CITY COUNCIL
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: May 18, 2026
Report #: 2604-6318
TITLE
Update Regarding the Builder’s Remedy Project at 156 California Avenue and Consideration of Adding Lot B (APN 124-28-003) Associated with the Development to the City’s Housing Element Sites Inventory.
RECOMMENDATION
The 156 California Avenue Ad Hoc Committee recommends that the City Council consider directing the Planning and Development Services Director to add Lot B (APN 124-28-003) to the Housing Element Sites Inventory.
EXECUTIVE SUMMARY
This report provides an update on the proposed Builder's Remedy mixed-use development at 156 California Avenue and presents an alternative concept for City Council consideration to the originally filed application. The City Council’s action to add Lot B to the Housing Element Sites Inventory, or not, likely determines which project will move forward. The original project, filed by Redco Development under California Government Code Section 65589.5(d)(5), proposes 382 residential units (20 percent affordable) across three integrated structures with a maximum height of 177 feet. Following a threat of litigation, the City Council’s Ad Hoc committee, comprised of Vice Mayor Stone and Councilmember Lauing, engaged in negotiations with the applicant, resulting in a revised conceptual project consisting of three towers with 390 residential units (50 affordable, or 13 percent) and a maximum height of 144 feet.
On May 4, 2026, the City Council authorized staff to enter into a settlement agreement with the applicant to resolve the threatened litigation and set forth a process for public consideration of the revised conceptual project. The agreement between the City and the applicant represents a conditional release of claims and does not predetermine any Council action or project outcome.
The Council’s decision on whether to add Lot B to the Housing Element Sites Inventory will signal its interest in pursuing the revised project; if the Council declines, the applicant would likely proceed with the originally filed application.
BACKGROUND
In March 2023, Redco Development submitted an SB 330 Preliminary Application establishing vesting rights under the Housing Accountability Act for a Builder's Remedy project. A formal Major Architectural Review application was filed in April 2024 that is substantially consistent with
the Preliminary Application in scope, unit count, building configuration, and affordability commitment. A Tentative Parcel Map application for a vertical airspace subdivision was filed in August 2024.
The filed application proposes a mixed-use, multifamily development on two lots totaling approximately 1.43 acres at 156 California Avenue (Lot A, 1.14 acres) and Park Boulevard (Lot B,
0.29 acres). Both lots are within the CC(2)(R) Community Commercial (Retail) zoning district. The site is currently developed with a Mollie Stone's Market grocery store and surface parking lot.
As proposed, the filed project consists of three integrated structures: a seven-story podium building at 77 feet that includes approximately 14,709 square feet of ground-floor commercial space dedicated to a relocated Mollie Stone's grocery store and 112 residential units; a 17-story tower (Tower A) at 177 feet with approximately 3,317 square feet of commercial space and 192 residential units; and an 11-story tower (Tower B) at 120 feet with approximately 1,423 square feet of commercial space and 78 residential units. The project includes 382 total residential units, of which 77 (20 percent) are proposed to be affordable, consistent with the affordability threshold required under Government Code Section 65589.5(d)(5). Vehicle parking totals 290 stalls, and 400 bicycle parking spaces are proposed.
Following a threat of litigation by the applicant, then Mayor Lauing established the 156 California Avenue Ad Hoc committee consisting of himself and current Vice Mayor Stone to determine whether a negotiated outcome could be reached that addressed the interests of both parties.
Following several meetings with the applicant and separate closed sessions of the City Council to discuss the threatened litigation and explore potential resolution options, a final concept project was presented to the City Council for consideration on May 4, 2026. During the closed session, the Council directed the City Attorney to enter into an agreement with the applicant to release claims arising from the threatened litigation and to document the conceptual project development parameters and the negotiated terms. The agreement does not predetermine any Council action or project outcome. The City Council further directed the City Manager to schedule this report to inform and engage the public of the revised concept plan and to summarize the terms of the agreement.
Revised Concept Project
The negotiated alternative concept consists of three towers totaling 390 residential units on the same two lots and reduces the overall development from 17 stories to 14 stories. Tower 1, located on the California Avenue site (Lot A), is 12 stories and 124 feet in height and includes 116 residential units and a 15,260 square foot grocery store on the ground floor. Tower 2, also on Lot A, is 14 stories and 144 feet in height and includes 170 residential units, with a bar/restaurant use on the top (14th) floor. Tower 3, located on the Park Boulevard site (Lot B), is 12 stories and 129 feet in height and includes 104 residential units. Of the 390 total units, 50 units (13 percent of the base density) are designated affordable. Residential density is approximately 272 dwelling units per acre across the two sites. The project provides 266 total parking stalls, including 200 residential stalls (187 on Lot A and 13 on Lot B) and 66 commercial stalls on Lot A.
Comparison of Original Project and Revised Concept
The following table compares key parameters of the original Builder's Remedy 1.0 application to the revised Builder's Remedy 2.0 concept. Project plans for the original project and revised concept proposal are available online.1
Category BR 1.0 (Original Application) BR 2.0 (Revised Concept) Change Configuration Two towers and a podium Three towers -
Stories 17 / 11 / 7 (podium) 12 / 14 / 12 -
Maximum height 177 feet 144 feet -33 ft
Site area 1.436 acres 1.436 acres -
Total residential units 382 390 +8
Affordable (BMR) units 78 (20%) 50 (13%) -28
Market-rate units 304 340 +36
Density (combined,
DU/acre)
267.1 271.6 +4.5
Development impact fees
(see Fiscal Impact section)
Full payment required Exempt the 50 BMR units; fees
for Public Art not on-site paid
to Affordable Housing Fund
-
Grocery store 14,519 SF 15,260 SF +741 SF
Bar/restaurant 2,570 SF (Level 17, Tower A) Level 14, Tower 2 - Retail 1,624 SF None -1,624 SF
Proposed parking stalls 290 266 -24
Term Sheet Summary
The terms of the agreement between the City and the applicant require the City to consider adding Lot B to the Housing Element Sites Inventory, which would enable the applicant to process the revised project as a Builder's Remedy 2.0 project in accordance with Government Code Section 65589.5 enacted by AB 1893 (2024). This law reduces the minimum affordability requirement from 20 percent to 13 percent of total units and establishes new objective standards governing project density, height, and other development parameters. The action to list the parcel on the inventory must occur within 45 days of the signed agreement. If the City Council acts to direct staff to add Lot B to the Housing Element Sites Inventory, it is signaling its support to process the alternative project under the agreement for the revised Builder's Remedy 2.0 1 View the Original Project (Builder’s Remedy 1.0) plans and revised conceptual project (Builder’s Remedy 2.0) at:
https://www.paloalto.gov/Departments/Planning-Development-Services/Current-Planning/Projects/156- California-Avenue.
project, and the City would have approximately 60 to 90 days to act on the project after the application is deemed complete. In accordance with state law (AB 130), the project would be statutorily exempt from environmental review under the California Environmental Quality Act (CEQA) as an urban infill housing development project.
Additionally, the City would consider a request to exempt the 50 inclusionary units from development impact fees, consistent with the City's existing approach to impact fees in the El Camino Real Focus Area; the applicant would pay all other applicable development impact fees.
The public art requirement would be partially satisfied by on-site art, with the remainder paid into the City's Affordable Housing Fund rather than the Public Art Fund. The City commits to expedited application processing, including a courtesy review by the Architectural Review Board prior to final action by the City Council.
The project would require approval of a Major Architectural Review Permit and a Tentative Subdivision Map, if the applicant elects to pursue an airspace subdivision. The applicant is expected to utilize provisions of the State Density Bonus Law to request a concession permitting the inclusionary units to be located on Levels 1 through 10, rather than distributed throughout the development.
All timelines related to the original application would be tolled until the city acts on the revised project.
Alternatively, the agreement also provides that if the City fails to perform certain actions – including, for example, a failure to add Lot B to the Housing Element Sites Inventory – and the applicant subsequently reverts to the original builder’s remedy project, the City would agree not to contest the use of the urban infill housing CEQA exemption established by AB 130 (2025) for the original builder’s remedy project. In that scenario, the City would have a similarly constrained time to take final action on the original project (60-90 days after the project is reactivated).
ANALYSIS
The purpose of this report is threefold. First, it informs the public of the results of a good-faith negotiation between the City and the applicant to resolve a legal dispute and presents an alternative development option for community awareness and Council consideration. Second, it invites public input to help inform the City Council’s decision on weighing the two project options. Third, it presents for Council consideration the question of whether to add Lot B to the Housing Element Sites Inventory, an action that would signal the Council’s interest in pursuing the alternative concept project and would enable the applicant to pursue its project under Builder’s Remedy 2.0. If the Council does not take this action, the applicant would likely proceed with the original project. There is no predetermined outcome as result of the negotiation and the Council is encouraged to weigh public input alongside the merits of each alternative.
If the Council votes to add Lot B to the inventory, the applicant would have up to 120 days to file revised application materials. The project would be presented to the Architectural Review Board for a courtesy review, and the applicant, to the extent feasible, would incorporate feedback received from the Board. The project would then be presented to the City Council for final action with findings and conditions of approval.
Under Government Code Section 65589.5, the City Council may only deny a qualifying Builder's Remedy project if it makes written findings, supported by a preponderance of the evidence on the record, that the project would have a specific, adverse impact upon public health or safety and that there is no feasible method to satisfactorily mitigate or avoid that impact other than disapproval of the project. Absent such a finding, either builder’s remedy project must be approved.
FISCAL/RESOURCE IMPACT
The recommendation in this report has no direct fiscal impact. However, the projects described herein are estimated to generate approximately $15.8 million (original project) or $14.1 million (revised project) in development impact fees to support city services and future affordable housing development. For the revised project, the developer would fund an on-site public art installation at an estimated cost of $500,000; the remaining balance of approximately $1.5 million in public art impact fees would be directed to the City's Affordable Housing Fund rather than the Public Art Fund, pursuant to the agreement. These fee estimates are preliminary and subject to change when more project details are known, and payment may be deferred to project completion.
STAKEHOLDER ENGAGEMENT
Internal coordination with applicable City staff and departments has occurred throughout the negotiation process and in preparation of this report. The City Council Ad Hoc subcommittee held several meetings with the applicant between August 2025 and February 2026 to develop the negotiated terms summarized herein. Notice of this meeting was published on May 7, 2026, providing 11 days of public notice in advance of the May 18, 2026 meeting. Members of the public will have the opportunity to provide comments at the meeting or email feedback directly to the City Council.
ENVIRONMENTAL REVIEW
The action recommended in this report (direction to add Lot B to the Housing Element Suitable Sites Inventory) is exempt from CEQA under the “common sense” exemption set forth in CEQA Guidelines Section 15061(b)(3). The recommended action is administrative in nature, does not authorize any physical change to the environment, does not redesignate or rezone the property, and does not entitle any specific development. It can be seen with certainty that there is no possibility that the action will have a significant effect on the environment. Any subsequent housing development project filed for the site will be evaluated for the appropriate level of environmental review at the time of application, which may include the statutory urban infill housing exemption established by AB 130 (2025).
ATTACHMENTS
Attachment A: Project Renderings of Builder's Remedy 1.0 and 2.0 Projects APPROVED BY:
Jonathan Lait, Planning and Development Services Director