Downtown Housing
Plan and SB 79
Implementation
Presented by: Vishnu Krishnan – Senior Planner
October 22, 2025 www.paloalto.gov
Downtown Housing Plan -
Objective
Focused on housing production in downtown
• Housing Element baseline capacity - 334 new
housing units across 32 opportunity sites in the
Plan Area.
Scope of the Downtown Housing Plan includes:
• Establish policies, development standards, and
design standards to make housing development
more feasible.
• Plan for public infrastructure necessary to
accelerate housing production and promote fair
housing.
2 Favorable conditions that support housing
1. High-Opportunity Area with access to transit, jobs, and services.
2. Community support for Affordable and Workforce Housing
3. Regional and State level regulatory support for housing development.
4. Public interest in downtown revitalization.
5. Regional Success Models.
6. City-Owned Land for Housing.
3 Challenges to housing production
1. High Land Value
2. Office Market Outperforms Housing
3. Parcel Limitations: Recent Development, Small Size, Historic Designations
4. Development Standards / Limited Housing Incentives
5. Impact of Parking on Development Cost
6. Potential Need for Infrastructure and Utility Upgrades 4 5
Market snapshot today
Broader challenges are impacting housing
development regionally, but conditions can change.
• Prototypes tested do not meet general financial
feasibility thresholds under current conditions.
• Some developers/landowners may still proceed
with projects if their individual costs or goals
make them financially viable.
• Broader market recovery and City actions could
improve future feasibility.
6 California Statewide Cost Inflation and Santa Clara County Rent Inflation, 2011 To 2025
Source: California Department of General Services, 2025; CoStar, 2025; Strategic Economics, 2025.
Mid-rise housing can perform
well as conditions change
• Mid-rise housing concentrates density
• Project value rapidly adjusts as conditions change
• Performed well at pre-pandemic investment return
thresholds
• City actions can enhance value and accelerate mid-
rise development as conditions gradually improve
7 Source: CoStar, 2025; Strategic Economics, 2025.
Residual Land Value Sensitivity Under Historic Market Conditions and Revenue Growth Scenarios (Prototype: Mid-rise Residential)
Preliminary considerations for
the Downtown area
• Increase maximum building height and total FAR within the Plan Area through a nuanced approach, to maximize
development potential of mid-rise residential.
• Revisit current requirements related to non-conforming commercial uses/buildings and consider relocating office floor area to incentivize residential development.
• Update development requirements, such as open space and common use space, to improve project feasibility.
• Explore options to incentivize lot consolidation.
• Increase predictability for developers and ability to shorten the overall project schedule.
8 October 22, 2025 www.paloalto.gov
SENATE BILL (SB 79)
Signed on October 10, 2025
SB 79 (2025 – 2026)
• Seeks to increase the supply of affordable housing,
reduce greenhouse gas emissions through reduced
vehicle miles traveled, and enhance the efficiency of
public transit systems.
• Mandates upzoning of land located within proximity to rail stations and rapid bus corridors to encourage transit- oriented development.
• Degree of upzoning depends on the classification of the transit and the distance from the station, as measured
from the pedestrian access points.
• Effective July 01, 2026.
10 SB 79: Transit-tiering and applicable standards
11 Distance from TOD
Stop
Minimum Height
Requirement
Residential Density
(du/ac) Residential FAR
Directly Adjacent Sites
(≤ 200 ft) 95 ft (75 + 20 ft bonus) 160 du/ac (120 + 40 bonus) Up to 4.5 (3.5 + 1 bonus)
Within ¼ Mile ≥ 75 ft ≥ 120 du/ac Up to 3.5
¼ – ½ Mile ≥ 65 ft ≥ 100 du/ac Up to 3.0
• Inclusionary Housing requirements (one of the following):
• 7% of units affordable to extremely low-income households; • 10% of units affordable to very low-income households; or • 13% of units affordable to lower-income households.
• California Environmental Quality Act (CEQA):
• Does not modify requirements.
• Does not establish a new ministerial approval process. • Projects qualifying under SB 35 and SB 423 are exempt.
SB 79: TOD Alternate Plan
• Requirements
• Maintain the net zoned capacity.
• Does not reduce maximum allowed density and exceptions (sites in a Fire severity zone, flood zone, designated historic resource) may not exceed 10 percent.
• Does not allow any site to exceed 200 percent of maximum density prescribed.
• Excludes from capacity calculations any sites exempted. • Timeline:
• Up-to 120 days for HCD review.
• Impact of SB 79 Unknown:
• Potentially significant land use policy shift.
• Property owner willingness and property size may influence participation. • Potentially more impactful near California Avenue and San Antonio stations. 12 Downtown Housing Plan / SB 79 Implementation
• Option 1:
• Continue with the Downtown Housing Plan
• Incorporate development potential mandated by the state • No HCD review required / No change to project schedule or budget • Option 2:
• Prepare a SB 79 TOD Alternative Transit Plan
• Explore opportunities to redistribute housing density and building height within the University Avenue Caltrain station mandated radius • Consider creating SB 79 TOD Alternative Transit Plan for California Avenue and portions of San Antonio Caltrain station in Palo Alto • Requires HCD review (process, requirements, timing uncertainty) • Requires change in consultant scope and budget; may impact schedule • Resume Downtown Housing Plan upon completion of Alternative Plan(s) • Consider at a future date a more comprehensive TOD Transit Plan that considers factors of visioning, placemaking, amenities, mobility, connections, parking, schools, infrastructure, financing, etc. 13 Downtown Housing Plan / SB 79 Implementation
• Option 3:
• Stop work on the Downtown Housing Plan effort
• SB 79 answers the question of housing location within the plan area. • Additional staff work likely required for Downtown surface parking lots. • Terminates the grant funding, some work completed will not be reimbursed.
• Left over City funds returned to General Fund.
14 Council direction
1. Complete the Downtown Housing Plan – tied to MTC grant funding.
2. Explore opportunities to unlock downtown properties for housing production – Evaluating options to allow for redevelopment of legal non-confirming properties.
3. Appoint a Downtown Housing Plan/SB 79 Implementation Ad Hoc Committee.
Related to TOD Alternative Plan:
a. Focus Resources on Implementing a TOD Alternative Plan– accelerate development of Alternative Plan and incorporate into Downtown Housing Plan. b. Consider directing staff to create a TOD Alternative Plan for the California Avenue andSan Antonio Road Caltrain stops– amend contract with the consultant to include additional areas. c. Identify additional sites and opportunities for affordable housing development– through this process Housing Element Program 1.4 quantified objective. d. Consider input from the Transit Center ULI study– supplemental analysis for the TOD Alternative Plan.
15 Vishnu Krishnan
Senior Planner
[email protected]
650.329.2425
16