same time, some members expressed trepidation about many of these changes, which in some cases only advanced by 4-3 votes. Commissioners specifically raised concerns about approving zone changes on Stanford University-owned sites that would allow Stanford to limit housing to its affiliates and avoid paying property taxes, a key source of revenue for the local school district.

Commissioners Keith Reckdahl and Bryna Chang were particularly concerned about the revenue issue and asked city staff to consider mechanisms for ensuring that these revenues flow in, whether in the form of taxes or impact fees. Currently, the city is considering three Stanford-owned sites for future housing projects: two on El Camino and one on Pasteur Drive, near the Stanford University Medical Center. Under the proposed plans, the two El Camino projects would be for the general public while the Pasteur project would be limited to Stanford staff, faculty and postdoctoral students.

Unlike the City Council, which raised some objections earlier this month about Stanford limiting its new housing projects to its own affiliates, the commission was generally amenable to Stanford's plan for staff housing. Its primary concern was around property taxes.

"Whether it's affiliates or not affiliates, they have the same impact on PAUSD and we should ensure that," Reckdahl said, before the panel voted 5-1, with Commissioner Bart Hechtman dissenting, to support his direction to staff.

Hechtman, meanwhile, raised concerns about adding policies that would weaken the incentives to build housing. He brought up similar concerns during the discussion of the El Camino focus zone when some of his colleagues proposed provisions that would better protect the creek and require more distance between new developments and adjacent single-family homes.

Templeton, meanwhile, took the opposite stance and suggested that the city is moving too fast in approving the new development standards for the proposed focus area. Under the proposal that the commission endorsed, sites in this area would have a height limit of 85 feet (far higher than the existing 50-foot standards) and they would be allowed to accommodate roughly twice as much density than they currently do.

"I feel like we're stuck between a rock and a hard spot because this isn't ready," Templeton said. "If this was any other point in time there's no way this would be considered for approval."

The proposed focus area, which the City Council is expected to formally approve next month, received high marks from the two developers who are already pursuing major residential projects on this segment of El Camino.

"We are very pleased with the movement in this focus area to allow this density," said Mark Johnson, partner at Acclaim Companies.

Acclaim is currently advancing a seven-story, 380-apartment project at 3150 El Camino Real, which until recently housed The Fish Market restaurant. Earlier this year, the developer indicated that it is willing to rely on the "builder's remedy" provision of state law, which applies to cities without approved Housing Elements and which allows developers to override local zoning regulations.

But while he supported the city's push on El Camino, Johnson did not preclude the option of Acclaim relying on the State Density Bonus law – which grants builders additional waivers from local regulations – as part of its new project at the Fish Market site. The benefits provided by the state law, he said, may be "essential to making this project actually happen."

"While we're encouraged, we are concerned we may not be able to build this project using the developing standards proposed for El Camino focus area without implanting some of the density bonus waivers," Johnson said.

Ted O'Hanlon, who has been working on the housing project proposed for the Creekside Inn site at 3400 El Camino Real, also lauded the new focus zone. The project, which is being developed by Oxford Capital Group, currently consists of a hotel building, a 185-apartment complex and four townhomes. He encouraged the city to advance policies that allow more height and, in doing so, let developers use the core of the building for parking and thus help them avoid the expense and disruption of constructing underground garages.

"We are excited to be included in the El Camino Real focus plan and look forward to working with the city on a continuing basis," O'Hanlon said at the Oct. 11 meeting.

While El Camino is expected to accommodate a small portion of the city's housing plan, a much larger share would go to the San Antonio Road and Fabian Way area, where most properties are currently zoned for commercial and industrial uses. The proposed Housing Element envisions about 2,000 dwellings – roughly a third of the city's total – in this area, which would see more height and density than any other Palo Alto neighborhood.

The commission supported the new zoning standards for this area, even as members expressed reservations about issues like parking requirements and the area's proximity to the Baylands. Vice Chair Bryna Chang noted the lack of transit services in this area and suggested raising the proposed parking standards. While some employees in this area, particularly those who work at nearby Google properties, may be able to get to work without cars, many others will have few good options for getting around.

"From an equity perspective, I'm concerned that if we don't have adequate parking, we're creating an area that's livable only for certain people," Chang said. "And it's a problem because it's a large amount of our RHNA allocation and it's also a large swath of a section of Palo Alto."

But Planning Director Jonathan Lait suggested that tightening parking standards could undermine the goal of the project, which is to make development easier.

"To achieve the densities that the Housing Element prescribes for this area, we need to eliminate constraints in our zoning code that would preclude us form achieving those densities," Lait said. "Parking is one of those constraints."

While the commission ultimately voted to support the new zoning standards in south Palo Alto, Templeton said she wasn't convinced that the area can – or should – accommodate as many housing units as the council and planning staff envision. She suggested that the city explore additional sites elsewhere for housing.

"There's no need to put all 1,900 that are being claimed can be built in this area," Templeton said. "They don't all have to go here. There are other places they can go."