City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: Planning and Development Services
Meeting Date: February 2, 2026
Report #:2512-5619
TITLE
44 and 88 Encina Avenue [25PLN-00308]. Request for Council Prescreening to Rezone the Subject Properties from Community Commercial (CC) to Planned Community/Planned Home Zoning (PC/PHZ) and to Allow Construction of 158 Units and 315 Parking Spaces in Two Seven- Story Structures. The Formal Application Will be Subject to California Environmental Quality Act (CEQA) Review. Zoning District: CC (Community Commercial).
RECOMMENDATION
Staff recommends Council conduct a prescreening and provide informal comments regarding the applicant’s request to rezone 44 and 88 Encina Avenue from Community Commercial to Planned Community/Planned Home Zoning (PHZ).1 Comments provided during the prescreening process are not binding on the City or the applicant.
EXECUTIVE SUMMARY
This prescreening is a request by the applicant to rezone the subject properties, which are currently zoned Community Commercial to “Planned Home Zoning (PHZ)”. The project site consists of nine parcels that currently serve as surface parking lots for Town & Country Village Shopping Center with approximately 150 parking spaces. The project proposes to construct two non-contiguous structures at 44 and 88 Encina Avenue crossing nine individual parcels. The buildings would include three levels of parking for Town & Country Village as well as the proposed residential use and four levels of residential rental units with 158 units in total.
This prescreening application responds to the City Council’s expressed interest in learning from home builders what it takes to create more housing opportunities in Palo Alto. To be eligible for the Planned Community (PC) zoning process, a PHZ application must meet two initial qualifying 1 Referred to in this report as "Planned Home Zoning" to emphasize the focus on housing as the benefit to the community. Palo Alto Municipal Code (PAMC) Section 18.38, which outlines the requirement and process for Planned Community (PC) Zoning, remains the underlying code supporting application of this policy.
criteria established by the City Council: 1) provide 20% of the total units as affordable housing selected from a prescribed menu of options, and 2) provide housing units that meet or exceed the demand generated by any net new jobs. In this case, no new jobs are proposed, as this project is exclusively residential. The project would still be required to meet the 20% affordable requirement.
The project would require a formal rezoning application consistent with Palo Alto Municipal Code (PAMC), Zoning Regulations, Chapter 18.38 to allow for a Development Plan with deviations from required development standards, including but not limited to, increased height, and increased floor area ratio (FAR) compared to existing CC requirements.
BACKGROUND
In February 2020, Council unanimously endorsed using Planned Housing Zoning (PHZ) for housing and mixed-use housing projects to help spur housing production. In exchange for deviation from certain standards as allowed under the rezoning, if approved by Council, the project must include at least 20% of the housing units as deed restricted for lower income households. Moreover, the number of housing units must offset the number of net new commercial jobs that are generated by the project.
In accordance with PAMC Section 18.79.030(A), a prescreening review is required for legislative changes, including rezoning, prior to submitting a formal application. Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Since this proposal may return to the City Council as a formal application, Councilmembers should refrain from forming firm opinions supporting or opposing the project.
Project Description
A location map of the proposed site is included in Attachment A. The preliminary schematic drawings included in Attachment C, are conceptual, as is appropriate at this stage of project consideration. As shown in these schematic drawings, the applicant is proposing two multi- family residential buildings on nine separate lots. These two buildings would be located on either side of the 70 Encina Avenue property, which recently received approval for a new 10- unit, three-story townhome development.
Building 1 would be 88,771 square feet in area (not including the parking area) and provide 78 apartment units. Building 2 would be 99,296 square feet (not including the parking area) and provide 80 apartment units, for a total of 158 residential rental units across the project. The units would be a mix of studio (19), one-bedroom (78), two-bedroom (47), and three-bedroom (14).3 Proposed Building 1 would have a lot coverage of approximately 28,852 square feet (93% 3 Units indicated as “urban” on the project plans are counted as one-bedroom units of the site) and proposed Building 2 would have a lot coverage of approximately 29,246 square feet (71%).
The proposed buildings would be seven stories tall and extend to a height of 85 feet to the gable midpoint. Parking would be provided on the first three levels of each building (ground floor through floor 3) with a total of 315 parking spaces, 165 of which would be for residents of Building 1 and Building 2, and 150 which would be commercial parking spaces for visitors of the Town & Country shopping center. The 150 commercial parking stalls are being proposed in an effort to replace the existing parking stalls on the subject lots that would be lost as a result of the proposed development. In addition to parking, the proposed ground floor for Building 1 includes three separate lobby areas, a trash room, and electrical and transformer areas. The ground floor of Building 2 would also include parking, two separate lobby areas, a trash room, and mechanical areas. The residential units would be on the upper four floors.
The primary entrances for pedestrians and cars would be provided from Encina Avenue. Parking is proposed on the ground floor level through level three of each building with a total of 315 parking stalls being proposed (165 residential stalls and 150 commercial stalls). A bike room has been provided on the ground floor level of Building 2; however, details regarding how much bike parking will be accommodated in the bike room was not included in the conceptual plans.
Surrounding Uses
Adjacent zoning and uses include the Town & Country Village shopping center and associated parking areas to the south, east, and west which also have a designation of Community Commercial. To the north across Encina Avenue are primarily one and two-story office buildings as well as the LifeMoves Opportunity Center within the Service Commercial (CS) zone district.
The portion of Town & Country adjacent to the site is mostly developed within one-story structures, though the building height increases to two stories towards the eastern side of the building. Between the two proposed buildings is the 70 Encina Avenue property, which recently received approval for a new 10-unit, three-story townhome development.
ANALYSIS
A thorough analysis of Comprehensive Plan and Zoning compliance will be prepared upon submittal of a formal application, if filed. A review of the conceptual plans, however, highlights key concessions that the applicant is requesting.
Comprehensive Plan Compliance
The Comprehensive Plan designation is Community Commercial, which is defined as:
“Larger shopping centers and districts that have a wider variety of goods and services than the neighborhood shopping areas. They rely on larger trade areas and include such uses as department stores, bookstores, furniture stores, toy stores, apparel shops, restaurants, theaters and non-retail services such as offices and banks. Examples include Stanford Shopping Center and Town & Country Village. Non-retail uses such as medical and dental offices may also locate in this designation. In some locations, residential and mixed-use projects may also locate in this category. Non-residential FARs range from
0.35 to 2.0. Consistent with the Comprehensive Plan’s encouragement of housing near transit centers, higher density multi-family housing may be allowed in specific locations.”
The proposed project includes multi-family residential development within close proximity to the University Avenue Caltrain station, which is consistent with this land use designation. The project is also consistent with Policy L2.4, which encourages housing near “retail, employment, and transit, in a way that connects to and enhances existing neighborhoods.” The site is located near retail, the Palo Alto Caltrain station (.5 miles), and VTA bus lines in addition to being close to Stanford University and the Stanford University Medical Center, and Downtown Palo Alto.
Although located on a separate parcel, the project is also located within the boundaries of the area defined as Town & Country Village. There are several policies that apply to this area, including:
Program L-2.4.4 - Assess non-residential development potential in the Community Commercial, Service Commercial and Downtown Commercial Districts (CC, CS and CD) and the Neighborhood Commercial District (CN), and convert non-retail commercial FAR to residential FAR, where appropriate. Conversion to residential capacity should not be considered in Town and Country Village.
Policy L-4.12 - Recognize and preserve Town and Country Village as an attractive retail center serving Palo Altans and residents of the wider region. Future development at this site should preserve its existing amenities, pedestrian scale and architectural character while also improving safe access for bicyclists and pedestrians and increasing the amount of bicycle parking.
Policy L-4.13 - In Town and Country Village, encourage a vibrant retail environment and urban greening.
Policy L-4.14 - In Town and Country Village, encourage improvement of pedestrian, bicycle and auto circulation and landscaping improvements, including maintenance of existing oak trees and planting additional trees.
These policy statements seek to preserve existing amenities and commercial floor area but the concept to convert a portion of the surface parking lot to housing does not appear inconsistent with these Comprehensive Plan polices, especially as the parking would be replaced.
Specifically, the proposal does not reduce commercial floor area or otherwise impede the vitality of the Town & Country Village. The placement of new residential structures at the subject location would temporarily disrupt the availability of parking spaces and requires consideration of drive aisle re-alignment. However, this also holds true if the parcels were developed with commercial uses as well. Moreover, adding housing to this location may actually prove beneficial to the Town & Country Village as it introduces new residents that could shop at the center and enjoy many of the other restaurants and retail stores within the immediate proximity.
Housing Element
The proposed project would contribute 158 units, including below market rate units, toward the City’s Regional Housing Needs Allocation (RHNA). None of the parcels on which the project is located are identified as housing inventory sites in the adopted Housing Element, though neighboring properties were included in the Housing Element and have received entitlements for development of those parcels. Development of this site with 158 units would provide additional units toward the City’s housing needs, consistent with various goals and policies in the housing element to encourage housing, particularly below market rate housing and transit- oriented housing.
Zoning Compliance
For projects rezoning to a PHZ, Council has the authority to set the parameters for most development standards, which would be reflected in the tailored ordinance for the new PHZ District. However, for informational purposes, Attachment B compares the required development standards under the current CC zone district with the proposed project. Staff notes that this analysis assumes that the parcels underlying each proposed building would be merged to create a single parcel, which is anticipated to be necessary in order to develop the project as proposed. If the parcels were not merged, development standards would be analyzed for each existing parcel. The project is located within the immediate vicinity of the approved residential project at 70 Encina Avenue and therefore subject to the special standards outlined in PAMC Section 18.38.150.
In comparison to the existing zoning, the applicant is requesting to deviate from the CC Zone district in the following manner:
Increases in floor area (2.86:1 for Building 1 and 2.41:1 for Building 2 where a total of
0.5:1 total FAR and 0.15:0 residential FAR is allowed). Increase in height (85 feet where 35 feet is allowed). An allowance for a 100% residential project where only mixed-use is allowed. No rear setback where a 10 foot setback is required.
Reduce 0- to 5-foot side yard where 10-foot side yard is required adjacent a residential zone district (the PC approved at 70 Encina Avenue).
The project also appears to conflict with several objective design standards set forth in PAMC Chapter 18.24. Particularly with respect to daylight planes adjacent existing residential uses as well as privacy impacts adjacent residential uses. Although not yet constructed, Council recently approved the 70 Encina Avenue project, a three-story, ten-unit townhome development which is located between these two proposed buildings. However, further analysis for consistency with all of the objective standards requires more detailed plans and would be completed upon submittal of a formal application.
Building Code Compliance
The applicant has expressed a preference to maintain the existing parcels on which the two structures are located and to not merge them. However, this proposal would not be compliant with California Building Code. The lots underlying each proposed structure would need to be merged as part of the proposed project.
Utilities
The proposed project would conflict with numerous existing utilities on the site including electical utility lines along the frontage and rear of the building and numerous underground utilties, particularly at the rear of the building and adjacent to Caltrans right-of-way. Further discussions would be required to determine whether active underground utilities could be relocated as well as to asses potential impacts to customers during relocation, if feasible. It is anticipated that all overhead lines would need to be undergrounded, and further discussions and design coordination would be required to ensure that this undergrounding would not conflict with existing utilities.
Multi-Modal Access & Site Circulation
The project is located close to high-frequency transit, including the Valley Transit Authority 22 bus line (El Camino Real and Embarcadero Road stop) and within walking distance of the Palo Alto Caltrain station (less than 0.5 mile). Stanford University’s Marguerite Shuttle also provides service from the Caltrain Station, as well as stops near El Camino Real and Encina Avenue, and El Camino Real and Galvez Street.
This project has not yet been analyzed for consistency with the City’s Bicycle and Pedestrian Transportation Plan and other transportation policies such as Council’s Local Transportation Impact Analysis Policy adopted on June 15, 2019 (CMR 11256). This analysis would be conducted as a part of any formal application.
The subject application presents an opportunity to also examine site access to Town and Country Village. It is anticipated that some residents would utilize existing access points other than Encina Avenue to access or leave the housing site. If an application is filed, staff would want to review and analyze driveway access and traffic and nearby intersections, including at El Camino Real and Encina Avenue and the signal accessing the Palo Alto Medical Foundation, for possible improvement.
The PTC previously has also expressed an interest in improvements to bicycle and pedestrian connections to this area.
Parking
The project would include 315 vehicle parking spaces on the ground floor and Levels 2 and 3 of each building. Of the 315 proposed parking spaces, 165 spaces are proposed for the residents of the two apartment buildings and 150 commercial spaces for patrons of the Town & Country Village shopping center. This does not meet the Code required minimum off-street parking spaces. As shown in Attachment B, PAMC Section 18.52 requires one parking space for both studio and one-bedroom units and two parking spaces for units that are two-bedrooms or larger (with at least one covered space). Based on the proposed units, the PAMC would require a total of 218 parking spaces for the proposed residential use; however, only 165 are proposed.
While the parcel is within a one-half mile radius from the University Avenue Caltrain station and subject to the provisions of AB 2097, because the applicant is seeking a PHZ application, the City can still require parking.
As previously mentioned, the 150 commercial parking stalls are being proposed to replace existing parking stalls on the subject parcels, which would be removed as a result of the proposed development. No loading space is required for residential use. Long-term bicycle parking is currently shown within the ground level parking garage at Building 2, with access from within the garage. Short-term bicycle parking is not currently shown on the plans. Details regarding the capacity of the proposed bike room were not provided in the conceptual plans and would need to be reviewed for compliance when the formal application is submitted.
Inclusionary Requirement and Jobs Housing Imbalance
The intent of limiting PC projects to residential and residential mixed-use is to address the job/housing imbalance. PHZ projects are required to provide more housing than jobs on site. As this is a 100% residential project, no new jobs would be created.
The project would also provide 20% of the units at Below Market Rate (BMR) in accordance with Council’s requirements for projects seeking to rezone using the PHZ process. The applicant’s team has not provided details as to how the BMR units would be allocated at this time, or the affordability levels, but would be required to do so through the formal application.
Senate Bill 79
Senate Bill (SB) 79 was signed into law by Governor Newsom on October 10, 2025, and is expected to become effective on July 1, 2026. Due to the proposed project’s proximity to a transit stop (within 0.5 mile of the Palo Alto Caltrain station), the applicant may decide to take advantage of SB 79 allowances at the time a formal application is submitted, once the law is effective. SB 79 is intended to simplify the development of housing when located near major transit stops and allows qualified housing developments on land zoned for residential, mixed- use, or commercial uses in jurisdictions with 15 or more passenger rail stations. SB 79 further identifies statewide development standards related to building height, density, and floor area ratio for such projects.
If the applicant were to pursue an SB 79 project in the future, it would be limited to 65 feet in height, a 3.0:1 FAR, and 100 dwelling units per acre.
POLICY IMPLICATIONS
Prescreenings are intended to solicit early feedback on proposed projects and, like all study sessions, cannot result in any formal action. Therefore, informal comments from Councilmembers would not impart policy. That said, there is interest among other home builders and property owners to learn of the Council’s initial reaction to the subject request, which may influence the filing of future prescreening requests.
TIMELINE
Following the prescreening review, the applicant will consider Council’s comments and determine how they want to proceed. Any formal application to rezone the property to a PHZ would be subject to hearings before the Planning and Transportation Commission (PTC), Architectural Review Board (ARB), and City Council.
FISCAL/RESOURCE IMPACT
The recommendation in this report does not have any significant fiscal or budgetary impacts since it is tied to the prescreening review; however, should the project proceed it will yield development impact fees and will likely generate additional tax revenues through property taxes and sales taxes.
STAKEHOLDER ENGAGEMENT
The Palo Alto Municipal Code requires notice of this public hearing be published in a local paper and mailed to owners and occupants of property within 600 feet of the subject property at least ten days in advance. Notice of a public hearing for this project was published in the Daily Post on January 23, 2026, which is 10 days in advance of the meeting. Postcard mailing occurred on January 22, 2026, which is 11 days in advance of the meeting.
As of the writing of this report no project-related public written comments were received.
ENVIRONMENTAL REVIEW
The prescreening is a preliminary review process in which Councilmembers may provide comment, but no formal action will be taken. Therefore, no review under the California Environmental Quality Act (CEQA) is required at this time. A full review in accordance with CEQA would be initiated with the formal filing of a development application.
ATTACHMENTS
Attachment A: Location Map
Attachment B: Zoning Comparison Analysis
Attachment C: Project Plans
APPROVED BY:
Jonathan Lait, Planning and Development Services Director