City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: May 27, 2025
Report #:2503-4305
TITLE
FIRST READING: Adoption of an Ordinance Amending Palo Alto Municipal Code Titles 18 (Zoning) and 16 (Building Regulations) to Modify the El Camino Real Focus Area, Implementing Program 3.4E of the Housing Element, and Updating the Housing Incentive Program. CEQA Status: the Addendum to the Comprehensive Plan Environmental Impact Report (EIR), Considered by the City Council on April 15, 2024, Analyzed Potential Environmental Impacts of the 6th Cycle Draft Housing Element Including Program 3.4E.
RECOMMENDATION
Staff recommends that the City Council adopt an ordinance amending Chapters 18.14 and 16.58 of the Palo Alto Municipal Code (PAMC) (Attachment A) to implement Program 3.4E of the Housing Element regarding the El Camino Real Focus Area expansion and modification of development standards.
EXECUTIVE SUMMARY
Adopted in December 2023, the El Camino Real Focus Area establishes more flexible development standards for a limited number of parcels fronting El Camino Real near Page Mill Road. In exchange, qualifying projects must provide at least 20 percent of residential units at or below 80 percent of the Area Median Income (AMI). The Focus Area was developed as an alternative to State Density Bonus Law and as a response to filed Builder’s Remedy applications.
This report describes the implementation of Housing Element Program 3.4E, which calls for targeted amendments to the El Camino Real Focus Area. The proposed amendments include two primary changes:
1.Geographic Expansion – Extending the boundaries of the Focus Area to include additional eligible parcels; and
2.Development Standards Modifications – Adjusting standards to support feasible and context-sensitive development, considering adjacent land uses and proximity to transit and essential services.
The draft ordinance also introduces additional incentives to encourage lot consolidation, the provision of below-market-rate housing, and utilization of the Focus Area program in lieu of pursuing State Density Bonus Law or Builder’s Remedy pathways.
Finally, the ordinance includes minor revisions to the updated Housing Incentive Program (HIP) to address implementation issues identified during the review of Ordinance No. 5650.
BACKGROUND
El Camino Real Focus Area
On December 18, 2023, the City Council adopted Ordinance No. 5608 to rezone sites identified in the 2023-2032 Housing Element to meet the Regional Housing Needs Assessment (RHNA) required under State law. This action implemented Housing Element Program 1.1 of the Housing Element and included specific zoning changes to properties on El Camino Real south of Page Mill Road, known as the “El Camino Real Focus Area.” The existing El Camino Real Focus Area extends along the west side of El Camino Real, between Page Mill Road and Matadero Avenue. Within this area—and as an alternative to State Density Bonus Law—applicants may elect to utilize more generous development standards in exchange for providing 20% of units at up to 80% of Area Median Income (i.e., “low income”).
The Focus Area was created as both a response to proposed housing project applications submitted under State Density Bonus Law and Builder’s Remedy, and a proactive effort to encourage transit-oriented mixed-income housing in compliance with the City’s design and development standards.
As a second step, the Housing Element anticipated further changes to the Focus Area through Program 3.4E:
Expand the geographic boundaries of the El Camino Real Focus Area (adopted in 2023) to incentivize housing production at appropriate locations. Increase building height and floor area ratios and apply other objective standards, such as transitional height restrictions, to address single family zoning district adjacencies. The proposed standards will be an alternative to the state density bonus.
To explore expansion areas, staff analyzed the characteristics of properties along El Camino Real and divided the corridor into four “tiers,” with Tier 1 representing the highest potential for inclusion in the expanded Focus Area and Tier 4 having the lowest potential. The sites were arranged into tiers based on the following criteria: lot size/shape, lot consolidation potential, developer interest, Housing Element opportunity site status, proximity to public transit, and lack of R-1 zone adjacencies.
Architectural Review Board (ARB) Feedback
On December 19, 2024, the ARB held a study session to consider potential modifications to development standards:
In contrast with the PTC, the ARB supported expansion to Tiers 1, 2, 3, and 4. ARB members were split between modulating standards for smaller lot sizes and in the middle of the corridor vs. maintaining the same standards throughout the whole corridor.
ARB members generally agreed on refining the daylight plane standard to an initial height of 16 feet and 45 degrees.
ARB members generally agreed that the daylight plane should regulate transitions and that the height transition standard should be removed.
ARB members supported refining the upper story stepback (on the El Camino Real frontage) to: 10 feet over 75% of facade above 55 or 65 feet in height.
Planning & Transportation Commission (PTC) Feedback
On December 17, 2025, the PTC held a study session to consider criteria for geographic expansion, and modifications to development standards in existing and potential Focus Area boundaries. The PTC provided the following feedback:
Generally supported expansion within Tier 1 and Tier 2 sites. Recommended modulated standards for different locations. Recommended providing incentives for lot consolidation. Supported modifications to height transition standards to allow more massing, while still creating transitions to lower height structures.
Supported maintaining adequate sidewalk widths and bike facilities.
A draft ordinance was presented to the PTC on March 26, 2025, based on the ARB and PTC study session feedback. The PTC held a public hearing and made the following motions and recommendations to the City Council:
Commissioners supported the geographic expansion of the Focus Area, removal of the height transition standard, including standardized setbacks, lot consolidation incentives, fee waivers for lower income below-market rate units, and limiting office uses based on base district regulations (Motion #1: 6-0).
Commissioners were split on how to adjust the daylight plane. They agreed on making it stricter in the absence of a height transition standard, but disagreed whether it should be lowered from 60 degrees to 45 degrees or 30 degrees (i.e., more restrictive) (Motion #2: 3-3). (See daylight plane discussion below.)
A majority of Commissioners supported the simplified upper story stepback in the draft ordinance (Motion #3: 4-2).
Commissioners supported revisions to the on-site below-market rate requirements within the Focus Area to match AB 1893/Housing Accountability Act provisions, for existing Builder’s Remedy projects only (Motion #4: 6-0). Commissioners also expressed interest in expanding Focus Area standards to other sites on El Camino Real in the future.
Commissioners did not make a recommendation about the Hansen Way special setbacks. They were open to changes to the setback if acceptable to the Transportation Division and Stanford. This topic is further discussed in Attachment B. Commissioners recommended that any zoning changes to 470 Olive Avenue be made as part of a development project. This rezoning is not included in the draft ordinance.
For further background information on the El Camino Real Focus Area and discussion of potential tiers for expansion, see the December 17, 2024 PTC staff report.1
ANALYSIS
The draft ordinance in Attachment A expands the geographic reach of the Focus Area and adjusts development standards in a manner that will encourage participation in the Housing Focus Area program and maintain the City’s design priorities.
Geographic Expansion of the Focus Area
The draft ordinance expands the Focus Area to include sites with the highest potential for development based on site conditions and location, and sites with active Builder’s Remedy applications. These sites could generate approximately 500 dwelling units based on the draft zoning standards (depending on the number of sites that turn over). As shown in Figure 1, these sites are close to services and Caltrain, several have developer interest and/or Housing Element opportunity site status, and several sites exceed ½ acre, which allows for higher density projects with parking.
1 December 17, 2024 PTC staff report:
https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=6713&meetingTemplateType=2&comp iledMeetingDocumentId=12701
Figure 1: Existing and Proposed El Camino Real Focus Area Further Geographic Expansion--NVCAP and Beyond
Notably, since adoption of the original Focus Area, the North Ventura Coordinated Area Plan (NVCAP) has been approved and sites in the plan area have been upzoned to allow higher densities and building heights. NVCAP sites are not included in the proposed expansion of the Focus Area consistent with the PTC’s recommendation. However, the Council could consider including the following NVCAP parcels within the Focus Area: 2951, 2905, and 2999 El Camino Real. Although currently owned by three different entities, the property owner of 2951 El Camino Real has been in discussions about site acquisition and lot consolidation to a form an approximately 1-acre parcel. Moreover, they have developed concept plans for these sites, which were reviewed by the City Council over two prescreenings in 2021.
Three parcels were preliminarily identified as “Tier 2” sites for potential inclusion in the El Camino Real Focus Area. These sites demonstrated some, but not all, of the established criteria:
they are of interest to developers but are adjacent to R-1 zoning districts and are relatively small unless consolidated. During study sessions, both the Planning and Transportation Commission (PTC) and the Architectural Review Board (ARB) generally supported the inclusion of all Tier 1 and Tier 2 sites.
However, due to limitations on the total development capacity analyzed in the California Environmental Quality Act (CEQA) Addendum prepared for the Housing Element, only the Tier 1 sites have been included in the draft Focus Area boundary. As such, the PTC did not evaluate the Tier 2 sites as part of its March 21 action.
Attachment C includes correspondence from the property owner of 2951 El Camino Real expressing interest in being included in the Focus Area. Separately, this property owner has also indicated interest in rezoning their adjacent parcel at 470 Olive Avenue, which is currently zoned R-1 and located behind the El Camino Real–fronting sites.
The Council could add 2951, 2905, and 2999 El Camino Real to El Camino Real Focus Area within the CEQA review completed in the Addendum. The addition of the Focus Area could help facilitate site acquisition and lot consolidation and offer the property owner a development process more attractive than State Density Bonus Law by allowing additional density. Compared to Density Bonus Law, the Focus Area allows more design predictability by eliminating the option for waivers from objective standards and requires more affordable housing to be located on-site.
Further expansion of the Focus Area would trigger additional environmental review and add approximately 10 months to the schedule, extending the timeline of implementation of Program 3.4E beyond the June 2025 deadline in the Housing Element. This potential work effort could be incorporated into a future area plan for El Camino Real, as previously directed by the Council.
Draft Zoning Modifications
The draft ordinance in Attachment A include the following key changes:
Remove Height Transition, but Decrease Daylight Plane: The height transition has been removed and replaced with standards that rely on setbacks and a stricter daylight plane to facilitate height transitions. The draft ordinance shows a decrease in the daylight plane from 60 degrees to 45 degrees (decreased angle makes it more restrictive). With an initial height of 16 feet at the property line, this will allow for two stories of building height (approximately 20 feet) abutting an R-1 zoning district, which has a height limit of 30 feet. For adjacencies to other zoning districts, the current regulations for daylight planes will continue to apply.
Figure 2 illustrates existing and proposed daylight plane and height transition standards that apply to the Focus Area when abutting an R-1 zoning district. The existing standard varies depending on the abutting zoning district and location (i.e., side or rear yard)--for example, 45 degrees for RM districts (e.g., 3400 El Camino Real/Creekside Inn condition) and 60 degrees for the typical CS/CN district. The draft ordinance proposes to standardize the daylight plane for any zone abutting an R-1 zoning district.
Figure 2 illustrates the two options that the PTC contemplated: a 45-degree daylight plane and a stricter 30-degree daylight plane. Staff recommends the 45-degree daylight plane as this was the ARB recommendation and it achieves light and air objectives for the abutting R-1 uses, but only extends to within 70 feet of the shared property line. The stricter 30-degree daylight plane extends approximately 120 feet into the property, limiting the potential for higher density development envisioned by the Focus Area.
Figure 2: Existing and Proposed Daylight Plane Options
Simplify Upper Story Setback: The upper story stepback standard was modified to require a 10-foot stepback above 55 feet in building height along at least 70% of the façade rather an average 20-foot stepback. This revision allows more massing on the El Camino Real frontage, while still requiring relief above the fifth story. Some developers within the Focus Area have expressed concerns that upper story setbacks will reduce the number of units feasible on a site and add costs due to construction inefficiencies and waterproofing needs.
Standardize Setbacks: The front, side, and rear setbacks are standardized for the Focus Area (generally consistent with typical El Camino Real standards for the CN/CS zones), rather than deferred to the underlying base district standards which have a broad range. Provide Incentives for Consolidation: Two sets of FAR and building height standards, depending on lot size are proposed, to acknowledge that larger sites can accommodate more density and building height and to provide incentives for lot consolidation. Provide Incentives for BMR Units: For projects with at least 20% of units at below- market rate levels, lower income BMR units would be exempted from development impact fees.
Streamlined Review: Projects that meet the City’s objective design standards may be processed through Streamlined Review (i.e., one study session with the ARB).
Alternatively, projects may choose to meet the City’s context based design criteria and go through Architectural Review (i.e., up to three hearings with the ARB).
Implications for Mixed Use Projects
As written, the draft ordinance allows mixed use projects that are at least 2/3 residential use (i.e., a housing development project as defined by State law) to utilize Focus Area standards.
This means that office, retail, and hotel uses may take advantage of these standards as long as they are proposed as part of a single project, even if there are multiple parcels and structures
build out in phases over time. The draft ordinance applies specific limits for non-residential FAR and building height. Non-residential uses are limited to 50 feet in building height and the maximum FAR identified in the base zoning district (e.g., 0.4 FAR in the RP zone). To incentivize ground-floor retail, the draft ordinance allows up to 5,000 sq. ft. of retail floor area beyond this FAR limit, as long as the project as whole does not exceed 4.0 FAR. For potential projects with hotel and office uses, this flexibility in the zoning may provide an incentive to use the Focus Area standards over Builder’s Remedy.
Development Impact Fee Waiver for Inclusionary Units
Consistent with prior City Council direction, the draft ordinance includes a provision exempting inclusionary dwelling units from development impact fees when a project provides at least 20 percent of total units on-site as income-restricted housing affordable to households earning up to 80 percent of the Area Median Income (AMI). As part of the City’s broader development impact fee nexus and feasibility study, staff will evaluate and present to the PTC options to extend this policy to other projects.
Builder’s Remedy – AB 1893 Affordable Housing Requirements & Project Compliance For an applicant to choose the El Camino Real Focus Area rules over the Builder’s Remedy, there needs to be an incentive to do so. The two processes currently have different affordability requirements and different development standards.
The original Focus Area included an affordability requirement to match the “Builder’s Remedy” section of the Housing Accountability Act (HAA) (Gov. Code Section 65589.5) as it existed at that time. However, Assembly Bill (AB) 1893, which went into effect January 1, 2025, modifies the HAA to allow alternate and reduced affordability requirements, including for Builder’s Remedy applications that have already been submitted. Existing Builder’s Remedy applicants with projects located at 3150 El Camino Real and 3400 El Camino Real (within the existing Focus Area), and 3606 El Camino Real and 3781 El Camino Real (within the proposed expansion area) have the option to reduce their affordability requirements under the Builder’s Remedy to:
7% of units are affordable to extremely low-income households (<30% AMI) 10% of units are affordable to very low-income households (<50% of AMI) 13% of units are affordable to lower-income households (<80% of AMI) 100% of units are affordable to moderate-income households (<120% of AMI)
The draft ordinance includes a specific provision for existing Builder’s Remedy projects to take advantage of these new options, though these projects would no longer receive an exemption from development impact fees for BMR units, noted above. Other Focus Area projects would need to provide 20% of units affordable to lower income households (<80% of AMI).
The projects proposed under Builder’s Remedy within the Focus Area are currently not compliant with all of the development standards in the draft ordinance. Some of the key inconsistencies include: daylight plane and setbacks at the interface with R-1 and R-1 zoning districts; open space/landscape coverage standards; upper story stepbacks on El Camino Real; special setbacks; and non-residential FAR and building height. These applicants would need to choose to modify their projects to meet the Focus Area standards in order to comply with and utilize this alternate process.
Adjustment to the Housing Incentive Program
Finally, the attached ordinance includes two minor adjustments to the City’s updated Housing Incentive Program, which was recently adopted by Ordinance no. 5650. The first adjustment removes the site at 156-164 California Avenue from eligibility under the HIP. This site is the subject of a pending project application seeking to utilize the “Builder’s Remedy” to construct a mixed-use project consisting of a seven-story podium, a 17-story tower, and an 11-story tower. Staff identified the potential for an unintended interaction between the new HIP standards and State law that could limit the City’s review of this project; staff therefore recommends removing the site from the HIP until the pending application is resolved.
The second adjustment clarifies that the increased floor area available under the HIP is intended only to increase the potential for residential development and that the HIP does not allow any additional floor area for non-residential uses. This clarification was inadvertently omitted from Ordinance no. 5650.
FISCAL/RESOURCE IMPACT
The implementation of the proposed ordinance is not anticipated to have any direct fiscal impacts on the City budget.
POLICY IMPLICATIONS
As part of the implementation of Program 3.2 (Monitor Constraints to Housing) of the Housing Element, the City needs to prepare an analysis in staff reports for initiatives proposing new regulations. This analysis should detail how the regulations may impact housing production, if at all, and recommend solutions to address any adverse impacts.
The draft ordinance implements Housing Element Program 3.4E to expand the geographic boundaries of the El Camino Real Focus Area to incentivize housing production though increases in building height and FAR, and application of other objective standards, as an alternative to State Density Bonus Law. Based on quantified objectives in the Housing Element, this program is anticipated to generate 500 housing units, beyond the existing Focus Area boundaries. In this way, the draft ordinance supports implementation of Housing Element Goal
2.0 (Affordable Housing), Goal 3.0 (Housing Development), and goals to affirmatively further fair housing by locating new housing in a resource-rich area near high-quality transit, services, and jobs.
STAKEHOLDER ENGAGEMENT
Notice of a public hearing for this project was published in the Daily Post on May 15, 2025, which is 12 days in advance of the meeting.
City staff and consultants have met with eight property owners and developers within the existing and proposed El Camino Real Focus Area and, in other portions of El Camino Real where the Focus Area could apply, to gauge the viability of the program, including the development standards and affordability requirements. These stakeholders have expressed support for the overall policy initiative and for the height and density standards, but concerns over the following regulations in the current Focus Area: height transitions and daylight planes, setbacks especially abutting R1 and R2 zoning districts, upper story stepbacks, and affordability requirements.
Additionally, as detailed in Attachment B, Stanford University, the property owner at 3300 El Camino Real, and Sand Hill Properties, the lessee at the site, advocate for removal of the 50- foot special setback on Hansen Way. They indicate that if the current 50-foot setback remains, it is unlikely that the area between the utility easement and the setback can be developed into any use, whether it be residential or commercial. They state that this would reduce the developable area of the site, as well as negatively impact the aesthetic appeal of the El Camino Real/Hansen gateway.
ENVIRONMENTAL REVIEW
On April 15, 2024, the City Council adopted Resolution No. 10155, approving an Addendum to the Comprehensive Plan Environmental Impact Report (EIR). The addendum analyzed potential environmental impacts of the 6th Cycle Draft Housing Element. This includes implementation of Housing Element Program 3.4E and associated increase in housing production including the RHNA, Housing Element sites inventory, and other Housing Element programs. Specifically, Housing Element Program 3.4E indicates that an additional 500 units could be generated through expansion of the Focus Area. Buildout of the proposed expanded Focus Area falls within this threshold.
ATTACHMENTS
Attachment A: Amendments to Title 18 to Implement Housing Element Program 3.4E Attachment B: Hansen Way Special Setbacks
Attachment C: 2951 ECR Multifamily Development Letter
APPROVED BY:
Jonathan Lait, Planning and Development Services Director