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Palo Alto’s plan to add more than 6,000 housing units has yet to win state approval, but recent correspondence between City Hall and the state Department of Housing and Community Development suggests that the complex, high-stakes exercise is finally nearing the finish line.
According to the letter that the HCD had sent to the city last week, Palo Alto’s recently revised Housing Element now “addresses most statutory requirements” that the department had described in its letter last August, when it rejected the city’s submission. The finding comes despite sustained efforts by downtown developers and housing advocates to further delay the certification of the document, according to correspondence obtained by this publication.
The July 9 letter identifies four issues that the city still needs to resolve before it could obtain state certification for its Housing Element. It needs to update its plan for monitoring new housing at faith-based institutions; create a schedule of actions to facilitate development of housing on city-owned parking lots; provide a specific target for expedited reviews for multi-family developments; and resubmit for a public comment a section relating to “alternative housing types” such as transitional housing, single-room occupancy housing and large family units.
Planning staff told this publication that they plan to make these revisions and post the updated Housing Element to the project webpage by the end of the week for a seven-day public review period. The requested changes are “minor and intended to clarify details of existing program language,” staff from the Department of Planning and Development Services said in an emailed response to this publication.
“Staff is optimistic, based on information provided in the most recent HCD comment letter, that the Housing Element can be certified this summer,” planning staff said in its response.
The recent progress is a welcome development for the City Council and planning staff, who have been trying for nearly two years to get state approval for the Housing Element, a document that will dictate the city’s residential growth. By law, the city has to plan for 6,086 new housing units by 2031. The new plan identifies sites that could accommodate this housing and creates new policies aimed at spur residential growth.
The city has already been rejected twice by the HCD, promoting significant revisions to the draft that the City Council initially adopted in May 2023. In August, the state agency concluded that the document falls short and requested a long list of revisions and additions. It requested, among other things, additional analysis of the nonvacant sites in the city’s housing inventory to make sure the sites can actually be converted to housing. It also asked city staff to look at additional commercial zones that could accommodate residential growth and evaluate its own permit process to address “constraints on local processing and permit procedures.”
The August rejection letter was a blow to the City Council and to planners who had been working on the state-mandate document for nearly two years. It also spurred the council to further loosened zoning standards in certain commercial zones, most notably in the newly created “focus zone” along El Camino Real, just south of Page Mill Road, where residential complexes will now be allowed to have heights of up to 85 feet. The council and the city’s Planning and Transportation both voted in April to approve the revised document and send it back to the HCD for approval.
For the council, state approval comes with a sense of urgency. Palo Alto has been out of compliance with state law since Jan. 31, 2023, when state certification was due. This opened the door for developers to propose “builder’s remedy” projects that far exceed local zoning regulations and development standards.
Numerous developers have indicated that they plan to take advantage of this lapse. Redco Developments has proposed a 382-unit development at the Mollie Stone’s site on California Avenue that would include two towers, one with 17 stories and another with 11. Acclaim Companies is leaning on builder’s remedy to build 380 apartments at the former site of The Fish Market, 3150 El Camino Real; while Oxford Capital Group is using the provision to advance its plan for 185 apartments at the site of Creekside Inn, 3400 El Camino Real.
Staffing costs have also been significant. City Council members and planners have warned in recent months that working on the Housing Element has hindered their ability to work on actual implementation of housing policies. During an April discussion, Council member Pat Burt cited the “tremendous amount of staff resources” that have gone into this exercise.
“I know all kinds of other things relating to long-term planning in our community are having to be put aside, including some of the zoning updates that we want to do and other measures,” Burt said. “That’s a real dilemma. The longer we don’t get it approved, the more you have to devote your primary resources to this rather than the changes that will actually bring about the new housing units.”
The argument has not, however, swayed Palo Alto Forward, a local nonprofit that has been offering copious comments on the city’s prior drafts and that has been urging the HCD to reject its most recent submission. On May 23, the group submitted a 33-page letter arguing that the newly adopted Housing Element continues to fall short. The group argued that the city’s housing plans don’t account for “economic feasibility” of housing projects and criticized the city for limiting its zoning reforms to specific “opportunity sites” and not to broader sections of Palo Alto.
“The choice to leave in place these acknowledged physical constraints throughout the city does not comply with Palo Alto’s housing obligations under state law,” Palo Alto Forward wrote.
The nonprofit also argued that the city’s housing plans rely too much on manufacturing and industrial zones in south Palo Alto, an area that the council expects to accommodate more than 2,000 of the new housing units.
The pro-housing group SV@Home similarly argued that Palo Alto’s new Housing Element remains substandard. The organization’s Executive Director Regina Celestin Williams submitted a letter to HCD that endorsed Palo Alto Forward’s concerns. Williams wrote in a June 21 letter that SV@Home remains “deeply concerned that the latest Housing Element Update leaves in place significant known constraints to housing production and does not meet state requirements to affirmatively further fair housing.”
Palo Alto’s planning staff pushed back against Palo Alto Forward’s criticism with its own 24-page rebuttal of the nonprofit’s letter. Planning Director Jonathan Lait wrote to the HCD that it is “clear from reading the commenter’s letter that this organization expects the City’s Housing Element to be held to a higher bar than other California jurisdictions, and what the Housing Element statute requires.”
“There is no basis for this treatment. Indeed, the latest revision to the Housing Element thoroughly addresses HCD’s comments on the previous draft, and Palo Alto Forward now appears to be applying additional scrutiny to delay the City’s Housing Element certification and program implementation,” Lait wrote to the HCD.
Housing advocates aren’t the only stakeholders pressuring the HCD to delay certification. The state agency also received correspondence from David Lanferman, an attorney who recently represented the developer Charles “Chop” Keenan in a legal battle against Palo Alto over its parking policies. Lanferman, who claimed to be representing “numerous businesses, property owners, residents and merchants,” took issue with the Program 1.4 in the Housing Element, which calls for building housing developments on city-owned parking lots in the downtown area.
Lanferman claimed that because these parking facilities were created through the Downtown Parking Assessment District, the city “does not have the unfettered right or legal authority to convert any of the existing Downtown parking lots.”
“The existing Downtown parking facilities were paid for by several hundred property owners who have been paying assessments for many years, based on commitments inducing the creation of the Assessment District and agreements regarding the purpose and use of the assessments to be undertaken, i.e., to acquire and provide these parking lots for the specific and limited use as parking facilities serving Downtown Palo Alto,” Lanferman wrote. “The City is not free to now disregard those agreements.”
The city attorney’s office pushed back against this argument. Assistant City Attorney Albert Yang suggested that Lanferman is “espousing a novel legal theory that the City does not truly own its surface parking lots, because those lots are held ‘in trust’ for downtown property owners who agreed, several decades ago, to finance construction of parking lots through creation of assessment districts.” He also noted that proposed policy for housing on city lots includes as a key provision the replacement of parking, either at the same site or at a nearby site.
“The City has asked Mr. Lanferman for legal authority stating that public property is held in trust for property owners in an assessment district; to date, he has not provided any. To the extent any rights of downtown property owners are implicated, the City believes they are adequately addressed by the provision of replacement parking spaces, as called for in Program 1.4,” Yang wrote.
The July 9 letter from the HCD notes that the agency considered letters from Palo Alto Forward and SV@Home before making its determination on the city’s latest Housing Element submission. By requiring only four relatively minor decisions, the agency suggested that approval might be coming soon.
“The element will meet the statutory requirements of State Housing Element Law once it has been revised, re-adopted if necessary, and submitted to HCD and reviewed by HCD to comply with the above requirements … ,” Melinda Coy, chief of the HCD’s Proactive Housing Accountability Unit, wrote to the city.