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MEMORANDUM
Date: November 26, 2025
From: Jean Eisberg
To: Planning and Development Services, City of Palo Alto Subject: Housing Element Implementation – Task 3.9B Parking Research
PURPOSE
This memo provides background research and summary of stakeholder interviews to support the following Housing Element program (3.9B):
B. Conduct outreach with home builders and other stakeholders regarding the feasibility of marketing different housing typologies without on-site parking (paid through in-lieu fee) and implications to City parking resources; present findings to the City Council with options on how to proceed, including extension of the University Ave In-Lieu Parking program to residential projects and creation of an in-lieu parking program for the California Avenue area.
SUMMARY
The project team conducted a review of applicable Palo Alto parking programs, requirements, and reports, as well as State Law, to understand the existing parking situation, with a focus on the transit- rich areas of Downtown and California Avenue. Additionally, the project team conducted stakeholder interviews to understand public perception of parking in Palo Alto. The below findings and analysis are based on current practices, which could change in the future. Palo Alto’s Office of Transportation (OOT) is tasked with beginning a public conversation in fiscal year 2025-2026 concerning potential parking policy changes available to the City, and how such changes might impact current parking concerns primarily for businesses and visitors, however future resident parking options might also be included.
Key findings are as follows:
• State Law (namely Assembly Bill [AB] 2097) precludes the City of Palo Alto (City) from enforcing minimum parking requirements in Downtown and California Avenue for most uses. As a result, it also prevents the City from assessing parking in-lieu fees within 1/2 mile 2 of major transit locations (i.e., Downtown and California Avenue Caltrain stations). The City could instead consider a parking impact fee, or other fees or regulations to support alternative modes of transportation, such as walking, biking, and transit. • Off-site parking may be viable for some developers and some projects (e.g., smaller projects, missing middle projects), but would need to be provided within a block or two of a project site. Sufficient off-site parking facilities would need to be available to address: (1) tenants’ needs; and (2) community concerns including both spillover parking and use of the City’s residential permit parking program by residents in new developments. • If residential developers voluntarily elected to pay an in-lieu fee to obtain off-site parking spaces, or the City implemented an impact fee, the existing fee of $130,823 per space for non-residential development would be too expensive to be feasible. • Some stakeholders believe that potential tenants will self-select—i.e., residents who do not own cars will choose to live in units that do not have a parking space. Other stakeholders believe that—especially given high rents and amenities of units in Palo Alto—a parking space is required and expected as part of a unit. According to property managers, units that do not have any parking can be difficult to lease in Palo Alto. • Stakeholders support eliminating or reducing parking requirements to allow the market to determine appropriate parking needs. Generally, 1 to 1.2 spaces per unit is the minimum required by developers and investors based on developer feedback. • From an urban design perspective and alternative transportation advocate’s perspective, on- site parking may not be desirable. Additional curb cuts degrade the pedestrian experience, can be especially challenging for small sites and mid-block locations where parking garage circulation is tight.
ANALYSIS
State Law Context
State law limits the City’s ability to enforce its minimum residential parking standards—and in turn in-lieu fees—for housing projects close to major transit stops and for affordable housing projects. A developer would have to specifically want and request off-site parking and/or voluntarily pay into a parking district to obtain off-site parking spaces.
AB 2097 (Gov. Code Section 65863.2) enables 100% reductions in required parking spaces for most residential and commercial uses within 1/2-mile of the three Caltrain stations, as shown in Figure 1 below. AB 2097 also applies in locations with intersecting bus lines with service at least every 20 minutes during peak commute hours.
3 Figure 1: AB 2097 Applicability in Palo Alto
Source: City Council Staff Report Attachment B, August 12, 2024:
https://cityofpaloalto.primegov.com/api/compilemeetingattachmenthistory/historyattachment/?historyId=9c8478b3- 8641-4b68-b55d-adab62632f8e
4 Figure 2: Downtown Parking District Boundaries
Source: City of Palo Alto.
5 In Downtown Palo Alto, AB 2097 applies to nearly the entire Downtown Parking Assessment District, as shown in Figure 2 above. The exception is a few parcels between Tasso and Webster Streets at the far east end of the District. As a result, most multifamily housing projects would already be exempt from the City’s minimum parking requirements and can therefore choose the amount of parking to provide or whether to provide parking at all. In other words, such projects would not be required to pay an in-lieu fee, except in the small area outside of the ½-mile boundary.
Senate Bill (SB) 35 provides alternate parking requirements for housing projects with a certain amount of affordable housing (currently 50% in Palo Alto). It sets a maximum of one space per dwelling unit, but requires no parking if the project meets certain standards, including but not limited to:
• The development is located within 1/2 mile of public transit (including bus stops); • The development is located within an historic district, such as the Professorville and Ramona Street Historic Districts; or
• On-street parking permits are required but not offered to the occupants of the development.
Similar to AB 2097, these provisions of SB 35 would preclude the City from requiring an in-lieu fee payment for off-site spaces within 1/2 mile of major transit. A developer would need to choose to pay into a parking district to park off-site because it is too expensive or physically infeasible to locate parking on-site.
Stakeholder Feedback
Feedback from five stakeholders, including residential developers, property managers, and a housing and transportation advocate, is summarized below. In total, these developers/property managers manage hundreds of units in Palo Alto, and have thousands of units proposed within Palo Alto.
Stakeholders generally support reduced parking minimums. Eliminating or reducing residential parking requirements allows the market to determine the appropriate parking requirement for a given project. Generally, developer stakeholders indicated that a ratio of 1 to 1.2 spaces per unit is the rule of thumb to meet tenant demand and investors’ expectation. By comparison, for multi- family housing units, the City’s zoning ordinance requires a minimum of 1 space per studio/1- bedroom unit and 2 spaces per 2-bedroom unit or larger. According to developer stakeholders, in a suburban location like Palo Alto, investors will not finance a project with a parking ratio of less than one space per unit, especially for ownership units and even in locations near transit or other modes of travel.
Perspectives on alternative parking strategies are mixed. Parking stackers can be a good way to fit more parking, but decision-makers and community members have expressed concerns. Some developers are concerned about whether stackers actually get used by tenants, but others think they are a great option. Educating decision-makers and community 6 members through videos or site visits to completed projects in the region to see how stackers operate could be a way to improve understanding about these options.
Similarly, there was mixed support for residential permit parking programs. Stakeholders generally acknowledge the sensitivity among existing residents about street parking and the potential for “spillover” of parking into existing neighborhoods. Developer stakeholders see providing sufficient parking on-site as a way to address those concerns during entitlement.
Off-site parking within a block or two of a project site could work, but is less desirable according to developer stakeholders, especially given high rent levels in Palo Alto. Some developers indicated that for small lots and small projects (e.g., 4-10 units), off-site parking may be viable since it’s just a few cars. Others indicated that there may be a missing middle market of residents who are willing to park off-site in exchange for more modest rent levels for units that do not come with parking.
The market for housing without parking/tenants without cars is unclear. Stakeholders provided a range of feedback regarding whether or not the market would support housing without parking. Some stakeholders believe that potential tenants will self-select—i.e., residents who do not own cars will choose to live in units that do not have a parking space. Some stakeholders believe that the market for housing without parking will improve over time, as tenants have access to shared driverless vehicles among other advanced technologies. Some project proponents are trying to be more forward looking now to attract a more missing middle housing market of residents who are willing to forego a nearby parking space, and potentially vehicle ownership, in exchange for reduced rent.
Other stakeholders believe that—especially given high rents and amenities of units in Palo Alto—a parking space is required and expected as part of a unit. Units that do not have any parking can be difficult to lease. One stakeholder looked up the data on residents in Palo Alto who own cars and found that their database shows that over 98% of their tenants own at least one vehicle. According to the City’s Rental Registry database for FY24-25, of the 7,653 registered rental units in the City, over 90% of units offered parking on-site and included parking in the monthly rent amount. This finding does not necessarily correlate with car ownership, but one can conclude that parking is a typical amenity provided with rental housing.
Moreover, stakeholders did not believe that the types of housing affected these findings that parking is an expected amenity. There are parking demands for both ownership and rental units, market rate and affordable units, and units geared toward young professionals vs. families. Rental and affordable units tend to have larger household sizes and may have more vehicles per household. There was generally a sense among developers that even if residents only use their vehicles on the weekends, they still have vehicles that need to be parked somewhere. In Downtown, near Caltrain and close to Stanford campus, parking demand may be lower, but a minimum 1:1 ratio is still appropriate. 7 Development typologies with no parking are common in highly urban areas and strong student housing markets. Developers are building multifamily without parking spaces in certain markets of the Bay Area. However, according to developer stakeholders, more suburban conditions in Palo Alto do not support these types of developments.
The images represent two recent housing developments on small lots (< 5,000 sq. ft.) that contain no parking spaces.
Located in Downtown Berkeley, these developments are walkable, near bus and rail lines, and target students (i.e., studios with built-in furniture).
The current in-lieu fee, assessed on commercial developers, may be too high for residential developers. The FY24-25 Parking In-Lieu Fee for Downtown Assessment District is $130,823.17 per space. This generally exceeds the cost of constructing a parking space, which is roughly $80,000 to $100,000 per space, for at-grade structured and underground, respectively, according to stakeholders. The City can impose an impact fee in an amount below the actual cost to construct new parking and fund the balance of the cost through operating revenues (permits or leases), but the fee amount still needs to be financially feasible. The fee assessed on non-residential projects is unlikely to be viable for residential projects, especially since it is less attractive than having access to a space on-site. There is a sense that fees are already high and that projects cannot take on more fees.
Mountain View and Redwood City allow residential projects to make fee payments in-lieu of providing parking in the Downtown Zones. However, these cities are also subject to AB 2097 given the proximity of their downtowns to transit and therefore may no longer require those fees. Still, Mountain View’s fee is substantially lower at $64,472 per space.
There was somewhat more support among stakeholders for off-site parking in existing garages as opposed to funding in-lieu fees for future parking supply.
8 Fees to support alternative modes of transportation as an alternative. Additionally, some stakeholders suggested that in-lieu fees could instead be used to support transportation demand management (TDM) measures or other related transportation improvements within the vicinity of a project site. Such alternative transportation strategies could better support tenants who do not own cars to encourage alternative modes of travel. Some stakeholders believe there may be less need for parking in the future as alternative modes increase and technologies improve. Stakeholders agree that on-site parking is expensive and drives site planning and reduces the number of units achievable on a site. Finding ways to reduce on-site parking supplies can make room for more housing units.
CONCLUSION AND RECOMMENDATIONS
In conclusion, based on feedback from developer stakeholders, at present the market is unlikely to bear housing development projects without parking, even in locations near transit. In the future, with mode share shifts, availability of shared and autonomous vehicles, and expansion of transportation alternatives, this trend could change and projects with reduced or no parking could be viable as way to lower construction costs and in turn rental rates. To monitor these trends over time the City could:
• Monitor parking levels for projects approved within ½ mile of major transit. Identify parking ratios for housing projects approved within and outside areas where AB 2097 applies. Determine whether projects are choosing to use AB2 097 parking exemptions or whether they are building on-site parking consistent with anticipated tenant demand.
Compare parking ratios approved for individual projects to the City’s minimum parking requirements to identify potential changes to City standards. • Monitor parking garage usage. Once completed, monitor the City’s California Avenue and Downtown Automated Parking Guidance Systems (APGS) to identify if there are excess parking spaces which could be set aside for permit parking.
This memo concludes that expanding parking districts to residential uses is not viable in Downtown and California Avenue given AB 2097 exemptions which prevent the City from collecting residential parking fees in-lieu of on-site parking. Instead, the City could consider other impact fees and/or transportation demand management (TDM) measures as part of holistic parking policies considered by the OOT, which continue to make alternative modes easier to choose and use, and in turn may reduce on-site parking demand.
• Consider assessing transportation impact fees and expanding TDM: The more that the City is able to fund and construct bicycle and pedestrian facilities identified in the Comprehensive Plan and Bicycle and Pedestrian Transportation Plan, the more one can expect community members to shift at least some trips to alternative transportation modes.
Likewise, as TDM measures fund free transit passes and public transit reliability and speeds improve, transit ridership may expand as well. However, any new fee or requirements will need to balance these potential benefits against effects on financial feasibility. At present, 9 commercial development is likely to be able to bear additional development costs, but housing development—especially rental housing—may not.
Over time, these mode shifts may reduce the need for car ownership and therefore reduce demand for on-site parking spaces.