Palo Alto City Council
May 12, 2025

From: Sven Thesen
To: Council, City; Lait, Jonathan; Sauls, Garrett
Cc: Kate Kramer; John Kelley
Subject: Agenda item 10, ADU"s - In Support of John Kelley"s ADU proposals Date: Sunday, May 11, 2025 11:47:38 PM
Attachments: Thesen Kramer Pre Notary Deferral 250312.pdf CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
i
Gentle City Council Members,
I am writing in support of

John Kelley's ADU proposals as detailed in his email of May 11, sent at approximately 9:40pm.

In summary:
1) We should be able to build larger than 1000 square-foot ADU's; 2) We should be able to convert the main house and/or the ADU(s) into condominiums similar to San Jose;
3) The city should cancel all impact fees associated with ADUs.

Please see his email for a detailed analysis of the above.

My wife and I are beginning the process of constructing an ADU.

As noted above, we are limited to 1000 ft.². We would have preferred to have built roughly 1200 ft.² to allow a second bathroom & bigger bedroom dedicated for a future caregiver.

Regarding converting the ADU to a condominium, we had not heard of this before and would at least like it as an option.

Impact fees, we have been requested to pay ~$23,700 in impact fees & this is separate from the ~$4,700 in school impact fees &

the cities ~$5,900 in permit fees
--
Sven Thesen,

415-225-7645
EV Consultant & Founder, ProjectGreenHome.org and BeniSolSolar.com; Wonder Junkie

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How California Is Keeping Electric Vehicles Out Of Reach For Apartment-Dwellers This document is recorded for the
benefit of the City of Palo Alto
and is entitled to be recorded
free of charge in accordance with
Section 6103 of the Government Code
After Recordation, mail to:

OFFICE OF THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301

AGREEMENT CREATING A LIEN

TO SECURE DEFERRED PAYMENT OF

DEVELOPMENT IMPACT FEES AND/OR IN-LIEU FEES
ADDRESS: ________________, PALO ALTO, CA
A.P.N. No._____________
This Agreement, made and executed this _____ day of_____________, 20___, by and between the CITY OF PALO ALTO, a California charter municipal corporation ("City"), and ___________________________, a ______________________ ("Developer") to secure the payment of deferred development impact fees and or in-lieu fees that would otherwise be due prior to issuance of a building permit.

RECITALS
A. Developer is the owner of that certain tract of land situated in the City of Palo Alto, County of Santa Clara, State of California, generally known and described as _______________[street address], Palo Alto, California and more fully described in Exhibit A [legal description], (the "Property"); and
B. On or about _____________[date], City approved Developer’s application(s) for _________________ [entitlements], subject to conditions of approval including the payment of development impact fees and/or in-lieu fees under Chapter 16.64 of the Palo Alto Municipal Code (“PAMC”).

C. Developer wishes to defer payment of development impact fees and/or in-lieu fees associated with the Property, more fully described in Exhibit B, pursuant to PAMC Section 16.64.030 NOW, THEREFORE, for and in consideration of the approval and covenants contained herein and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Deferral of Fees. Pursuant to PAMC Section 16.64.030, payment of the development impact fees and/or in-lieu fees described in Exhibit B shall be deferred until the date the development is approved for occupancy. If the development contains more than one dwelling, the fee shall be paid on a pro rata basis for each dwelling when it is approved for occupancy. All fees must be paid before final occupancy approval may be granted. Fees shall be payable at the rates in effect on the date the fees are paid, except: (1) an applicant for a vesting tentative map for a development project shall pay the fees at the rate in effect on the date the application for the vesting tentative map is deemed complete, and (2) an applicant that defers fees for a designated residential redevelopment project, as defined in California Government Code Section 66007, may elect to pay the fees at the rate in effect at the time of building permit issuance. 314 Stanford Avenue,
124-30-002
Thesen Kramer 2007 Revocable Living Trust dated 31 October 2007 trust
314 Stanford Avenue
ADU Building Permits

2. Lien Created. Developer hereby grants to the City a lien against the Property described in Exhibit A; said lien is intended to guarantee the payment in full of the deferred fees described in Exhibit B, plus the City’s costs of enforcement and collection, including reasonable attorney’s fees, if any.

3. Release of Lien. Upon full payment of all deferred fees to City and complete satisfaction of all terms of this Agreement by the Developer, the City shall promptly release the lien created hereunder by executing a lien release in substantial form as shown in Exhibit C. Upon request by the Developer, the City will execute a partial release of the lien in the event the fee is prorated pursuant to Section 1 above.

4. Enforcement. The City may pursue collection through all available legal and administrative means, including without limitation, judicial or non-judicial foreclosure of the recorded lien against the Property or a civil judgment against the Developer for breach of this Agreement and/or the security provided hereunder. The Developer will be responsible for any fees required of the City for the enforcement and collection of the development impact fees, including reasonable attorney’s fees.

5. Notices. All notices hereunder shall be given in writing and mailed, postage prepaid, by certified mail, addressed as follows:

To City: Office of the City Clerk
250 Hamilton Avenue
Palo Alto, CA 94301

To Developer: _________________________

6. Miscellaneous.
a. This Agreement will be governed by the laws of the State of California.

b. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California.

c. The terms, covenants and conditions of this agreement shall run with the land and shall bind, the heirs, successors, executors, administrators, assigns, contractors, and subcontractors of the parties.

d. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties.

e. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect.

f. In the event the either the City or Developer shall at any time or times waive any breach of this Agreement by the other, such waiver shall not constitute a waiver of any other or succeeding breach of this Agreement, whether of the same or any other covenant, condition, or obligation.

g. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly Sven Thesen, 314 Stanford Ave Palo Alto CA 94306
executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement.

h. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement.

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed in duplicate the day and year first above written.

CITY OF PALO ALTO Developer

____________________________ ______________________________ City Manager
Name: ________________________

APPROVED AS TO FORM: Title: _______________________

____________________________
Deputy City Attorney ______________________________

APPROVED AS TO CONTENT: Name: ________________________

Title: _______________________
____________________________
Director of Planning
and Development Services

Sven H. Thesen
Trustee
Sven H. Thesen
Trustee

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B

DEFERRED DEVELOPMENT IMPACT FEES AND/OR IN-LIEU FEES

[name of fee] [amount of fee]

Amounts provided are estimates based on the rates in effect at the time this Agreement is executed. Fees are payable at the rates in effect on the date of payment except: (1) an applicant for a vesting tentative map for a development project shall pay the fees at the rate in effect on the date the application for the vesting tentative map is deemed complete, and (2) an applicant that defers fees for a designated residential redevelopment project, as defined in California Government Code Section 66007, may elect to pay the fees at the rate in effect at the time of building permit issuance.

EXHIBIT C [Option 1: Full Release]

LIEN RELEASE FORM
This document is recorded for the
benefit of the City of Palo Alto
and is entitled to be recorded
free of charge in accordance with
Section 6103 of the Government Code
After Recordation, mail to:

OFFICE OF THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301

RELEASE OF LIEN UPON REAL PROPERTY
ADDRESS: ________________, PALO ALTO, CA
A.P.N. No._____________
WHEREAS, on __________, ___________________________ (“Grantor”) and the City of Palo Alto (“Grantee”) entered into an Agreement Creating a Lien to Secure Deferred Payment of Development Impact Fees and/or In-Lieu Fees (“Agreement”), which Agreement was recorded as Document No. ____________ in the Official Records of the County of Santa Clara on ____________; and WHEREAS, Grantor has satisfied the conditions for the release of lien encumbering certain property under the Agreement;
NOW, THEREFORE, Grantee hereby releases all of its right, title, and interest to the lien in the real property described in Exhibit A, attached hereto.

CITY OF PALO ALTO
____________________________ Date: __________________
City Manager
APPROVED AS TO FORM:
____________________________
City Attorney or Designee
APPROVED AS TO CONTENT:
____________________________
Director of Planning and Development Services
314 Stanford Avenue,
124-30-002

EXHIBIT C [Option 2: Partial Release for Pro Rata Payments]

LIEN RELEASE FORM
This document is recorded for the
benefit of the City of Palo Alto
and is entitled to be recorded
free of charge in accordance with
Section 6103 of the Government Code
After Recordation, mail to:

OFFICE OF THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301

PARTIAL RELEASE OF LIEN UPON REAL PROPERTY
ADDRESS: ________________, PALO ALTO, CA
A.P.N. No._____________
WHEREAS, on __________, ___________________________ (“Grantor”) and the City of Palo Alto (“Grantee”) entered into an Agreement Creating a Lien to Secure Deferred Payment of Development Impact Fees and/or In-Lieu Fees (“Agreement”), which Agreement was recorded as Document No. ____________ in the Official Records of the County of Santa Clara on ____________; and WHEREAS, the Agreement provides that the fees shall be paid on a pro rata basis for each dwelling unit when it is approved for occupancy;
WHEREAS, Grantor has partially satisfied the conditions for the release of lien encumbering certain property under the Agreement by paying $________ upon the approval for occupancy of _________ [number or description of dwelling units];
NOW, THEREFORE, Grantee hereby partially releases its right, title, and interest to the lien in the real property described in Exhibit A, attached hereto.

There remain unpaid fees for _______ units.

CITY OF PALO ALTO
____________________________ Date: __________________
City Manager
APPROVED AS TO FORM:
____________________________
City Attorney or Designee
APPROVED AS TO CONTENT:
____________________________
Director of Planning and Development Services
314 Stanford Avenue,
124-30-002

CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)

STATE OF __________________________)
)
COUNTY OF _________________________)

On __________________, before me, _____________________, a notary public in and for said County, personally appeared _________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

_____________________________

CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)

STATE OF __________________________)
)
COUNTY OF _________________________)

On __________________, before me, _____________________, a notary public in and for said County, personally appeared __________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

_____________________________

CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189)
STATE OF __________________________)
)
COUNTY OF _________________________)
On __________________, before me, _____________________, a notary public in and for said County, personally appeared ______________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.
_____________________________

From: John Kelley
To: Council, City
Cc: Lait, Jonathan; Sauls, Garrett; Stephen Levy; Sven Thesen Subject: PA-ADUs: Recommendations re Agenda Item #10 on May 12, 2025 Date: Sunday, May 11, 2025 9:40:14 PM
Attachments: PA-POLI-letter to PACC re Amending Municipal Code re ADUs 2025-05-11 -- with attachment.pdf CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.

Dear Mayor Lauing, Vice Mayor Veenker, and Councilmembers, Please see the attached letter concerning Agenda Item #10 regarding ADUs on the agenda for tomorrow night’s City Council meeting:

The summary and recommendations from the attached letter are also copied below in this email.

Respectfully submitted,
John Kelley
**********************
TO: Palo Alto City Council (City Council)
RE: Recommendations re Agenda Item #10 on May 12, 2025 Agenda, “Adoption of an Ordinance Amending Various Palo Alto Municipal Code…” re ADUS, and Comments re Staff Report 2503-4326 (Staff Report) DATE: May 11, 2025
FROM: John Kelley

SUMMARY AND RECOMMENDATIONS
Accessory Dwelling Units (ADUs) are succeeding in Palo Alto. More than half of the new homes permitted in Palo Alto in recent years have been ADUs. Let’s not stop now. We can make ADUs “21st century starter homes” to help Palo Alto achieve its Housing Element commitments and address housing challenges facing our community and the entire state.

Consider three groups of people who want (a) to age in place, (b) to buy a new home, or (c) to feel that they can continue to pay the rent in Palo Alto.

Older homeowners might want to downsize or to supplement their retirement income. But they don’t want to be forced out of Palo Alto by transaction costs and capital gains taxes. Many couples recognize that they will not be happy moving from a 2,200 sf house to an 800 sf ADU, because they need more space. And if they seek rental income, it might be advantageous to build a bigger ADU.

A young couple or family wants to leave their apartment and put down roots.

They know about Palo Alto’s great community, phenomenal environment, and extraordinary schools. They check Zillow: “The average Palo Alto, CA home value is $3,704,698, up 7.9% over the past year and goes to [sale] pending in around 9 days.” They catch their breath. They don’t feel welcomed.

An individual, a couple, and a family have all lived in Palo Alto for years, but they worry about being able to stay because of rising rents. Can we build enough homes in Palo Alto to moderate rent increases?
Making ADUs “21st century starter homes” — big enough for a couple or small family to live in comfortably — yet much more affordable — requires three key reforms. (1) We need to move beyond the current 1,000 sf limit and allow for larger ADUs, with maximum sizes of 1,200, 1,400, or even 1,600 sf, just like starter homes were in the 20th century. (2) We must create ownership opportunities for ADUs — to finance them, to broaden access to the financial benefits of home ownership, and to safeguard buyers’ long-term access to our community and its schools. (3) And we must remove disincentives to building ADUs, especially larger ADUs. Chief among these are local impact fees — which can total $15,000, $20,000, or more when levied on ADUs 750 sf or larger. New single-family homes, by contrast, even 4,000+ sf “scrapes” and 2,000+ sf additions, almost never pay local impact fees. Dozens of other local regulations ought also to be changed to spur production of ADUs, especially larger ADUs.

With 1,200-1,600 sf sizes, with ownership opportunities created by allowing existing single-family homes and ADUs to become condominiums, and without impact fees or other poorly conceived local regulations that deter ADU production, ADUs can become “first-class homes.” They can be as well loved as any other home in Palo Alto, providing both “next-phase” and “missing middle” housing. The needs of the three distinct groups can be addressed together. Recall the older homeowners seeking to downsize or to supplement their retirement income. They decide to build a 1,600 sf ADU and to create a condominium owners association (COA), unlocking new financing alternatives. They have several options: (a) move into the new ADU and either sell or rent the existing house as a condominium; or (b) stay in the existing house and sell or rent the new ADU as a condominium. Depending on their choices, they will have created a form of “next-phase housing” for themselves, putting the additional square footage to good use by building an extra bedroom and a “bonus room” for loved ones or caregivers. And they have also created a second “first-class” home on their lot that provides “missing middle” housing: either an ownership opportunity for people seeking to buy a new home; or a new rental home that can moderate future rental increases.

Making ADUs “21st century starter homes” will benefit our community in other ways.

Production of new ADUs, especially larger ADUs, will increase revenues from property taxes. In some instances, the incremental property taxes on the new ADU may be greater than the current property taxes on the existing home. Creating both new ownership and new rental opportunities will likely increase the numbers of younger people able to remain in, return to, or join our community. At present, Palo Alto is aging relatively quickly. To maintain its vibrancy as an innovation center, allowing more younger people to be part of the community would be beneficial. With more younger people, it’s also likely that there will be less pressure in coming years to close local schools. Unless checked, declining enrollments will force difficult school closure decisions. If we ensure that younger individuals, couples, and families are welcomed in Palo Alto, we can help to maintain the excellence of Palo Alto’s schools, which have always been part of the lifeblood of the community.

Accomplishing all of this work will require more than one City Council meeting, but much can and should be completed on the night of May 12th. The City Council should:
increase the size limit for detached ADUs with 2+ bedrooms to 1,200 sf, and request City Staff to draft a further increase to 1,600 sf by September 1st; request City Staff to draft a local ordinance under Gov. C. sec. 66342 to allow for condominium conversions of ADUs by September 1st;
eliminate new local impact fees for ADUs, and request City Staff to draft a new local ordinance by September 1st to refund all local impact fees for ADUs that were charged at any time after March 23, 2023; and
request City Staff to engage actively with local architects, other design professionals, and members of the public to analyze the other reforms identified below, among others, and to return to the City Council no later than October 1, 2025 with a set of policy alternatives and recommendations for the Council.

TO: Palo Alto City Council (City Council)
RE: Recommendations re Agenda Item #10 on May 12, 2025 Agenda , “Adoption of an Ordinance Amending Various Palo Alto Municipal Code…” re ADUS, and Comments re Staff Report 2503-4326 (Staff Report)
DATE: May 11, 2025
FROM: John Kelley

SUMMARY AND RECOMMENDATIONS
Accessory Dwelling Units (ADUs) are succeeding in Palo Alto. More than half of the new homes permitted in Palo Alto in recent years have been ADUs. Let’s not stop now.

We can make ADUs “21st century starter homes” to help Palo Alto achieve its Housing Element commitments and address housing challenges facing our community and the entire state.

Consider three groups of people who want (a) to age in place, (b) to buy a new home, or (c) to feel that they can continue to pay the rent in Palo Alto. ● Older homeowners might want to downsize or to supplement their retirement income. But they don’t want to be forced out of Palo Alto by transaction costs and capital gains taxes. Many couples recognize that they will not be happy moving from a 2,200 sf house to an 800 sf ADU, because they need more space.

And if they seek rental income, it might be advantageous to build a bigger ADU. ● A young couple or family wants to leave their apartment and put down roots.

They know about Palo Alto’s great community, phenomenal environment, and extraordinary schools. They check Zillow : “The average Palo Alto, CA home value is $3,704,698, up 7.9% over the past year and goes to [sale] pending in around 9 days.” They catch their breath. They don’t feel welcomed. ● An individual, a couple, and a family have all lived in Palo Alto for years, but they worry about being able to stay because of rising rents. Can we build enough homes in Palo Alto to moderate rent increases?
Making ADUs “21st century starter homes” — big enough for a couple or small family to live in comfortably — yet much more affordable — requires three key reforms. (1) We need to move beyond the current 1,000 sf limit and allow for larger ADUs, with maximum sizes of 1,200, 1,400, or even 1,600 sf, just like starter homes were in the 20th century. (2) We must create ownership opportunities for ADUs — to finance them, to broaden access to the financial benefits of home ownership, and to safeguard buyers’ long-term access to our community and its schools. (3) And we must remove disincentives to building ADUs, especially larger ADUs. Chief among these are local impact fees — which can total $15,000, $20,000, or more when levied on ADUs 750 sf or larger. New single-family homes, by contrast, even 4,000+ sf “scrapes” and 2,000+ sf additions, almost never pay local impact fees. Dozens of other local regulations ought also to be changed to spur production of ADUs, especially larger ADUs. 1 With 1,200-1,600 sf sizes, with ownership opportunities created by allowing existing single-family homes and ADUs to become condominiums, and without impact fees or other poorly conceived local regulations that deter ADU production, ADUs can become “first-class homes.” They can be as well loved as any other home in Palo Alto, providing both “next-phase” and “missing middle” housing. The needs of the three distinct groups can be addressed together. Recall the older homeowners seeking to downsize or to supplement their retirement income. They decide to build a 1,600 sf ADU and to create a condominium owners association (COA), unlocking new financing alternatives. They have several options: (a) move into the new ADU and either sell or rent the existing house as a condominium; or (b) stay in the existing house and sell or rent the new ADU as a condominium. Depending on their choices, they will have created a form of “next-phase housing” for themselves, putting the additional square footage to good use by building an extra bedroom and a “bonus room” for loved ones or caregivers. And they have also created a second “first-class” home on their lot that provides “missing middle” housing: either an ownership opportunity for people seeking to buy a new home; or a new rental home that can moderate future rental increases.

Making ADUs “21st century starter homes” will benefit our community in other ways.

Production of new ADUs, especially larger ADUs, will increase revenues from property taxes. In some instances, the incremental property taxes on the new ADU may be greater than the current property taxes on the existing home. Creating both new ownership and new rental opportunities will likely increase the numbers of younger people able to remain in, return to, or join our community. At present, Palo Alto is aging relatively quickly. To maintain its vibrancy as an innovation center, allowing more younger people to be part of the community would be beneficial. With more younger people, it’s also likely that there will be less pressure in coming years to close local schools. Unless checked, declining enrollments will force difficult school closure decisions. If we ensure that younger individuals, couples, and families are welcomed in Palo Alto, we can help to maintain the excellence of Palo Alto’s schools, which have always been part of the lifeblood of the community.

Accomplishing all of this work will require more than one City Council meeting, but much can and should be completed on the night of May 12th. The City Council should:
● increase the size limit for detached ADUs with 2+ bedrooms to 1,200 sf, and request City Staff to draft a further increase to 1,600 sf by September 1st; ● request City Staff to draft a local ordinance under Gov. C. sec. 66342 to allow for condominium conversions of ADUs by September 1st;
● eliminate new local impact fees for ADUs, and request City Staff to draft a new local ordinance by September 1st to refund all local impact fees for ADUs that were charged at any time after March 23, 2023; and
● request City Staff to engage actively with local architects, other design professionals, and members of the public to analyze the other reforms identified below, among others, and to return to the City Council no later than October 1, 2025 with a set of policy alternatives and recommendations for the Council. 2 DISCUSSION
By (a) creating new incentives for ADU production, and
(b) eliminating barriers to ADU production not yet identified by the HCD, ADUs can help to create a true local housing breakthrough.

1. Palo Alto needs a 1,600 sf size limit for detached ADUs with 2+ bedrooms, so that ADUs can become “21st century starter homes.” .

Palo Alto currently places a 1,000 sf maximum size limit on detached ADUs: “900 sf (1,000 sf for two or more bedrooms).” PAMC 18.09.040(b ), Table 2. But Palo Alto needs a larger size limit for ADUs to become “first-class homes” for both “next-phase” and “missing middle” housing.

In recent decades, average home sizes have continued to grow and grow. Because much of Palo Alto’s housing stock is relatively old, and because relatively few lots in R-1 neighborhoods are sub-standard, there are strong economic incentives to maximize the square footage of new single-family homes, particularly “scrapes.” Consequently, the number of smaller, more affordable single-family homes is generally declining.

Increasing the maximum size for detached ADUs with two or more bedrooms to 1,600 sf can help create more abundant housing.

Many older Palo Altans have already recognized that their single-family homes are larger than they need. But many (a) cannot live comfortably in 800 or even 1,000 sf ADUs, and (b) have found that larger apartments, condominiums, or townhomes are so expensive that, after selling their single-family homes, and paying transaction costs and taxes, “downsizing” just doesn’t “pencil out.” May also love their current neighborhoods, and others may wish to retain ownership of their homes as part of their estates.

Increasing the maximum size of ADUs to 1,600 square feet would allow ADUs to become “21st century starter homes,” suitable for both “next-phase” and “missing middle” housing. Because “dirt,” the land constituting the parcel on which ADUs can be built, has already been paid for, developing ADUs is relatively less expensive than developing new units on newly purchased lots. Older homeowners could choose either (a) to move into new 1,600-square-foot ADUs — big enough to have an extra bedroom and a “bonus room” for visiting family members or caregivers — or (b) remain in their existing homes and to rent the larger ADUs — sufficiently large for a young family — to allow younger people to remain in or to join the Palo Alto community. Either way, 1,600-square-foot ADUs would create new price points and more “missing middle” homes. The entire community would benefit from a growing, more diverse, and marginally more affordable housing market.

ADUs can be “21st century starter homes,” true “first-class homes” for both “next-phase” and “missing middle” housing. The first step towards achieving this vision is to increase the size limit for detached ADUs with two or more bedrooms to 1,600 sf. 3 2. Palo Alto should allow for condominium conversions of ADUs, under Gov. C. sec. 66342, to provide for new financing for and sales of ADUs .

Besides Increasing maximum size limits, treating larger ADUs as true “first-class homes” requires allowing them to be bought, sold, and financed like other houses. A new state statute enables cities to allow ADUs to become condominiums.

The City of San Jose has summarized the background for Gov. C. sec 66342 as follows:

State law AB 1033 , effective January 2024, enables condominium conversions of ADUs and California Code Section 66342 enables cities to adopt local ordinances to allow for conveyance of an ADU as a condominium. “ ADU Condominium Conversions ” web page. The provisions of that state code section were incorporated into a local ordinance by the San Jose City Council in June 2024.

Ibid. In 2023, the Los Angeles Times explained part of the significance of AB 1033 as follows:

Under AB 1033, which was signed into law this week, property owners in participating cities will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums. It gives homeowners more options for building on their property, and “the hope is, it would create more homeownership,”....

Some older Palo Alto homeowners, even with substantial assets, have already learned that, after retirement, it can be harder to refinance an existing home with lower current incomes, because lenders often make credit decisions based on current income levels.

Rather than forcing Palo Alto homeowners who want to build ADUs to accept poor alternatives — higher transaction costs, unattractive loans, retirement savings withdrawals, or even not building an ADU — adopting a local ordinance under Gov. C. sec 66342 will help create new means of paying for ADUs.

And that’s good news for younger, prospective Palo Alto homeowners. Allowing ADUs to become condominiums would mean that individuals, couples, and young families could own their own homes throughout Palo Alto at lower prices. The combination of increasing ADUs size limits and allow for condominium conversions of ADUs will turn them into true “first-class homes,” suitable for both “next-phase” and “missing middle” housing.
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4 3. Impact fees for ADUs should be eliminated, and fees paid after March 23, 2023 refunded, based upon the proportionality rule, commitments made in the Housing Element, and fundamental fairness . (a) Impact fees for ADUs and single-family residences (SFRs) are inextricably linked, just as the thigh and lower leg are joined to form one lower limb .

The state’s “proportionality rule” links ADU and SFR impact fees in one calculation.

Gov. C. subd. 66324(c)(1) requires that “[a]ny impact fees charged for an accessory dwelling unit of 750 square feet or more shall be charged proportionately in relation to the square footage of the primary dwelling unit.” In its ACCESSORY DWELLING UNIT HANDBOOK, January 2025 (2025-01 HCD ADU Handbook), the HCD recently specified the meaning of “charged proportionately”:

What is “Proportionality”?
“Proportionality” is some amount in relation to a total amount, in this case, an impact fee for a single-family dwelling. For example, a 2,000 square-foot primary dwelling with a proposed 1,000 square-foot ADU could result in 50 percent of the impact fee that would be charged for a new primary dwelling on the same site . (Gov. Code, § 66324, subd. (c)(1).)
2025-01 HCD ADU Handbook, p. 23 (bold in original, and emphasis added).

Four points from the HCD’s statement are essential to understand:
● The calculation considers “the impact fee that would be charged for a new primary dwelling on the same site,” i.e. , not the historical impact fees previously charged on an actually existing primary dwelling, and not a maximum amount that could be charged on any new primary dwelling of any size, but the impact fees that would in fact be charged if a new primary dwelling were being built simultaneously, or if the existing primary dwelling were, in effect, being hypothetically built anew. We can refer to this as the “New Or Hypothetical New Primary Dwelling Impact Fees.”
● The calculation utilizes a ratio between the size of the proposed ADU and the size of the proposed or actually existing primary dwelling on the same parcel, in this case, 1,000 sf/2,000 sf = 50%. We can refer to this as the “Pure Percentage Ratio.” Importantly, this ratio is a pure percentage value, because the measurement units of the numerator and the measurement units of the denominator are not only commensurable (as a square foot would be to a square yard), but also identical (here both are square feet). When the denominator divides the numerator, these measurement units cancel each other out. ● Whether or not the new or hypothetical new primary dwelling is or is not a “new unit” or a “net new unit,” i.e., whether the new or hypothetical new primary dwelling is built on a pristine parcel, or instead whether another primary dwelling had existed on the parcel before the new or hypothetical new primary dwelling is built (and that earlier primary dwelling is being hypothetically “scraped”) is 5 irrelevant. One need not know the history of primary dwellings on the parcel to calculate the impact fees for a new ADU under the proportionality rule. ● Finally, once one knows both (a) the New Or Hypothetical New Primary Dwelling Impact Fees, and (b) the Pure Percentage Ratio, the final calculation is straightforward. The two are multiplied, and the result is the impact fees that may be charged on an ADU consistent with the proportionality rule. (b) Palo Alto still calculates impact fees for single-family residences using what is effectively a per-unit basis, so that they are nearly always $0 .

Prior to December 2, 2024, Palo Alto had calculated impact fees on a “per-unit” basis.

In the August 20, 2024 “ Palo Alto 2023-2031 Housing Element (Certified) ” (Certified HE), and earlier, Palo Alto acknowledged that per-unit impact fees had “led to some inequitable results…,” and promised “to convert fees to a per square foot calculation.” Certified HE, p. 4-65. 1 In “PROGRAM 3.5: ACCESSORY DWELLING UNIT (ADU) FACILITATION,” Implementing Objective E, the City specifically committed to the HCD that it would “[r]ealign development impact fees for ADUs larger than 750 sq. ft. to utilize per-square-foot methodology, likely reducing fee[s] applied to ADUs.” Certified HE, p. 5-19. Through Ordinance No. 5639, 2 introduced at the November 18, 2024 City Council meeting and approved on December 2, 2024, Palo Alto purported to adjust certain impact fees for ADUs to a new per-square-foot basis, but, in practice, it failed to do so, creating even greater unfairness.

The record of the November 18, 2024 City Council meeting expressly acknowledges that Palo Alto does not charge impact fees on “single-family home additions or scrapes and rebuilds,” because “it’s based on the unit, and new units, net-new units that are produced…..” Video of November 18, 2024 City Council Meeting (1:53:05 f.). This raises multiple concerns.
● The proportionality rule links impact fees on ADUs to those on SFRs. Because Palo Alto charges SFR impact fees “based on the unit, and new units, net-new units,” it’s not honoring its commitment to the HCD to switch to a “per-square-foot methodology.”
● Based on the HCD’s statement of how impact fees should be calculated, discussed above, it’s not necessary to know the history of primary dwellings on the parcel to calculate the impact fees for a new ADU under the proportionality rule. Consequently, references to “net-new units,” which presuppose inquiring into the history of a parcel’s primary dwellings, raise a large, crimson flags. 2 Available through the City of Palo Alto public portal . 1 “In accordance with state law, fees for ADUs are only charged on ADUs larger than 750 square feet, and are charged in proportion to the fee that are or would be assessed on the primary unit. Because Palo Alto has historically charged per-unit fees for residential development, this has led to some inequitable results, as the fees for an ADU will depend not only on the size of the ADU, but also on the size of the primary unit, with higher fees required under state law when the primary unit is smaller. To avoid this scenario, the City will implement Programs 3.1 Fee Waivers and Adjustments and 3.5 ADU Facilitation to convert fees to a per square foot calculation.”
6 These concerns are amplified by the text of Ordinance 5639:

Single Family Multi-Family
…
Park Impact Fee
Note: ADUs under 750 sf exempt. $18.78 per sq. ft. $44.50 per sq. ft. (Ordinance No. 5639, Attachment A, row 5). No footnote alongside the “Single Family” column name explains that virtually all single-family homes are categorically exempt from any impact fees. 3
Nothing has changed since the November 18th City Council meeting. Palo Alto continues to calculate impact fees for SFRs on what remains a type of per-unit basis — applying “impact fees to net new dwelling units ” (Staff Report, p. 7, Mini-Packet p. 8/79 (emphasis added)). Continuing to this day, as the City Council heard last November, “single-family home additions or scrapes and rebuilds” are generally not charged any impact fees. Because nearly all single-family construction in Palo Alto is “in-fill,” on lots that already have single-family homes, such “net-new units” are almost never to be found. Consequently, the “impact fee that would be charged for a new primary dwelling on the same site” is, almost always, $0.

As discussed above, under the proportionality rule, once one knows both (a) the New Or Hypothetical New Primary Dwelling Impact Fees, and (b) the Pure Percentage Ratio, one merely multiplies the two to determine the amount of ADU impact fees. Because Palo Alto almost never charges any impact fees on SFRs, however, the calculation becomes even simpler. No matter what the Pure Percentage Ratio is — i.e. , no matter what the ratio is between the size of a 750 square-foot or larger ADU and the size of a new or hypothetical new primary dwelling on the same parcel, $0 times the Pure Percentage Ratio is always $0.

Consequently, if the City Council wishes to (a) comply with the state’s “proportionality rule” in Gov. C. subd. 66324(c)(1) , (b) honor the City’s commitments made in the Housing Element, and (c) “avoid the continued ambiguity in whether the City’s ordinance complies with State law,” Staff Report, p. 2, Mini-Packet p. 3/79, then the City should immediately cease charging impact fees for ADUs. //
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3 This discussion of ADU impact fees is only half the story (or, more accurately a quarter), because the enormous disparity between single- and multi-family impact fee rates creates other problems as well. 7 (c) Fundamental fairness requires immediately ceasing impact fees on ADUs and refunding all impact fees paid on ADUs after March 23, 2023 .

The City has addressed one limited problem in Program 3.5, Objective E and Ordinance No. 5639, but it has failed to address a much bigger problem with ADU impact fees.

The Housing Element also states:

Because Palo Alto has historically charged per-unit fees for residential development, this has led to some inequitable results, as the fees for an ADU will depend not only on the size of the ADU, but also on the size of the primary unit, with higher fees required under state law when the primary unit is smaller.

Certified HE, p. 4-65. Ordinance No. 5639, despite its flaws, may have reduced the inequities between impact fees charged on different ADUs at the margin, and it may have reduced the absolute amount of those impact fees by ~10-20% 4 , but fundamental inequities in Palo Alto’s current impact fees remain and cannot be ignored. 750 to 1,000 square-foot ADUs may be charged $15,000-$20,000 or more in supposedly per-square-foot impact fees, when “scrapes” - even those adding 2,000, 3,000, 4,000 or more square feet pay nothing. The former ADU-to-ADU inequity has been superseded by a greater ADU-to-SFR inequity. 5
Palo Alto has effectively enacted “inversely progressive housing taxes,” saddling 750+ sf ADUs with extraordinary impact fees while 4,000+ sf luxury houses pay no impact fees whatsoever. Besides correcting other inequities (such as those between single- and multi-family housing), the City should immediately cease charging any impact fees on ADUs.

In addition, if the City wishes to do what’s right and to correct the mistakes that it has made in assessing impact fees on ADUs in the past, then it should refund all ADU impact fees charged during the period beginning March 23, 2023. That date is when, it is believed, the City may have first acknowledged during the Housing Element process that there was a problem with per-unit impact fees. 6 Many ADU applicants have paid $10,000, $15,000, $20,000, $25,000, or even more to the City in impact fees since that date, while proportionality rules should have prevented the City from charging any such fees. The fair, right, and honorable thing would be for the City to reimburse all of those applicants for all of the impact fees that they were wrongly assessed as a condition for obtaining a building permit for an ADU. 7
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7 For additional details, please see the additional details provided in “City of Palo Alto-Notes re 2025-03 ADU reforms--Revised 2025-04-23” (ADU Spreadsheet), nos. 26 and 36, Staff Report, Attachment E, and attached.
6 It is believed that the City may have had actual or constructive knowledge of such problems earlier. 5 The same types of inequities hold for additions to SFRs, and not just for scrapes. 4 I do not know the exact reduction and believe it varies by ADU project. This is a very rough estimate. 8 4. City Staff should (a) meet and engage actively with local architects, other design professionals, and members of the public to analyze the other reforms identified below, among others, and (b) return to the City Council no later than October 1, 2025 with a set of policy alternatives and recommendations for the Council.

A. ADU permitting should be improved .

ADU permitting should be accelerated. This will benefit both the City, by processing ADU permit applications more efficiently, and applicants, for whom improper plan check comments lead to unnecessary plan check responses, additional permitting expenses, and delayed permits. The Planning and Development Services department should agree to consult and work with local architects and design professionals to ensure that:
● Fire review criteria focus on "fire area," not FAR. [ADU Spreadsheet No. 23] See, e.g., Cal. Fire Code (2022) sec. 202:
“[BF] FIRE AREA. The aggregate floor area enclosed and bounded by fire walls, fire barriers, exterior walls or horizontal assemblies of a building. Areas of the building not provided with surrounding walls shall be included in the fire area if such areas are included within the horizontal projection of the roof or floor next above."
● No assumed property lines are requested between two buildings. [ADU Spreadsheet No. 24]
Instead:
(1) Consider the two buildings as one structure with two dwelling units. This would be the same as considering one structure with an attached ADU. (2) One of the walls between the buildings to be considered as the wall separating dwelling units would require 1-hour fire-rating with 45 min. rated opening protection (the same as fire partition requirements per CBC).

CRC R302.3.
● Constructing an ADU does not change a Group R occupancy, unless an authorized representative of a local agency makes a specific, written finding regarding a particular project. [ADU Spreadsheet No. 25] Gov. C. subd. 66314(d)(8) states in part:
"[T]he construction of an accessory dwelling unit shall not constitute a Group R occupancy change under the local building code, as described in Section 310 of 9 the California Building Code (Title 24 of the California Code of Regulations), unless the building official or enforcement agency of the local agency makes a written finding based on substantial evidence in the record that the construction of the accessory dwelling unit could have a specific, adverse impact on public health and safety. Nothing in this paragraph shall be interpreted to prevent a local agency from changing the occupancy code of a space that was unhabitable space or was only permitted for nonresidential use and was subsequently converted for residential use pursuant to this article." (Introductory language omitted.)
B. The City should not impose additional design, zoning, and other standards on 66323 Units (“state exemption” ADUs).

City Staff should be commended for seeking to “avoid the continued ambiguity in whether the City’s ordinance complies with State law,” Staff Report, p. 2, Mini-Packet p. 3/79. Taking that goal seriously, however, requires that the City consider its ADU ordinance both directly and in the contexts of its other ordinances, rules, regulations, and procedures.

The 2025-01 HCD ADU Handbook makes clear that development of 66323 Units may not be curtailed by local standards that penalize such "state exemption" ADUs and JADUs:

What design, zoning, or other local standards can be imposed on 66323 Units?
A local agency may not impose development or design standards, including both local standards and standards found in State ADU Law, on 66323 Units that are not specifically listed in Government Code section 66323. (Gov. Code, § 66323, subds. (a), (b).) This includes, but is not limited to, parking, height, setbacks, or other zoning provisions (e.g., lot size, open space, floor area ratio, etc.)." 2025-01 HCD ADU Handbook, p. 20. This principle applies to all four categories of ADUs and JADUs identified in Gov. C. sec. 66323.

Contrary to the principle articulated by the HCD, Palo Alto has adopted many ADU-specific, local standards that may not be applied to 66323 Units, including, but not limited to, the following:
● Palo Alto calculates allowable heights for all ADUs differently from single-family homes in flood zones. [ADU Spreadsheet No. 30]
● Palo Alto calculates FAR for basements for all ADUs differently from single-family homes. [ADU Spreadsheet No. 30]
● Palo Alto incorrectly calculates FAR for ADUs, and possibly single-family homes as well, requiring measurements "to the outside of stud walls...." [See also No. 29] [ADU Spreadsheet No. 30]
10 ● Palo Alto generally prohibits ADUs from either (i) using an existing sewer line for a single-family residence to convey sewage from an ADU to the main sewer system or (ii) running a separate sewer line for an ADU under a single-family home, effectively requiring long, sometimes tortuous, and frequently expensive separate sewer runs for ADUs. [ADU Spreadsheet No. 30]
● Palo Alto, through the City of Palo Alto Utilities, prohibits ADUs from obtaining their own, separate municipal utilities. This too may operate as a constraint on the production of 66323 Units. Homeowners should, at their sole option, have the choice of whether to connect ADUs, both attached and detached, directly to CPAU utilities. [ADU Spreadsheet No. 30A]
● Just as Urban Forestry review should not be part of permitting ADUs or JADUs, CPAU should not review ADU or JADU permit applications unless the applicant specifically requests such permitting review in writing as part of the permit application. [ADU Spreadsheet No. 30A]
● Palo Alto should (A) use HCD tools for determining whether a given parcel is within 1/2 mile of transit, and (B) acknowledge that (i) non-VTA bus routes are relevant to determining such areas, (ii) the appropriate unit of analysis is a bus stop, not a bus route, and (iii) the requisite periodicity established by state law has changed recently. This requires that Palo Alto's current maps, wherever they are maintained and however they are shared with the public, be revised. [ADU Spreadsheet No. 30B & 30C]
C. Under Gov. C. sec. 66321, attached ADUs up to 800 sf in size may be constructed out to four-foot side and rear setbacks .

Palo Alto must allow an attached ADU up to 800 sf in size to be built out to four-foot side and rear setbacks; in other words, it need not be confined to the setbacks for the primary dwelling on the lot. Such an ADU would enjoy the height benefits provided by Gov. C. subd. 66321(b)(4)(D); as a result, in most parts of the City, it could be built to 25', provided that it does not have more than two stories. [ADU Spreadsheet No. 31A] D. Besides eliminating barriers to ADU production the HCD did not identify, Palo Alto should do far more to create incentives for ADU production .

As a creative city, a policy innovator, and a community facing ever greater demographic obstacles, Palo Alto should aim not just to comply with California ADU law. If Palo Alto continues to age, if its population continues to decline, and if enrollments in local schools continue to fall, we will lose much of the vibrancy that has historically made Palo Alto such an exceptional community within which to live, learn, and work. By making ADUs “first-class homes,” we will create opportunities for older generations of Palo Altans to continue to live in our community, to find “next phase housing,” and to feel economically secure, even if present national economic trends continue.

We need a robust suite of new policy initiatives to meet the needs of both younger and older members and would be members of our community. Our conception of ADUs should be expanded to include “next-phase housing,” which will create new means for 11 older Palo Altans to continue to live in our community, while creating new forms of “missing middle” homes that will allow younger people to expand and enhance the Palo Alto community. Such additional policy initiatives include the following:
● Palo Alto should create an alternative, local, 20' height limit, for two-story, detached, Table 2 ADUs, with a daylight plane. [ADU Spreadsheet No. 38] ● Palo Alto should experiment with meaningful financial incentives to increase ADU production, totaling $5 million in grants and on-bill financing over two years. [ADU Spreadsheet No. 41]
○ Up to 50 $25k grants for pre-designed ADUs.
○ Up to 50 $25k grants based on CalHFA program.
○ Up to 25 on-CPAU-bill financings for first $100k of ADU costs. ● The City should waive all impact and permitting fees on both ADUs and JADUs. [ADU Spreadsheet No. 37]
● If the City does charge any impact fees on ADUs, however, applicants should be allowed to defer them without recording a lien against their properties. [ADU Spreadsheet No. 27]
● End the "loser lottery." Do not condition permit approval of ADUs or JADUs on charging applicants for CPAU infrastructure upgrades, a type of impermissible demand for public improvements, and give applicants, at their sole option, the ability to obtain one or more separate utility services for ADUs. [ADU Spreadsheet No. 34]
Conclusion
ADUs should be “first-class homes.” We should increase the maximum size of ADUs to 1,600 sf, allow ADUs to become condominiums, which will provide additional financing and sales, and eliminate obstacles to ADU production, including impact and permitting fees. ADUs can provide more abundant “next-phase” and “missing middle” homes for our community. The City Council should:
● increase the size limit for detached ADUs with 2+ bedrooms to 1,200 sf now, and request City Staff to draft a further increase to 1,600 sf by September 1st; ● request City Staff to draft a local ordinance under Gov. C. sec. 66342 to allow for condominium conversions of ADUs by September 1st;
● eliminate new local impact fees for ADUs, and request City Staff to draft a new local ordinance by September 1st to refund all local impact fees for ADUs that were charged at any time after March 23, 2023; and
● request City Staff to engage actively with local architects, other design professionals, and the public to analyze the other reforms in the attached spreadsheet, among others, and to return to the City Council no later than October 1, 2025 with policy alternatives and recommendations for the Council.

Attachments: City of Palo Alto-Notes re 2025-03 ADU reforms--Revised 2025-04-23” (ADU Spreadsheet)
12 City of Palo Alto-Notes re ADU reforms, 2025
John Kelley
Apr 23, 2025
Ver. 0.2
These notes summarize some of the key points made in the accompanying document, “City of Palo Alto-Notes re 2025-03 ADU reforms--Revised 2025-04-23.” Please see that document for details.

Based on State ADU Regulations

1. Because the City does not charge impact fees for additions to or scrapes of single-family residences (SFRs), proportionality requires that impact fees be eliminated for ADUs. [No. 26]

1.1. As a matter of equity, the City should also refund improperly charged ADU fees back to at least March 23, 2023. [No. 36]

2. Additional local design, zoning, and other standards may not be imposed on 66323 Units. The 2025-01 HCD ADU Handbook makes clear, at p. 20, that development of 66323 Units may not be curtailed by local standards that penalize such "state exemption" ADUs and JADUs. (This principle applies to all four categories of ADUs and JADUs identified in Gov. C. sec. 66323.) This principle requires modifying Palo Alto’s regulation of 66323 Units in many ways. [Nos. 30, 30A, 30B, and 30C]

2.1. Palo Alto calculates allowable heights for all ADUs differently from single-family homes in flood zones.

2.2. Palo Alto calculates FAR for basements for all ADUs differently from single-family homes.

2.3. Palo Alto incorrectly calculates FAR for ADUs, and possibly single-family homes as well, requiring measurements "to the outside of stud walls...." [ See also No. 29]

2.4. Palo Alto generally prohibits ADUs from either (i) using an existing sewer line for a single-family residence to convey sewage from an ADU to the main sewer system or (ii) running a 1 separate sewer line for an ADU under a single-family home, effectively requiring long, sometimes tortuous, and frequently expensive separate sewer runs for ADUs.

2.5. Palo Alto, through the City of Palo Alto Utilities, prohibits ADUs from obtaining their own, separate municipal utilities. This too may operate as a constraint on the production of 66323 Units.

Homeowners should, at their sole option, have the choice of whether to connect ADUs, both attached and detached, directly to CPAU utilities.

2.6. Just as Urban Forestry review should not be part of permitting ADUs or JADUs, CPAU should not review ADU or JADU permit applications unless the applicant specifically requests such permitting review in writing as part of the permit application.

2.7. Palo Alto should (A) use HCD tools for determining whether a given parcel is within 1/2 mile of transit, and (B) acknowledge that (i) non-VTA bus routes are relevant to determining such areas, (ii) the appropriate unit of analysis is a bus stop, not a bus route, and (iii) the requisite periodicity established by state law has changed recently. This requires that Palo Alto's current maps, wherever they are maintained and however they are shared with the public, be revised.

3. Fire review criteria should focus on "fire area," not FAR. [No. 23]

4. No assumed property line between two buildings. [No. 24]

5. Constructing an ADU does not change a Group R occupancy, unless an authorized representative of a local agency makes a specific, written finding regarding a particular project. [No. 25]

6. Palo Alto must allow an attached ADU up to 800 sf in size to be built out to four-foot side and rear setbacks. [No. 31A]

6.1. In other words, it need not be confined to the setbacks for the primary dwelling on the lot.

6.2. Such an ADU would enjoy the height benefits provided by Gov.

C. subd. 66321(b)(4)(D); as a result, in most parts of the City, it could be built to 25', provided that it does not have more than two stories.
2 More Effective Local Regulations For Stimulating ADU Production

1. Palo Alto should allow for separate conveyance of ADUs under Gov.

C. sec. 66342. [No. 32]

2. Palo Alto should adopt a 1,200 sf size limit for all ADUs. [No. 39]

3. Palo Alto should create an alternative, local, 20' height limit, specifically for two-story, detached, Table 2 ADUs, with a daylight plane. [No. 38]

4. Palo Alto should experiment with meaningful financial incentives to increase ADU production, totaling $5 million in grants and on-bill financing over two years. [No. 41]

4.1. Up to 50 $25k grants for pre-designed ADUs.

4.2. Up to 50 $25k grants based on CalHFA program.

4.3. Up to 25 on-CPAU-bill financings for first $100k of ADU costs.

5. The City should waive all impact and permitting fees on both ADUs and JADUs. [No. 37]

5.1. If the City does charge any impact fees on ADUs, however, applicants should be allowed to defer them without recording a lien against their properties. [No. 27]

6. End the "loser lottery." Do not condition permit approval of ADUs or JADUs on charging applicants for CPAU infrastructure upgrades, a type of impermissible demand for public improvements, and give applicants, at their sole option, the ability to obtain one or more separate utility services for ADUs. [No. 34]
3 1
City of Palo Alto-Notes re 2025-03 ADU reforms (selected summary points for City Staff and City Council in larger font, comments from 2024-10 HCD L2025-04-23 Ver. 0.5(WIP draft).

Category No. Issue Reference(s)
"18.09.030UnitsExemptfromGenerallyApplicableLocalRegulations" 1 The HCD's comments concern additional height requirements for, , detached ADUs witihin a half mile of a major transit stop or a high-quality transit corridor,as well as additional height for matching the roof pitch of the primary dwelling. Those changes should be adopted.

Please also see the further discussions below, "Additional concerns re setbacks, daylight plane, and height," and "Palo Alto should use HCD tools for determiningwhether a given parcel is within 1/2 mile of transit." 2024-10 HCD Letter,#2
2These proposed changes should be adopted.
2024-10 HCD Letter,#3
3This proposed change, which concerns Gov. C. sec. 66331, should be made. 2024-10 HCD Letter,#4
4This proposed change, which refers to ADU construction not triggering "a requirement for fire sprinklers to be installed in the existing multifamily dwelling," shouldbe made. 2024-10 HCD Letter,#5
5The proposed change, which concerns JADUs without a separate bathroom needing "a separate entrance from the main entrance to the structure, with an interiorentry to the main living area," should be adopted. 2024-10 HCD Letter,#6
6 As indicated by the HCD, the City should amend this portion of the Ordinance to allow for the expansion for ingress and egress pursuant to Gov. C. subd.66323(a)(1)(A).

Although not specifically noted by HCD:
(a) in the Ordinance, "renovation of reconstruction..." should perhaps read, "renovation or reconstruction...."; and, 2024-10 HCD Letter,#7 7Both sections of the Ordinance should allow for the separate sale of an ADU "built or developed by a qualified nonprofit corporation, among other things," to aqualified buyer pursuant to Gov. C. sec. 66341. 2024-10 HCD Letter,#8
Section 18.09.030 (a) iii -- "Footnote 5 in Table 1 of Section 18.09.030 provides for these allowances, the City must amend the Ordinance to comply withState ADU law and avoid contradictory provisions." Section 18.09.030 Table 1 – . "This permits a homeowner, who meets specified requirements, to create one converted ADU; one detached, newconstruction ADU; and one JADU." Section 18.09.030(d) – . "Therefore, the City must add language allowing delay of enforcement." Section 18.09.030(d) – . "Therefore, City must add the second sentence in the preceding citation to the Ordinance to be consistent with State ADUlaw.." Section 18.09.030 (g) – JADUs and Interior Entry. "Therefore, the City must amend the Ordinance accordingly." Section 18.09.030(h) – .

Sections 18.09.030(j) & 18.09.040(m)(2) – .

Height.

Unit Allowance
Delay of Enforcement
Sprinklers
Conversion and Expansion
Separate Sale
e.g.

Gov. C. subd.66321(b)(4)(B)Gov. C. subd.66323(a)(1)(C)Gov. C. subd.66317(c) Gov. C. sec. 66323
Gov. C. sec. 66331
Gov. C. subd.66323(d)
Gov. C. subd.66333(e)(2)
Gov. C. subd.66323(a)(1)(A)
Gov. C. subd. 66341
(b) if the ADU being expanded for ingress and egress is a 66323 Unit (formerly sometimes known as a statewide exemption ADU) under Gov. C. subd.66323(a)(1), then, in addition, such an expansion should not be subject to Section 18.09.040. 2 8
(a) All explicit or implicit references to any of the City's tree or landscape regulations, including those in PAMC Chap. 8.10, "Tree and Landscape Preservation andManagement," should be deleted from the ADU Ordinance. (b) PAMC Chap. 8.10 should be amended to make clear that it may not be applied or enforced with regard to ADUs, pursuant to Gov. C. subd. 66317(c). (c) Any review of an ADU permit application by the City's Public Works Urban Forestry Section, or any other part of the City seeking information or review withregard to the City's tree or landscape regulations, should cease, pursuant to Gov. C. subd. 66317(c). (d) These actions are consistent with Governor Newsom's recent . As explained on February 6, 2025 in a , "Theexecutive order issued by Governor Newsom," among other things, "[d]irects the State Board of Forestry to accelerate its work to adopt regulations known as“Zone 0,” which will require "an ember-resistant zone within 5 feet of structures located in the highest fire severity zones in the state." From the recent, devastating fires in Southern California and advances in fire science, we know that "Zone 0" protections are critical to enhancing fire safety forCalifornia homes. The current Tree Ordinance should not prohibit Palo Altans from defending their homes against the increasing and increasingly great threats ofwildfires resulting from catastrophic global heating. 2024-10 HCD Letter,#9
"18.09.040UnitsSubject toLocalStandards." 9As indicated by the HCD, the City should amend this portion of the Ordinance to "remove references to JADUs in this section," because JADUs are createdpursuant to Gov. C. subd. 66323(a)(1), "and would therefore be approved under section 18.090.030." 2024-10 HCD Letter,#10
10As indicated by the HCD, the City should amend this portion of the Ordinance to clarify that ADUs may be built when a "lot is zoned to allow single-family ormultifamily dwelling residential use...," pursuant to Gov. C. subd. 66314. 2024-10 HCD Letter,#11
11 As indicated by the HCD, the City should amend this portion of the Ordinance to delete any reference to the Palo Alto Historic Inventory, pursuant to Gov. C.subd. 66314(b)(1).

Although not specifically noted by HCD, this also means that the City should refrain from any review of an ADU permit application by the City's Planningpersonnel or any other part of the City with reference to the Palo Alto Historic Inventory, pursuant to Gov. C. subd. 66317(c). 2024-10 HCD Letter,#11
12As indicated by the HCD, the City should amend this portion of the Ordinance to make clear that, in the case of a street-side setback, as well as a front setback,such a setback "may not preclude the development of an 800 square foot unit," pursuant to Gov. C. subd. Gov. C. subd. 66321(b)(3). 2024-10 HCD Letter,#13
13As indicated by the HCD, the City should amend this portion of the Ordinance to include the parking exceptions included in Gov. C. subds. 66322(a)(1)-(a)(6),, if an ADU is within a half mile of public transit. 2024-10 HCD Letter,#14
14As indicated by the HCD, the City "may not require parking as a condition to permitting a JADU, even when the JADU is converted from an attached garage,"citing Gov. C. subd. 66334(a) in a footnote. This change should be made. 2024-10 HCD Letter,#15
Sections 18.09.030(m) & 18.09.040(g) and (j)(2)(C) –
Section 18.09.040(a) – JADUs and Development Standards.

Section 18.09.040(c) – Multifamily ADU Allowances.

Section 18.09.040(h) – Local Historic Register.

Section 18.09.040 (j)(4) – Street-Side Setback.

Section 18.09.040 (l) – Parking Exceptions.

18.09.040 (l)(2) – Garage Conversion and Replacement Parking.

Tree Ordinance.

Executive Order N-18-25 separate announcement
Gov. C. subd.66317(c)
Gov. C. subd.66323(a)(1)(A)
Gov. C. subd. 66314
Gov. C. subd.66314(b)(1)Gov. C. subd.66317(c)
Gov. C. subd.66321(b)(3)
Gov. C. subds.66322(a)(1)-(a)(6)
Gov. C. subd.66334(a)
e.g.
3 "18.09.050AdditionalRequirements forJADUs"
15As indicated by the HCD, the City should amend this portion of the Ordinance to clarify that "'enclosed uses within the residence' include 'attached garages,[which] are considered a part of the proposed or existing single-family residence.'” Gov. C. subd. 66333(d). 2024-10 HCD Letter,#16
16As indicated by the HCD, the City should amend this portion of the Ordinance to conform with the broad language of Gov. C. subd. 66333(f), deleting the City'smore stringent requirements regarding JADU kitchens. 2024-10 HCD Letter,#17
17As indicated by the HCD, the City should amend this portion of the Ordinance to conform with the precise terms of Gov. C. subd. 66333(e)(2). 2024-10 HCD Letter,#18
18As indicated by the HCD, Gov. C. subd. 66333(c) does not include authority for prohibiting short term rentals, and the City must delete such provisions from its listof deed restrictions. 2024-10 HCD Letter,#19
"18.04.030Definitions"
19 .

As indicated by the HCD, Gov. C. subd. 66313(a) does not specifically define cooking facilities, and HSC sec. 17958.1 allows for "'partial kitchen'" facilities.Accordingly, the City must delete its appliance and counterspace requirements for ADUs.

Although not specifically noted by HCD, relying upon those same code sections, an ADU applicant constructing an "efficiency unit" should also be allowed toprovide only "partial .... bathroom facilities," as described in HSC sec. 17958.1. 2024-10 HCD Letter,#20

18.09.050 (a) - JADUs in Attached Garages.

18.09.050 (b)(i) and (ii) – JADU Kitchen Facilities.

18.09.050 (b) iii. – JADU Entry.

18.09.050 (e) – JADU Term Limits.

18.04.030(a)(75)(A) – Kitchen Requirements
Gov. C. subd.66333(d)
Gov. C. subd. 66333(f)
Gov. C. subd.66333(e)(2)
Gov. C. subd.66333(c)
Gov. C. subd.66313(a)HSC sec. 17958.1
4 Additionalproposedregulatorychanges
20 Combine building permit applications and demo permit applications for ADUs, and makeresponsibilities for matters typically handled by contractors (such as securing a J#) post-permit-issuance, rather than pre-permit-issuance, requirements. Suchchanges should be memorialized in Chp. 18.09 of the PAMC. " .Adds a requirement fora local agency toreview and issue ademolition permit for“a detached garagethat is to be replacedwith an ADU” at thesame time it reviews,and issues permits for,the ADU construction.(Gov. Code, § 66314,subd. (e).) Alsoprohibits permittingagencies requiringapplicants to “providewritten notice or post aplacard for thedemolition of adetached garage ...unless the property islocated within anarchitecturally andhistorically significantdistrict.” (Gov. Code, §66314, subd. (f).)"2025-01 HCD ADUHandbook, p. 14 21 The 60-day time limit for approving or denying an ADU or JADU permit application should be (a) strictly observed, and (b)calculated using the equivalent of a "chess clock" displayed in the City's online permitting system. Such changes should be memorialized in Chp. 18.09 of thePAMC. " .Requires a permittingagency to eitherapprove or deny(replacing the formerlanguage “act on”) anapplication to create orserve an ADU orJADU within 60 days Integrate building and demo permit applications for ADUs.

Demolition Permits
Enforce the 60-day time limit. Permitting Process
Compare:
5 22
Prohibit reviewers from adding new plan check comments after C1 plan check comments have been returned to anapplicant unless such new plan check comments (a) only note a failure to comply with prior plan check comments, or (b) are directed to and concern onlychanges in submittal materials made in response to earlier plan check comments. Such changes should be memorialized in Chp. 18.09 of the PAMC. 23 The City's "Fire Department Checklist for
Residential Plan Review" includes a misleading question, which can lead to an incorrect plan check comment. It asks: "Are you doing an addition that will resultin the total floor area (including basements and attached garages) exceeding 3600 square feet?" This question refers impliciitly to PAMC subd. 16.06.140,"Section R313.2.2 NFPA 13D sprinkler systems increase in design requirements," whose numbered sub-part 2 states, "Structures where the combined fire area is3600 sq ft or larger." FAR is simply not the same as fire area. Accordingly, the fire review criteria should focus on fire area, not FAR, and the Fire Departmentchecklist should be revised accordingly. , : "[BF] FIRE AREA. The aggregate floor area enclosed and bounded by fire walls, fire barriers, exterior walls orhorizontal assemblies of a building. Areas of the building not provided with surrounding walls shall be included in the fire area if such areas are included within thehorizontal projection of the roof or floor next above." 24 Instead:
(1) Consider the two buildings as one structure with two dwelling units. This would be the same as considering one structure with an attached ADU. (2) One of the walls between the buildings to be considered as the wall separating dwelling units would require 1-hour fire-rating with 45 min. rated openingprotection (the same as fire partition requirements per CBC).

CRC R302.3.
" Obligates apermitting agency,when it denies an ADUor JADU application,to “return in writing afull set of comments tothe applicant with a listof items that aredefective or deficientand a description ofhow the applicationcan be remedied bythe applicant” within60 days from when acompleted applicationis received. (Gov.Code, §§ 66317, subd.(b); 66320, subd. (b);66335, subd. (b).)" No new-later-cycle plan check comments. Permitting AgencyDenials.

Fire review criteria should focus on "fire area," not FAR.

No assumed property line between two buildings.

See also
See, e.g.,
Cal. Fire Code (2022) sec. 202
PAMC subd.16.06.140
CRC R302.3
6 25
26 Palo Alto recently replaced per-unit with per-square-foot impact fees to comply with prior state law. Nonetheless, it still treats ADUs unfairly, because on parcelswith existing SFRs, it does not levy impact fees on additions or even complete “scrapes.” ( video recording of the .) The proportionality example at p. 23 of the HCD’s 2025 ADU Handbook refers to “a new primary dwelling on the same site.” If a parcel in Palo Alto has an existing SFR, a new primary dwelling on that site would not trigger any impact fees under the city’s procedures. Consequently, theproportionate impact fees for an ADU of any size should also be zero.

Imposition of such impact fees on ADUs should cease immediately (and the City should refund amounts charged improperly to applicants, as discussed below). 2025-01 HCD ADUHandbook, p. 23.
"(c) (1) A local agency,special district, orwater corporation shallnot impose any impactfee upon thedevelopment of anaccessory dwellingunit less than 750square feet. Anyimpact fees chargedfor an accessorydwelling unit of 750square feet or moreshall be chargedproportionately inrelation to the squarefootage of the primarydwelling unit." Gov. C. subd. 66314(d)(8) states in part:
"[T]he construction of an accessory dwelling unit shall not constitute a Group R occupancy change under the local building code, as described in Section 310 ofthe California Building Code (Title 24 of the California Code of Regulations), unless the building official or enforcement agency of the local agency makes a writtenfinding based on substantial evidence in the record that the construction of the accessory dwelling unit could have a specific, adverse impact on public health andsafety. Nothing in this paragraph shall be interpreted to prevent a local agency from changing the occupancy code of a space that was unhabitable space or wasonly permitted for nonresidential use and was subsequently converted for residential use pursuant to this article." (Introductory language omitted.) Because the City does not charge impact fees for additions to or scrapes ofsingle-family residences (SFRs), proportionality requires that impact fees beeliminated for ADUs.

Constructing an ADU does not change a Group R occupancy, unless an authorizedrepresentative of a local agency makes a specific, written finding regarding aparticular project.

See, e.g., Palo Alto City Council meeting onNovember 18, 2024 Gov. C. subd.66324(c)(1)
Gov. C. subd. 66314
7 27
Payment of impact fees on ADUs, among other projects, may deferred until , as now codified in , as well as ,which was updated recently based on Ord. 5645.

If any impact fees are assessed on ADUs, then homeowners should be allowed to defer payment of such fees, and the issuance of a permit to build an ADUshould not be deferred pending their payment.

But requiring that homeowners record a lien for payment of such fees is unnecessarily burdensome, time-consuming, and expensive. The City should be able tocraft other means of ensuring that such fees, if any, are paid prior to final inspection or issuance of a certificate of occupancy using the City's own permitting andinspection systems, rather than requiring a recorded lien. 28 As indicated above, the City's current impact fee regime as applied to ADUs is, at best, problematic. If the City is genuinely interested in providing more and moreaffordable housing, and if the City wishes to meet its Housing Element goals by producing more ADUs, one of the most reasonable steps would be to eliminateimpact fees on ADUs altogether.

In addition, one might have doubts about the continued constitutional validity of California's impact fee system. following the vacating of the priorsubmission of the case in , Case Number C093682, before the 3rd District Court of Appeal, is now scheduled for June 24, 2025. ,Case NumberC093682.
29 The HCD has clarified how square footage of ADUs and JADUs should be calculated:
"The CBC defines “Floor Area, Gross” as “[t]he floor area within the inside perimeter of the exterior walls of the building under consideration, exclusive of ventshafts and courts, without deduction for corridors, stairways, ramps, closets, the thickness of interior walls, columns or other features. The floor area of a building,or portion thereof, not provided with surrounding exterior walls shall be the usable area under the horizontal projection of the roof or floor above. The gross floorarea shall not include shafts with no openings or interior courts.

Government Code section 66314, subdivision (d)(8) states that a local ADU ordinance must require ADUs to comply with local building codes. Thus, when a localagency has not adopted specific changes to the CBC in its local building standards, then the CBC standards, and in this case the definition of floor area, shallapply. If the local agency has made specific amendments, additions, or deletions relating to the definition of “Floor Area” within its local building standards, thenthose altered definitions shall apply." 2025-01 HCD ADU Handbook, p. 39.

Palo Alto does ot appear to have incorporated a change to this portion of the CBC. PAMC subds. . Consequently, Palo Alto is bound by theCBC rules, requiring measurements to "the inside perimeter of the exterior walls of the building under consideration...." But Palo Alto measures "to the outside ofstud walls...." . The same considerations likely apply to lot coverage and other zoning measurements based on square footagecalculations. Therefore, Palo Alto's Municipal Code and its calculation of square footages for ADUs must be changed.

In addition, because the PAMC likely requires conformity with the CBC for single-family homes, absent specific local changes, this problem may affect thecalculation of square footages for single-family homes as well. 2025-01 HCD ADUHandbook, p. 39 If the City does charge any impact fees on ADUs, applicants should be allowed todefer them without recording a lien against their properties Indeed, the City can and should go further and simply eliminate impact fees onADUs Palo Alto incorrectly calculates square footages, including FAR, for ADUs, andpossibly single-family homes as well. .
.

SB 937 Gov. C. sec. 66007 PAMC subd.16.64.030
Oral argument
Docket of

16.04.230-240
PAMC subd. 18.04.030(a)(65)(C)
Sheetz v. County of El Dorado
See
Sheetz v.County of El Dorado
830
2024-10 HCD Letter,#3
Additional local design, zoning, and other standards may not be imposed on 66323Units.

Palo Alto calculates allowable heights for all ADUs differently from single-familyhomes in flood zones.

Palo Alto calculates FAR for basements for all ADUs differently from single-familyhomes Palo Alto incorrectly calculates FAR for ADUs, and possibly single-family homesas well, requiring measurements "to the outside of stud walls...." Palo Alto generally prohibits ADUs from either (i) using an existing sewer line fora single-family residence to convey sewage from an ADU to the main sewer systemor (ii) running a separate sewer line for an ADU under a single-family home,effectively requiring long, sometimes tortuous, and frequently expensive separatesewer runs for ADUs.

The 2025-01 HCD ADU Handbook makes clear, at p. 20, that development of 66323 Units may not be curtailed by local standards that penalize such"state exemption" ADUs and JADUs. (This principle applies to all four categories of ADUs and JADUs identified in Gov. C. sec. 66323.) As the HCDhas explained:
"What design, zoning, or other local standards can be imposed on 66323 Units?A local agency may not impose development or design standards, including both local standards and standards found in State ADU Law, on 66323Units that are not specifically listed in Government Code section 66323. (Gov. Code, § 66323, subds. (a), (b).) This includes, but is not limited to,parking, height, setbacks, or other zoning provisions (e.g., lot size, open space, floor area ratio, etc.)." (Blue font deleted.). 2025-01 HCD ADUHandbook, p. 20.

Palo Alto has many ADU-specific, local standards that may not be applied to 66323 Units, including, but not limited to, the following:
(a)
See, e.g., footnotes 3 and 3 to Table 1 of Section 18.09.030 and Table 2 of Section 18.09.040, respectively. (b)
See, e.g., City of Palo Alto, "Guidebook 2024, Accessory Dwelling Unit" ("Palo Alto ADU Guidebook 2024"), p. 16: "Basements are permitted, but habitable basement space will contribute to unit size." Contrast one part of the definition of "Gross floor area" in PAMC subd.18.04.030(a)(65)(D)(i):
"D) Low Density Residential Exclusions: In the RE and R-1 single-family residence districts and in the R-2 and RMD two-family residence districts,'gross floor area' shall not include the following:
(i) Basements where the finished level of the first floor is not more than three feet above the grade around the perimeter of the buildingfoundation, shall be excluded from the calculation of gross floor area, provided that lightwells, stairwells and other excavated features comply withthe provisions of Section 18.12.070;....' (c)
PAMC subd. 18.04.030(a)(65)(C).
(See the discussion above.)
(d)
(This requirement is believed to be in a manual maintained at the Development Services office, to which I do not presently have access.) But these requirements as well go beyond the text of Gov. C. sec. 66323. (See also the discussion below of the limitedscope of utilities review of ADU building permit applications.)

.

Gov. C. sec. 66323
9 30A
(e)
(f)
Otherwise, such CPAU review may also operate as a constraint on the production of 66323 Units. The City has already determined which parts of Palo Alto have adequate water and sewer service. This is apparently includes all residential areas in Palo Alto: "ADUs are allowed on any property wheresingle- or multi-family residential is a permited use." Palo Alto ADU Guidebook 2024, p. 6. ADU and JADU applicants should simply indicate that the parcel islocated in a residential area on the title sheet of a set of plans for an ADU or a JADU. Applicants should have the option of deferring all other CPAU reviews untilafter a permit has issued. This will also facilitate contractor involvement with utilities issues. (See also the additional discussion of limitations on CPAU permittingreview below.) (g) Palo Alto should use HCD tools for determining whether a given parcel is within 1/2 mile of transit. (PLEASE NOTE: please see the further discussionimmediatley below.) 2024-10 HCD Letter,#3
Palo Alto, through the City of Palo Alto Utilities, prohibits ADUs from obtainingtheir own, separate municipal utilities. This too may operate as a constraint on theproduction of 66323 Units. Homeowners should, at their sole option, have thechoice of whether to connect ADUs, both attached and detached, directly to CPAUutilities.

Just as Urban Forestry review should not be part of permitting ADUs or JADUs,CPAU should not review ADU or JADU permit applications unless the applicantspecifically requests such permitting review in writing as part of the permitapplication.

Gov. C. sec. 66323
10 30B (Continued immediately below.)
Additional local design, zoning, and other standards may not be imposed on 66323 Units (continued). (h)
The HCD has prepared an "Affirmatively Furthering Fair Housing (AFFH), Data Viewer & Mapping Resources," which provides tools for determiningwhether a given parcel is or is not within 1/2 mile of transit. I have not checked this recently, but in the past I have observed that the results of usingthe HCD tool lead to different results from consulting with the City regarding the distance between particular parcels and transit. In general, I believethat the City should, at a minimum, accept the results from such HCD tools, even if the City wishes to be more generous than the state mandates.Reasons for this conclusion include the following:(i) I believe that non-VTA bus routes are relevant to determining such areas. Although I have not been able to find a public-facing, web-available toolfrom the City for determining whether or not a given parcel is within 1/2 mile of transit, based on past communications, I believe, but have notconfirmed, that the City's current maps are based on VTA bus routes. But there are other transit providers whose routes should be considered, suchas AC Transit, Stanford, and perhaps others, and, as far as I know, one cannot easily test the City's maps to determine whether such other routes areeven being considered in determining such 1/2 mile distances.(ii) Importantly, the appropriate unit of analysis is a bus stop, not a bus route. Gov. C. subd. 66321(b)(4)(B), for example, refers to this distance:"one-half of one mile walking distance of a major transit stop or a high-quality transit corridor, as those terms are defined in Section 21155 of thePublic Resources Code." The phrase "major transit stop" is significant. PRC subd. 21155(b) states, in part, " "A major transit stop is as defined in Section 21064.3, except that, for purposes of this section, it also includes major transit stops that are included inthe applicable regional transportation plan. For purposes of this section, a high-quality transit corridor means a corridor with fixed route bus servicewith service intervals no longer than 15 minutes during peak commute hours. A project shall be considered to be within one-half mile of a majortransit stop or high-quality transit corridor if all parcels within the project have no more than 25 percent of their area farther than one-half mile fromthe stop or corridor and if not more than 10 percent of the residential units or 100 units, whichever is less, in the project are farther than one-half milefrom the stop or corridor." (Emphasis added.) (iii) PRC sec. 21064.3 was recently changed. ("Amended by Stats. 2024, Ch. 275, Sec. 2. (AB 2553) Effective January 1, 2025.). It now states:"“Major transit stop” means a site containing any of the following: (a) An existing rail or bus rapid transit station. (b) A ferry terminal served by eithera bus or rail transit service. (c) The intersection of two or more major bus routes with a frequency of service interval of 20 minutes or less during themorning and afternoon peak commute periods." In terms of implications for Palo Alto's ADU ordinace, specifically with reference to height limits:(1) It is unclear how one can interrogate the City's current maps through the web. Asking regarding particular parcels is accepting a "black box"analysis which is not transparent. Homeowners are entitled to know what they can build before they incur the cost and expense of preparing a permitapplication, and the community should be able to know, for example, in the context of urging the City Council to amend its current ordinance, whichspecific areas of Palo Alto the City current considers to be within such 1/2 mile distances.

PLEASE NOTE: These are additional comments provided on 2025-03-25.

This concern applies specifically to 66323 Units, as well as to what might bedeemed "66321 Units." Palo Alto should (A) use HCD tools for determiningwhether a given parcel is within 1/2 mile of transit, and (B) acknowledge that (i)non-VTA bus routes are relevant to determining such areas, (ii) the appropriate unitof analysis is a bus stop, not a bus route, and (iii) the requisite periodicityestablished by state law has changed recently. This requires that Palo Alto'scurrent maps, wherever they are maintained and however they are shared with thepublic, be revised. 2024-10 HCD Letter,#3Gov. C. sec. 66323
11 30C
31PLEASE NOTE: Please see the further discussion immediately below. 2024-10 HCD Letter,#2
(2) It is unclear whether the City has even begun to update its analyses based on the recent changes to PRC sec. 21064.3 with its new, 20-min.standard.(3) It is unclear whether the City has taken account of non-VTA transit providers, including AC Transit and Stanford, among others.(4) It is unclear on what principled basis the City would substitute its own analyses for those of HCD.(5) And, perhaps most importantly, while I am not certain, I believe that the City has constructed its map based on bus routes, rather than bus stops.A "major transit stop" includes "the intersection of two or more major bus routes...." There is nothing on the face of PRC sec. 21064.3 requiring thatsuch bus routes be orthogonal, or even at a slight angle, to one another. In the absence of such a legislative requirement, two bus routes couldintersect by overlaping one another. Since the fundamental unit of analysis is a "major transit stop," this means that the number of "major transitstops" throughout Palo Alto is likely considerable greater than that suggested by the City's maps. In many instances, VTA, AC Transit, Stanford, andperhaps other transit servcie providers (including the City itself, whether now or in the future) run buses along the same major vehicular arteries,such as University, Embaracadero, San Antonio, Middlefield, etc. Although service may be provided by different agencies or carriers at such stops,because the same bus stop is served by multiple providers, there are likely far more that qualify as "major transit stops" under the new 20-min.standard. If the City has not undertaken such an analysis, in addition to acknowleging and accepting the results of the HCD's tools, it should alsocalculate which particular stops in Palo Alto are served with 20-min. intervals by any carrier at peak commute times. It would be sad, and, indeed,ironic, were the City not to take account of interactions between different transit providers for the purposes of assessing height limitations for ADUswhen its own "Getting Around" web page champions "the free Stanford Marguerite shuttle bus network" as complementing VTA buses.

Although not specifically noted by the HCD (see discussion of "Section 18.09.030 (a) iii -- Height," above, parts of both Table 1 of Section 18.09.030and Table 2 of Section 18.09.040 are inconsistent with state law. Among other things, "66323 Units do not have to comply with lot coverage, frontsetbacks, and design standards." The 2025-01 HCD ADU Handbook, p. 18. Cf. paragraph immediately below table at p. 20. That 66323 Units do nothave to comply with lot coverage, front setbacks, and design standards affects both Table 1 and, importantly, and Table 2 as well, in several ways:
(a) The heading for the third column from the left of Table 1 reads, "Construction of Attached ADU Within the Proposed Space of a Single-FamilyHome," and a large cell for the rows concerning setbacks, daylight plane, and maximum height states, "Underlying zone standard for Single[-]FamilyHome (ADU must be within allowable space of Single-Family Home)." (b) As for setbacks, Gov. C. subd. 66323(a)(1)(C) states, "The side and rear setbacks are sufficient for fire and safety," not that the setbacks are thesame as for the single-family home. (c) As for daylight plane requirements, none are mentioned in Gov. C. subd. 66323(a); therefore, for the same reasons discussed by the HCD in2024-10 HCD Letter, #9 (discussed above), under Gov. C. subd. 66317(c), the City may not enact additional requirements to delay an ADU or JADUbuilding permit. (d) As for maximum height, footnote (3) states, "Units built in a flood zone are not entitled to any height extensions granted to the primary dwelling."Again, under Gov. C. subd. 66317(c), the City may not enact additional requirements to delay an ADU or JADU building permit. Consequently, the Citycannot rely upon other parts of the PAMC to reduce the effective height limit for ADUs. (e) In addition, the heading for the second column from the left of Table 2 merely states, "Attached," but its problems --- regarding setbacks, daylightplane, and maximum heigh --- are analogous to those of the third column in Table 1, and they too must be corrected. (f) Both tables should incorporate the current guidance from HCD regarding two-story ADUs:
"If a detached two-story ADU can be built according to the height allowances required under State ADU Law while remaining compliant with thebuilding code, a local agency cannot deny an ADU application to create a two-story ADU, irrespective of the underlying zoning that might restrict aprimary dwelling to one story. (Gov. Code, §§ 66321, subd. (b)(4)(D); 66314, subd. (d)(8).)". 2025-01 HCD ADU Handbook, p. 25. 2024-10 HCD Letter,#3Gov. C. sec. 66323
Gov. C. subd.66321(b)(4)(B)
Gov. C. subd.66323(a)(1)(C)Gov. C. subd.66317(c)
Additional concerns re setbacks, daylight plane, and height. 12 31A
(g) While 66323 Units have a special status, including an explicit ministerial approval requirement, Gov. C. subd. 66323(a), additional concerns regarding PaloAlto's current ADU ordinance concerning setbacks, daylight plan, and height arise from consideration of Gov. C. subd. 66321. For example, while Gov. C. subd.66323(a)(1)(A) does not speak separately and explicitly to rules governing attached ADU ("The accessory dwelling unit or junior accessory dwelling unit is withinthe proposed space of a single-family dwelling or existing space of a single-family dwelling or accessory structure...."), state ADU laws still encourage and protectthe development of attached ADUs in important ways. Among other things:

Gov. C. subd. 66321(a) explicitly references "both attached and detached accessory dwelling units."Gov. C. subd. 66321(b)(2) sets floors for the maximum sizes of all ADUs and those that "provide[] more than one bedroom."Gov. C. subd. 66321(b)(4)(D) generally provides greater height limits for attached ADUs: "A height of 25 feet or the height limitation in the local zoning ordinancethat applies to the primary dwelling, whichever is lower, for an accessory dwelling unit that is attached to a primary dwelling. This subparagraph shall not require alocal agency to allow an accessory dwelling unit to exceed two stories."And Gov. C. subd. 66321(b)(3) establishes a special set of protections for "an 800 square foot accessory dwelling unit with four-foot side and rear yard setbacksto be constructed in compliance with all other local development standards." Because all of these provisions are part of one section of the Government Code, and because Gov. C. sec. 66321 should be read in harmony with Gov. C. subd.66323, along with the other parts of Article 2, an 800-sf ADU with four-foot side and rear setbacks, whether attached or detached, enjoys, among other things, theadditional height allowances provided by Gov. C. subd. 66321(b)(4)(D), and protection from any portion of any local agency ordinance that would seek to impose"[a]ny requirement for a zoning clearance or separate zoning review or any other minimum or maximum size for an accessory dwelling unit, size based upon apercentage of the proposed or existing primary dwelling, or limits on lot coverage, floor area ratio, open space, front setbacks, and minimum lot size, for eitherattached or detached dwellings...." Gov. C. subd. 66321(b)(3).

Applying these principles to Palo Alto's current ADU ordinance leads to several important conclusions, including, but not limited to, the following:
(3) Although it is perhaps a bit of an open question, I believe that the most reasonable reading of Gov. C. sec. 66321, particulary in light of Gov. C. subd. 66323,along with the other parts of Article 2, protects such an attached ADU from Palo Alto's daylight plane requirements, provided it respects the four-foot side and rearsetback requirements. 2024-10 HCD Letter,#2
Additional concerns re setbacks, daylight plane, and height.

PLEASE NOTE: These are additional comments provided on 2025-03-25. (1) Palo Alto must allow an attached ADU up to 800 sf in size to be built out to four-footside and rear setbacks; in other words, it need not be confined to the setbacks for theprimary dwelling on the lot. (2) Such an ADU would enjoy the height benefits provided by Gov. C. subd.66321(b)(4)(D); as a result, in most parts of the City, it could be built to 25', provided thatit does not have more than two stories.

Gov. C. subd.66321(b)(4)(B)
Gov. C. subd.66323(a)(1)(C)Gov. C. subd.66317(c)
13 OTHERPOLICYCHANGES
32 Althought not required by state law, Gov. Code section 66342 gives local jurisdictions the option of adopting an ordinance to provide for the separate conveyanceof an ADU, apart from its primary dwelling, as noted by the HCD in a footnote in the 2024-10 HCD letter. Palo Alto should adopt such an ordinance as a means ofstimulating ADU production. Allowing for the separate conveyance of ADUs in Palo Alto would likely expand capital availability for ADU production considerably. 2024-10 HCD Letter,#8, fn.1
33 A Palo Alto worksheet for estimating existing electrcal loads ( ), which isreferenced by implication in Palo Alto's " " at p. 2 ("COMPLETED AND SIGNED UTILITY SERVICE APPLICATION INCLUDING UTILITYDEMANDS FOR THE REQUIRED SERVICES") essentially relies upon nameplate information, with repeated instructions to specify "Volt Amps from Label." WithPalo Alto's new "Advanced Meter Infrastructure" for electrical service, applicants can, in addition, use , which begins, "The calculation of a feeder or service load for existing installations shall be permitted to use actual maximum demand to determine the existing load under all ofthe following conditions...." Palo Alto should: (a) make clear that this alternate form of calculation existing electrical loads can be used for ADUs and JADUs; (b) provide an updated form forcalculating the resultant demand in accordance with CEC (2022) 220.87; and (c) simplify and publicize clearly instructions for obtaining historical load data fromCPAU customer service personnel or directly online through MyCPAU.

Allow for separate conveyances of ADUs under Gov. C. sec. 66342 Gov. C. sec. 66342.
res_load_calc_gh_03.24.17_dc1-emUtility Service Application CEC (2022) 220.87
Simplify and improve CPAU load calculatons.
220.87 Determining Existing Loads
CEC (2022) 220.87
14 34 2025-01 HCD ADUHandbook, p. 33,
At present CPAU will sometimes
charge a customer for electrical infrastructure upgrades. For example, if a customer seeks to upgrade a home's electrical service to electrify the home or to addan EV charger, CPAU sometimes allocates the entire cost of that infrastructure upgrade to the customer requesting a new service, even thought the capacity ofthe existing CPAU infrastructure reached an exhaustion threshold by the load demands of all of the customers in a given local area. This can be thought of as a"loser lottery." When this policy is applied to ADUs or JADUs in the additional regulatory context of the City's newly modified reach codes, it becomes particularlyuntenable. Making it extremely difficult for ADU or JADU applicants to have gas appliances while charging them for CPAU electrical infrastructure upgradescreates a "damned if you do, and damned if you don't" choice. This is also poor public policy because CPAU infrastructure upgrades, in general, should be borneby CPAU itself or all customers, not a select few.

From an ADU and JADU regulatory perspective, such CPAU policies also violate state law. Gov. C. subd. 66314(a) makes clear that (a) only local water andsewer utilities have any proper participation in ADU and JADU permitting, and (b) even then, the only legitimate inquiry concerns "the adequacy of water andsewer services...."; once a local agency has consulted with local water and sewer utilities as to which regions with that agency's jurisdiction have adequate waterand sewer services, further involvement of local utilities in ADU and JADU permitting should end. Thus, if a local agency (a) allows water or sewer review of aparticular permit application concerning a parcel that is in an area with adequate water and sewer services, or (b) allows any other local utility to review an ADU orJADU permit application, it fails to respect and honor that portion of Gov. C. sec. 66314. Therefore, current CPAU policies concerning the "loser lottery" aredoubly problematic: electrical utilities have no role in ADU and JADU permitting, and even if the state had allowed cities to consider the adequacy of electricalservice in a local sub-region --- which is not the case --- once that determination had been made, an electrical utility should not be further involved in permittng foran ADU or JADU.

CPAU's "loser lottery" policies are troublesome when applied to 66323 Units for other reasons as well. There is no mention of electrical infrastructure upgrades inGov. C. sec. 66323, and Gov. C. subds. 66323(b)-(c) state:
"(b) A local agency shall not impose any objective development or design standard that is not authorized by this section upon any accessory dwelling unit thatmeets the requirements of any of paragraphs (1) to (4), inclusive, of subdivision (a). (c) A local agency shall not require, as a condition for ministerial approval of a permit application for the creation of an accessory dwelling unit or a junioraccessory dwelling unit, the correction of nonconforming zoning conditions." Taken together, the entirety of that section and those particular sub-divisions also prohibit the City from forcing ADU or JADU applicants to pay for CPAUinfrastructure upgrades as price for a building permit, as well as prohibiting CPAU electrical permitting review. 2025-01 HCD ADU Handbook, p. 33,concerning non-conforming zoning.

End the "loser lottery." Do not condition permit approval of ADUs or JADUs oncharging applicants for CPAU infrastructure upgrades, a type of impermissibledemand for public improvements, and give applicants, at their sole option, theability to obtain one or more separate utility services for ADUs.

Cf.

Gov. C. sec. 66314
Gov. C. sec. 66323
15 35
A homeowner seeking to build an ADU in a flood zone will frequently be directed to complete a" ," which will likely result in a determination by the City, made using RS Means cost estimating data or software,which, without further work, frequently results in a determinaton by the City that the cost of adding an ADU is more than 50% of the current value of the primaryhome, thus preventing one from obtaining an exception to certain additional flood zone building requirements. As ordinarily followed, this procedure is irrational,failing to take reasonable account of home values in Palo Alto. Therefore, an applicant is required to seek and to pay for a custom appraisal of the home, onemore expense tacked onto the price of creating the additonal housing that our community needs. A better approach is possible. Here are three suggestions(doubtless there are more possibilities):

1. The City could acknowledge that the RS Means data and software are extremely poor indicators of the value of existing homes in Palo Alto, and it could createmore realistic estimates of home values in our community. This need not be a major undertaking requiring exceptional expenditures. (Perhaps there are studentsat local universities who might find this an interesting project and a worthwhile endeavor that could even lead to creating a profitable business. One will only knowfor sure by asking.)

2. The City, having made that acknowledgement, could entertain other approaches that are likely far more accurate than the RS Means data and softwareapproach. The question ought not to be whether the alternative is perfect, but whether it's better than the current, highly tarnished, "gold standard." The Cityshould be able to use, for example, rough data from, ., Zillow, to establish the market price of a home and then to have an optional parameter, perhaps 25% oreven 20% (and maybe an variable that changes with both the size of the house relative to the size of the lot and the age of the house) of the Zillow-estimatedFMV as an acceptable approximation of the FMV of the structure on property. Local relators might have even better ideas. Any such figures that accord with theexperience and judgments of those who probably know these values best, such as local relators, ought to be allowed in lieu of a detailed and costly appraisal forthe purposes of a flood-zone-screening analysis. Perhaps waivers or exceptions might be necessary state or federal regulators, but let's not make the process ofbuilding ADUs in Palo Alto --- even in flood zones --- any more expensive than it already is, particularly when RS Means data and software simply fail to measureactual Palo Alto home FMV values accurately.

3. Simply accept a good-faith estimate provided by a local, licensed relator. 36 In a , the HCD wrote, with respect to Palo Alto's
December, 2022 draft housing element:
"Fees and Exaction: While the element describes required fees for single family and multifamily housing developments, including impact fees, on (pp. 4-66) theelement states that impact fees/capacity fees are considered the highest in the County. In addition, on (pp. 4-67) the City recognizes that currentplanning/permitting and development fees add substantial cost to residential development." By this time, if not earlier, Palo Alto reasonably should have known that there were serious problems with its per-unit impact fees as applied to ADUs, and that, asthe City would acknowledge explicitly in the redlined ("V6") of the housing element, if not earlier that:
"Because Palo Alto has historically charged per-unit feesfor residential development, this has led to some inequitable results, as the fees for an ADU will dependnot only on the size of the ADU, but also on the size of the primary unit, with higher fees required under state law when the primary unit is smaller." V6, at p. 4-65.

The City should do the right thing and refund the impact fees that were charged on ADUs improperly from at least March 23, 2023 to the present in two distinctways:

1. At a minimum, the City should re-calculate the fees charged on a per-unit basis and refund the difference as compared with the amounts that would becharged under current rules. To follow its stated values ( , Recital A(5) in the draft resolution attached to ": "Will safeguard public trust through transparent practices and opencommunication."), this is the minimum that the City should do even to begin to make whole the homeowners who were overcharged for ADU impact fees.

2. If the City recognizes that even the current impact fee structure is improper, as discussed above, then the City should refund the entire amount of the feespreviously charged to such homeowners, as having been charged in violation of state proportionality rules for ADUs. references notedabove concerningimpact fees andproportionality.

Create a simplified approach for flood zone appraisals.

FLOOD ZONE SCREENING QUESTIONNAIRE
letter dated March 23, 2023
April, 2024 version
"City Council At Places Memo, From: MayorLauing and Vice Mayor Veenker, Meeting Date: February 24, 2025, Item Number: 8 e.g
see, e.g.

See
Refund improperly charged ADU fees.
16 37
If the City is serious about meeting its
goals in the Housing Element, it should simply waive all such fees. Impact fees for larger ADUs can amount to tens of thousands of dollars. In addition,permitting fees are themselves consequential, sometimes amounting to several thousand dollars or more. Building more ADUs and JADUs is, perhaps, thefastest, most effective, and most demonstrably successful means of creating more and more afforedable housing in Palo Alto. We should make it easier and lessexpensive for people to build ADUs and JADUs. Waiving all such fees would send the right message and address current geopolitical conditions. Homeownersare already concerned about the effects of global tariff wars on the prices of lumber, appliances, and the other goods necessary to construct ADUs and JADUs.Cutting all such fees would show that Palo Alto is committed to meeting its housing goals even as geopolitical changes create higher construction costs. referencesnoted aboveconcerning impactfees andproportionality, as wellas the separatediscussion of simplyending impact fees onADUs. 38 By going beyond what is required by state law in terms of ADU height, the City may be able to create appropriate incentives for complying with current daylight plane standards. A simple approach would be to allow for 20' high, two-story, detached,Table 2 ADUs, on the condition that they conform with current daylight plane standards. Because the 20' height limit is greater than that contemplated in stateADU statutes for non-66323 Units, allowing for such an alternative, non-mandatory regulatory pathway might be countenanced by the HCD. 39 State law allows for 1,200 sf ADUs, and some Bay Area jurisdictions allow for such larger ADUs already. To truly reform Palo Alto's housing market and spur construction of more and more affordable housing, our community needs to embrace"next phase housing," which will meet the needs of, and be embraced by, Palo Altans seeking to downsize, but confronted with the unavailability of suitablehousing alternatives. Community members who have lived for decades in larger homes are likely to be sceptical about moving into 800 sf ADUs. 1,200 sf ADUs,which could have a third bedroom, space for family members who visit occasionally, or home offices, might be attractive enough so that homeowners wouldconsider moving our of their single-family residences into a 1,200 sf ADU, thus freeing primary dwellings up for rental (and ideally sale, if the City ever embracesGov. C. sec. 66342). 2024-10 HCD Letter,#8, fn.1
40 To create the additional and lessexpensive housinng that our community needs and deserves, the City should do more than meet minimal standards; it should strive for excellence. Palo Altoshould set a goal of earning a "Prohousing Designation" from the HCD. As shown on the , neighboring cities such as Mountain View and RedwoodCity have already achieved such designations, as have other cities such as Santa Monica. Achieving such a designation can unlock meaningful benefits forcreating additional housing in Palo Alto, and changing existing regulations and creating new housing incentives will benefit the Palo Alto community along the wayto earning such a designation.

Waive all impact and permitting fees on both ADUs and JADUs.

Create an alternative, local, 20' height limit, specifically for two-story, detached,Table 2 ADUs, with a daylight plane.

Adopt a 1,200 sf size limit for all ADUs.

Palo Alto should seek a "Prohousing Designation," and ADU reforms can help our community to achieve that goal.

See also
Gov. C. sec. 66342.

HCD's website ProhousingDesignation Benefitsand ProhousingDesignatedJurisdictions 17 41
To create more and more affordable housing, the City should also allocate reasonable funding. In some housing projects, the City appears to expect other government agencies to contribute significantly to construction costs. But the City has an enormous budget, much more of which couldbe used to create incentives for new housing. Allocating a tiny fraction of that budget, even only 25 basis points or less over a two-year period would free up $5million in total that could be used to test different regulatory and incentive programs to determine the ease of their implementation and the likelihood of theirsuccess. The oversubscription and success of certain state-wide financial incentives has already demonstrated demand for funds to help build ADU. Palo Altocould and should experiment with such mechanisms and others. Here is a rough outline of a series of such possible experiments:

Total of $5 million in grants and on-bill financing over two years:

Up to 50 $25k grants for pre-designed ADUs Up to 50 $25k grants based on CalHFA program Up to 25 on-CPAU-bill financings for first $100k of ADU costs With this partricular experimental approach, $2.5 million would be returned to the City over time, which could help pay for the next, full implementation phase ofsuch programs. Creating such incentives, even on an experimental basis, might also accelerate Palo Alto's obtaining a "Prohousing Designation." 2025-01 HCDADU Handbook, p. 28. 2025-01 HCD ADUHandbook, p. 28 Palo Alto should experiment with meaningful financial incentives to increase ADUproduction. 1 City of Palo Alto-References & Abbreviations re 2025-03 ADU reforms Abbreviation Reference
2024-10 HCD
Letter
Letter to Jonathan Lait, Director, from Jamie Candelaria Senior Housing Accountability Unit Manager, HCD, dated October 29, 2024 2025-01 HCD
ADU Handbook

CALIFORNIA DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT, OK, January 2025ACCESSORY DWELLING UNIT HANDBO
From: [email protected]
To: Council, City; Lait, Jonathan
Subject: Expanding Incentives for ADUs—A Vision to Meet Multiple City Goals Date: Sunday, May 11, 2025 11:19:31 AM
Attachments: Expanding Incentives for larger ADUs--A Vision.docx CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
!
Dear Mayor Lauing, council members and staff.

ADUs are a major success story for Palo Alto housing.

Consider expanding incentives for larger ADUs and imagine how powerful this could be for meeting multiple housing goals.

Monday night is a first reading of the city's revised ADU ordinance.

I believe some improvements can be made before the second reading and other incentives will take longer to develop.

I hope you are as excited as I am about the possibilities.

Let's move this vision to implementation.

I make a couple of broad suggestions for moving ahead and look forward, hopefully, to council's thoughts on expanding incentives for larger ADUs--say in the range of 1,200 to 1,400 square feet with opportunities for ownership.

Thank you for considering how we can meet multiple city goals: helping seniors age in place, providing a path for new families to live here and offset declining school enrollment, not expanding the urban footprint, and with some additional incentives, open up ADUs to more lower income families.

Stephen Levy
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Expanding Incentives for ADUs—A Vision to Meet Multiple City Goals

Accessory dwelling units (ADUs) are a success story for meeting Palo Alto’s housing goals. The city issued permits for 249 ADUs in 2023 and 2024 accounting for more than 50% of our total housing permits issued in these two years.

This success was made possible by a set of incentives for ADUs that are not larger than 750 square feet including the waiver of impact fees and other incentives. State law both protects those ADUs from paying impact fees, which can total tens of thousands of dollars, and provides ADUs up to 800 sf with more generous design options and expedited permitting. Expanding incentives to larger ADUs can greatly expand production and, at the same time, meet multiple city housing goals.

Imagine the potential of ADUs in the 1,200 to 1,400 square foot range. This would provide options for older families to downsize but remain in place without having to sell their single-family home. The number of older households is continuing to grow but downsizing to 750 square feet is not attractive while moving to 1,200 to 1,400 square feet would work fine. That could happen by moving to an ADU on their property while offering their existing home to family members or renting it for income.

Palo Alto has twin goals of encouraging new families to move here and also addressing the affordability challenges for the middle class—the “missing middle” housing affordability challenge. Larger ADUs can include, possibly depending on size, three bedrooms and yet cost less than buying most existing single-family homes in Palo Alto.

What do we gain? We will see a surge in permits and new homes. All homes will be within the existing urban footprint. Older households will see expanded options to remain in their community while making their current homes available to others. We will encourage new families with children to attend public schools in Palo Alto and avoid having to close neighborhood schools with declining enrollment. We will address the “missing-middle” affordability challenge.

What do we need to do to make this vision come alive?

We need to replicate and expand the incentives now in place for smaller ADUs. That means waiving impact fees as we already do for smaller ADUs. It means creating ownership opportunities for the larger ADUs that will expand the market and help with financing. And we could develop meaningful financial incentives and grants to reduce the cost for new ADUs.

From: James Lloyd
To: Council, City; Burt, Patrick; Lauing, Ed; Lu, George; Lythcott-Haims, Julie; Reckdahl, Keith; Stone, Greer; Veenker, Vicki
Cc: Clerk, City; City Attorney; City Mgr; PlannerOnDuty; Kallas, Emily Subject: public comment re item 10 for 5/12/25 Council meeting Date: Friday, May 9, 2025 6:11:31 PM
Attachments: Palo Alto ADU Ordinance Letter - 9 May 2025.pdf CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.

Dear Palo Alto City Council,
The California Housing Defense Fund (“CalHDF”) submits the attached public comment concerning item 10 on the agenda for the Council meeting scheduled for May 12, 2025, an amendment to the City’s regulations for ADUs and JADUs.

Sincerely,
James M. Lloyd
Director of Planning and Investigations
California Housing Defense Fund
[email protected]
CalHDF is grant & donation funded
Donate today - https://calhdf.org/donate/
May 9, 2025 City of Palo Alto
250

Hamilton

Avenue
Palo Alto, CA 94301 By email: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected] Cc: [email protected]; [email protected]; [email protected]; [email protected]; [email protected] Re: Proposed Amendments to the City’s Accessory Dwelling Unit and Junior Accessory Dwelling

Unit

Regulations
Dear Palo Alto City Council, The California Housing Defense Fund (“CalHDF”) submits this letter as a public comment concerning

item

10 on

the

agenda

for

the

Council

meeting

scheduled

for

May

12,

2025,

an

amendment

to

the

City’s

regulations

for

ADUs

and

JADUs.

This

proposed

ordinance

fails

to

comply

with

state

law

in

one

specific

way

and

the

City

should

address

this

issue

before

approving

the

ordinance.

Background The law gives local governments authority to enact zoning ordinances that implement a variety of development standards on ADUs. (Gov. Code, § 66314.) The standards in these local ordinances

are

limited

by

state

law

so

as

not

to

overly

restrict

ADU

development.

(See

id.)

Separately

from

local

ADU

ordinances,

Government

Code

section

66323

establishes

a

narrower

set

of

ADU

types

that

local

governments

have

a

ministerial

duty

to

approve.

“Notwithstanding

Sections

66314

to

66322

...

a

local

agency

shall

ministerially

approve”

these

types

of

ADUs.

(Gov.

Code,

§

66323,

subd.

(a).)

This

means

that

ADUs

that

satisfy

the

minimal

requirements

of

section

66323

must

be

approved

regardless

of

any

contrary

provisions

of

the

local

ADU

ordinance.

(
Ibid
.)

Local

governments

may

not

impose

their

own

standards

on

such

ADUs.

(
Id.

at

subd.

(b)

[“A

local

agency

shall

not

impose

any

objective

development

or

2221 Broadway, PH1, Oakland, CA 94612 [email protected]

design standard that is not authorized by this section upon any accessory dwelling unit that meets

the

requirements

of

any

of

paragraphs

(1)

to

(4),

inclusive,

of

subdivision

(a).”].)
In addition, ADUs that qualify for the protections of Government Code section 66323, like other

ADUs,

must

be

processed

by

local

governments

within

60 days

of

a

complete

permit

application

submittal.

(Gov.

Code,

§

66317,

subd.

(a).)
State law also prohibits creating regulations on ADU development not explicitly allowed by state law. Government Code Section 66315 states, “No additional standards, other than those provided

in

Section

66314,

shall

be

used

or

imposed,

including

an

owner-occupant
requirement, except that a local agency may require that the property may be used for rentals of terms 30 days or longer.” Impermissible Front Setback Requirement on Section 66323 ADUs City code section 18.09.030(b) Table 1 imposes underlying front setback requirements on new

construction,

detached

ADUs

developed

pursuant

to

Government

Code

section

66323,

subdivisions

(a)(2)

and

(a)(4),

on

single-family

and

multifamily

properties,

respectively.

However, Government Code section 66323, subdivision (a) does not permit imposition of front

setback

requirements

for

ADUs

that

qualify

for

the

protections

of

that

section

of

law.

Additionally,

Government

Code

section

66323,

subdivision

(b)

specifically

forbids

the

imposition

of

any

local

design

or

development

standards

beyond

what

is

provided

in

section

66323.

This

means

that

the

City

may

not

impose

front

setback

requirements

on

ADUs

that

meet

the

requirements

of

Government

Code

section

66323,

subdivision

(a).

There are many policy reasons for this, regardless of whether or not it is possible to locate an ADU

elsewhere

on

the

property.

For

instance,

a

homeowner

may

prefer

to

preserve

a

private

backyard

space

while

redeveloping

the

less

useful

front

yard.

While

children

may

play

in

the

backyard,

the

front

yard

is

closer

to

the

street

and

less

safe

for

a

variety

of

activities.

Additionally,

an

ADU

in

the

front

setback

may

be

easier

to

make

accessible

for

disabled

residents,

as

it

is

much

closer

to

the

street.

The

City

therefore

must

allow

front

yard

ADUs

that

comply

with

the

standards

in

Government

Code

section

66323,

subdivision

(a)

both

on

single

family

and

on

multifamily

properties.

HCD has issued guidance pursuant to its authority under Government Code section 66327 (the January 2025 HCD ADU Handbook, page 18) affirming the duty of local agencies to allow ADUs protected by Government Code section 66323 in the front setback under all circumstances.

From page 18 of the HCD ADU Handbook (emphasis added): “For example, 66323 Units do not

have

to

comply

with

lot

coverage,

front

setbacks
,

and

design

standards.”

2 of 3

⧫

⧫

⧫
CalHDF appreciates the City’s effort to implement state law governing ADU construction.

However,

the

City

should

amend

its

ordinance

to

ensure

that

it

complies

with

state

law.

CalHDF is a 501(c)(3) non-profit corporation whose mission includes advocating for increased

access

to

housing

for

Californians

at

all

income

levels,

including

low-income
households. You may learn more about CalHDF at www.calhdf.org. Sincerely, Dylan Casey CalHDF Executive Director

James M. Lloyd CalHDF Director of Planning and Investigations 3 of 3

From: [email protected]
To: Council, City; Planning Commission; Lait, Jonathan; Jean Eisberg; Shikada, Ed Subject: tape of SPUR webinar with David Zisser
Date: Friday, May 9, 2025 2:43:00 PM
CAUTION: This email originated from outside of the organization. Be cautious of opening attachments and clicking on links.
!
https://www.spur.org/events/2025-05-01/tracking-housing-elements-ensuring-cities- follow-through-their-plans
About 24 minutes into the webinar Zisser of the HCD Housing Accountability Unit described the process for informing cities of HE problems.

Thus far 4 cities have been decertified.

My takeaway is that HCD is most interested in programs and promises/commitments not kept and does understand that market forces are making it harder right now to build housing even if it is permitted.

Also as an fyi, I heard him encourage webinar attendees to contact the HAU as appropriate.

He made other comments later in the webinar that I think are worth listening to.

Steve
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