City of Palo Alto
Housing Incentive Program,
Affordable Housing Incentive Program,
Retail Preservation Ordinance
Public Hearing
City Council
March 3, 2025
Meeting Purpose
1. Receive presentation summarizing a draft
ordinance amending:
a. Housing Incentive Program
b. Affordable Housing Incentive Program
c. Retail Preservation Ordinance
2. Consider amendments to Title 18 to
implement Programs 3.3A, B, & D, 3.4A-D,
and 6.2A of the Housing Element
2 Background - Available Density Bonus Incentives
3 Housing Incentive
Program (HIP)
Modified development
standards for market
rate projects in
commercial districts in
exchange for
processing through
Architectural Review
State Density Bonus
Law (SDBL)
Modified development
standards in exchange
for a percentage of
on-site affordable or
senior housing
Affordable Housing
Incentive Program (AHIP)
Modified development
standards for 100% middle-
or low-income projects in
commercial districts near
transit in exchange for
processing through
Architectural Review
Background: Housing Element Program 3.4A-D
Housing Incentive Program (HIP):
1. Streamline process: one ARB meeting for projects that comply with objective standards.
2. Expand applicability: include RM zone and ROLM/GM Focus Area.
3. Modify zoning standards: Including building height, floor area ratio (FAR), and parking to enable greater housing production.
Retail Preservation Ordinance:
4. Waive preservation requirements: For opportunity sites and reduce replacement requirement, except in specific locations.
4 Based on
site tests
Background: Housing Element Program 3.3A, B, &D
Affordable Housing Incentive Program (AHIP):
1. Modify zoning standards:
○ Maximum 2.4 residential FAR
○ Maximum 60-foot building height for projects
< 60% of AMI
○ Reduced parking ratios
2. Expand applicability to Housing Opportunity
Sites
3. Streamline project review
5 Wilton Court (AHIP Project): 59 units for low
income households
AHIP: Draft Ordinance Amendments
6 Specified in Housing Element Program 3.3:
● Increase FAR and building height, and reduce parking ratios. ● Streamline review process (for projects that meet objective standards). ● Expand eligibility to all Housing Element opportunity sites.
Additional amendments in draft Ordinance, recommended by staff and/or PTC:
● Expand eligibility to include all locations eligible for the HIP. ● Provide consistent definitions of 100% affordable housing that include lower income households.
7 AHIP: 2018 Original
Boundaries CD Downtown
(w/in ½ mile of
Caltrain)
CN and CS (w/in ¼
mile of El Camino)
CC (w/in ½ mile
of Caltrain)
8 Housing Element
Opportunity Sites
AHIP: 2025 Proposed
Boundaries
HIP-Eligible
Sites (e.g., RM,
ROLM/GM
Focus Area)
Retail Preservation: Draft Ordinance Amendments
Specified in Housing Element Program 3.4:
● Retain requirements in the GF (Downtown) and R (Cal Avenue) combining districts, and defined nodes on El Camino Real.
● Waive retail preservation requirements on Housing Element sites. ● Reduce retail replacement floor area requirement in other locations.
Additional amendments in draft Ordinance, recommended by staff and/or PTC:
● Create parking and height incentives for ground-floor retail. ● Simplify code language and 100% affordable housing definition. 9 Retail Preservation: Existing vs. Proposed
10 Location/Type
Subject to Retail Preservation
Ordinance?
Existing Proposed
GF Downtown & R Cal. Ave. Overlay ✓ ✓
El Camino Real Retail Nodes ✓ ✓
El Camino Real (Outside of Retail Nodes) ✓ ✗
Housing Element Opportunity Sites (Not HIP Projects) ✓ ✗ Housing Element Opportunity Sites (HIP Projects) ✓ ✓
High-Density Mixed-Use Projects ✓ (reduced) ✓ (reduced) 100% BMR Housing ✗ ✗
Program 3.4
expands
exemptions
Required El Camino Real Retail Nodes
11 HIP: Draft Ordinance Amendments
12 Specified in Housing Element Program 3.4
● Update development standards:
○ Increase FAR and building height maximums
○ Reduce parking ratios to match State Density Bonus Law ○ Revise daylight plane and reduce front/street side setbacks ● Expand eligibility to include RM districts and GM/ROLM Focus Area ● Streamline process for projects that meet objective design standards Additional amendments in draft Ordinance, recommended by staff and PTC:
● Expand transportation demand management measures for projects with reduced parking ● Remove separate development standards for 100% affordable projects (and relocate to AHIP) ● Allow unlimited density/bonus FAR for “family-friendly” (3+ bedroom units) (Program 6.2A) 13 CD(C) Downtown
CC(2) California Ave.
CN El Camino Real
(neighborhood retail/
pedestrian access)
CS El Camino Real
(service commercial/
auto-oriented)
HIP: 2018 Original
Boundaries
14 CS San Antonio
(service commercial/
auto-oriented)NVCAP (all
multifamily zones)
HIP: 2020-2024
Modified Boundaries
15 RM (Multifamily
zones)
GM/ROLM Focus
Area
HIP: 2025 Proposed
Boundaries
Existing Regulations: Housing Element Created Two Tiers 16 Base Zoning
NOT a Housing
Element Opportunity
Site
Housing Element
Opportunity Site
Base Zoning
Lower
densities
Higher
densities
Draft HIP Regulations
17 Base Zoning
Housing Incentive
Program
NOT a Housing Element Opportunity Site Housing Element Opportunity Site HIP
Base Zoning
Housing Incentive
Program
HIP
In the commercial mixed-use districts, HIP provides an incremental increase in FAR and height above base zoning; other standards are the same for opportunity sites and non-opportunity sites
Commercial Districts: Existing Vs. Proposed HIP Standards 18 Existing HIP Proposed HIP Existing HIP Proposed HIP
Maximum FAR (Non-Opportunity
Site/Opportunity Site) Maximum Height (ft.)
CC(2) 2.0 2.6/3.5 37 60
CS (El Camino) 1.5 2.85/3.5 50 60
CS (San Antonio) 2.0 2.0 50 50
CN (El Camino) 1.5 2.5/3.25 40 50
CD(C) 3.0 3.0 50 50
RM Districts: Existing Base Vs. Proposed HIP Standards
19 Existing Base Proposed HIP Existing Base Proposed HIP Maximum FAR (Non-Opportunity
Site/Opportunity Site) Maximum Height (ft.)
RM-40 1.0/1.5 3.0 40 50
RM-30 0.6/1.25 2.5 35 40
RM-20 0.5/1.25 2.0 30 40
GM/ROLM Focus Area n.a./2.5 3.5 60 60
Parking: Existing Vs. Proposed HIP Standards
20 Existing Proposed HIP
Studios/1-Bedroom Units 1 space/unit 1 space/unit
2+ Bedroom Units 2 spaces/unit 1.5 spaces/unit
Comparison of Density Bonus Options
21 State Density Bonus Law Local Housing Incentive Program (Proposed) Bonus
Density
100% BMR projects: Unlimited bonus
15% VLI + 15% MOD projects: 100% bonus
100%-500% bonus depending on district and
whether HE opportunity site
Affordability On-site required Inclusionary Housing Ordinance (fee in lieu) Waivers Unlimited Limited (e.g., FAR, building height, coverage) Concessions Up to 4, depending on affordability None
Parking 1 sp./studio & 1-bed; 1.5 sp./2- & 3-bed 1 sp./studio & 1-bed; 1.5 sp./2- & 3-bed Process Streamlined Review (Objective Standards) or
Architectural Review (Context-Based Criteria)
Streamlined Review (Objective Standards)
Awareness Known Highlight in new Ch. 18.14: Housing Incentives, create handout, provide website page
Needs to be
better than SDBL
to be viable!
Staff Recommendation
Adopt an ordinance amending Title 18 (Zoning) to implement Programs 3.3A, B, & D, 3.4A-D, and 6.2A of the Housing Element
22 Housing Incentive Program
How HIP standards were evaluated
Site Testing Analysis:
Physical and Financial Feasibility
23 Process
Evaluate financial
feasibility of
existing zoning
standards
Consider
zoning
modifications
to improve
feasibility
Evaluate physical
feasibility of
existing zoning
standards
Test modified
zoning standards
to achieve financial
feasibility
24 Test Sites
● Sites selected primarily
from Housing Element
Sites Inventory
● Range of lot sizes and
shapes (e.g., corner,
interior, alley access)
● Most sites are small, so
results are somewhat
conservative –
feasibility improves on
larger sites
CD-C 635
High St.
RM-40 Interior
Lot (5,000 sq ft)
RM-30 355
College Ave.
RM-20 680
University Ave.
CN 3700 El
Camino Real
RM-40 Interior
Lot (10,000 sq ft)
25 CC(2) 310
Cal Ave.
RM-30 Zoning Standards
(pre-January 2024 updates)
Grade Level Plan
Third Level Plan
Second Level Plan
Section View
Key standards affecting feasibility:
parking, building height, FAR,
density and retail requirements
Summary of Findings - Existing Zoning Standards
(type of development supported by zoning)
27 Standards generally yield
lower-density townhome
product for all prototypes
Standards generally do not
support retail mixed use or
stacked flats (i.e., apartments and
condos)
✘✔ ✘
Financial Feasibility Approach
28 ● Keyser Marston Associates (KMA) prepared pro
forma analyses based on the site tests.
● Pro formas compare value supported by the
prototype project to the project’s development cost.
○ Key inputs: hard and soft costs, financing costs, rent and for-sale revenues, standard developer profit.
● If project value < costs plus developer profit, the
project was deemed unlikely to develop.
Pro forma example
Zoning CN CC(2) RM-20 RM-30 RM40
# of Residential Units 15 3 4 4 4
Typology Townhomes Townhomes Townhomes Townhomes Townhomes Financially Feasible? unlikely unlikely unlikely unlikely unlikely Residential ZonesMixed-Use Zones
Summary of Findings - Existing Zoning Standards
29 Zoning Changes to Enhance Feasibility
Key Development Standards to Change:
● Increase or eliminate residential density
● Increase floor area ratio (FAR)
● Reduce parking requirements
30 Objectives:
● Accommodate stacked flats and
mixed-use development (higher density)
● Improve financial feasibility
● Retain Palo Alto design values
Additional Regulations to Refine while Addressing
Neighborhood Context and Compatibility:
● Increase building height
● Revise daylight plane
● Reduce setbacks
● Increase site coverage
● Revise use requirements for retail
Example: RM-30 Zone
Site Testing
Existing
Zoning
Potential HIP
Zoning
Example: Resulting Program
RM-30 Zoning District
Residential (units)
Building Height
Setback (rear) (ft.)
Density (du/ac)
Residential FAR
Parking
Parking Type
Open Space Min Usable (sf/unit)
Site coverage
4 7
35 40
10 5
27 47
1.0 1.6
8 (2 per unit) 11 (1-1.5 per unit)
Covered, tandem Podium, tandem
150 150
40% 65%
Observations:
● Parking still limits density
● Increase in site coverage
● Modest increase in height,
but change in daylight
plane to start higher
32 Zoning CN CC(2) RM-20 RM-30 RM40
# of Residential Units 33 34 7 7 9
Typology Apartments Apartments Townhomes Townhomes Apartments Financially Feasible? ✔ ✔ ✔ ✔ ✔
RM ZonesMixed-Use Zones
Summary of Findings - Potential HIP Zoning Standards
33