CITY COUNCIL
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Planning and Development Services
Meeting Date: June 1, 2026
Report #: 2605-6397
TITLE
Receive Update and Provide Direction to Staff on the Implementation of Senate Bill 79 (SB 79) and the Work Related to the Downtown Housing Plan. Adoption of Two Temporary Ordinances Implementing SB 79, Adopting a Transit Oriented Development Combining District, Excluding Certain Sites from Government Code Section 65912.157, and Authorizing the Planning and Development Services Director to Make Corresponding Updates to the Zone Map. CEQA Status:
Exempt Under Government Code section 65912.161(c)(2).
RECOMMENDATION
Staff and the SB 79 / Downtown Housing Plan Ad Hoc recommend that the City Council:
1. Receive an update on the approaches for the implementation of Senate Bill (SB) 79 (2025) and work related to the Downtown Housing Plan;
2. Introduce a temporary ordinance (Attachment B) excluding historic resources designated on the City’s local register as of January 1, 2025, from the development standards otherwise applicable under SB 79, through one year following adoption of the City’s 7th Housing Element;
3. Introduce a temporary ordinance (Attachment C) establishing development standards for all transit-oriented development (TOD) eligible parcels subject to SB 79 at 50 percent of the otherwise allowable development capacity authorized under State law, and simultaneously exempting those properties from default SB 79 standards through one year following adoption of the City’s 7th Cycle Housing Element;
4. Direct staff to return with interim urgency versions of the above ordinances to be introduced and adopted on June 15, 2026, when the above ordinances are agendized for second reading.
5. Direct staff to prepare permanent ordinances to be presented to the Planning and Transportation Commission, incorporating the provisions of the interim ordinances and any additional provisions necessary and beneficial in implementation of SB 79.
6. Direct staff to continue work to advance and complete the Downtown Housing Plan and amend the scope of work as appropriate to take into consideration implementation of SB 79.
EXECUTIVE SUMMARY
This item was originally scheduled for the March 9, 2026, City Council meeting and was rescheduled to the May 4, 2026, City Council meeting, and subsequently to the June 1, 2026, City Council meeting.
SB 79 will take effect on July 1, 2026. The legislation is intended to facilitate the development of multi-family housing on land located in proximity to qualifying transit stations, thereby promoting transit-oriented development through the establishment of new minimum standards for building height, residential density, and floor area. In the City of Palo Alto, numerous parcels are located within the influence areas of three qualifying transit stations: two Caltrain stations within the City of Palo Alto and one Caltrain station in the City of Mountain View adjacent to Palo Alto.
This report provides an overview of the implications of SB 79, outlines the next potential steps for the citywide implementation of state law through ordinances and policy options for City Council consideration and direction.
BACKGROUND
SB 79, codified in Government Code Section 65912.155, et seq., supersedes locally adopted standards for density, floor area ratio (FAR), and height in TOD zones. These new standards are for housing projects proposed on qualifying sites located within one-half mile of a TOD stop, provided the development meets specified statutory requirements. Local jurisdictions may adopt an ordinance to exempt historic properties or may prepare a TOD Alternative Plan that modifies applicable development standards, subject to review and approval by the California Department of Housing and Community Development (HCD). Sites within the SB 79 influence areas zoned at 50 percent of the standards in State law may also be exempted until one year after the adoption of the 7th cycle Housing Element amendment (January 31, 2032).
On October 22, 20251, staff provided the City Council an update on the Downtown Housing Plan and an overview of SB 79 and requested direction on the implementation of the State law. The classification of qualifying transit stops, and key statutory provisions discussed in that report are highlighted below:
1 October 22, 2025, City Council Staff
Report https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=18007 Distance from Pedestrian Access Point to a TOD Stop
Tier 1 TOD Stop (Caltrain)Development
Standard Up to ¼-mile Up to ½-mile
“Adjacent”
(within 200’)
Bonus Height,
Density, and
Residential FAR
Height3 75' 65' 95'
Density 120 du/ac 100 du/ac 160 du/ac
Residential
Floor Area
Ratio (FAR)
3.5 3.0 4.5
The City Council appointed a SB 79 / Downtown Housing Plan Ad hoc Committee (Councilmembers Burt and Lauing) to further evaluate the implications of SB 79. Staff met with the Ad hoc Committee three times (January 27th, March 25th, and April 21st) since it was formed and presented information on areas affected by SB 79, projected residential development, and policy options for Council consideration.
Staff prepared the May 4, 20264, staff report outlining potential approaches for implementing State law and identifying options available for the Downtown Housing Plan based on direction from the Ad hoc Committee. The staff report also presented the Ad hoc Committee’s recommendations for Council consideration. The discussion was rescheduled at the Council’s direction. Staff now advise that the Council should select one of the options for addressing SB 79, which requires a local ordinance, that the Council adopt both the urgency and non-urgency ordinances prior to July 1, 2026. Delaying adoption of the ordinances would create a gap between the implementation date of SB 79 and the adoption of a local exclusion authorized in the law.
ANALYSIS
SB 79 implementation is limited to sites that meet specific statutory eligibility criteria, including applicable zoning designations and proximity to qualifying transit stops (Attachment A).
Metropolitan Transportation Commission (MTC), the region’s designated Metropolitan Planning 3 Note that a qualifying project may use the standards in SB 79 as its base density under state density bonus law; however, if the project exceeds the City’s height limit due to the provisions of SB 79, the City is not required to grant an additional height waiver.
4 May 04, 2026, City Council Staff Report
https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=18711&compileOutputType =1
Organization, is required to prepare and publish official maps identifying applicable TOD zone boundaries. Staff has seen preliminary drafts that are generally aligned with staff expectation.7 On March 20, 2026, HCD issued an advisory memorandum providing clarifications on key SB 79 definitions to assist the state's Metropolitan Planning Organizations in completing their required transit stops mapping prior to the law's July 1, 2026, effective date. The advisory establishes HCD's interpretive positions on critical terms including transit stop tiers, qualifying service types, and distance measurement methodology, and confirms that SB 79 will take effect in seven California counties, including Alameda, Los Angeles, Sacramento, San Diego, San Francisco, San Mateo, and Santa Clara.
Attachment A of this report is staff’s analysis of SB 79 TOD zones and eligible parcels within the City. These maps closely align with the draft maps available on MTC’s webpage and are subject to revision upon release of the official maps by MTC. The analysis discussed was presented to the City Council’s Ad Hoc Committee.
A summary of the key takeaways from the analysis is provided below:
SB 79 significantly reshapes development near transit:
SB 79 establishes state-mandated maximums for height, density, and FAR on qualifying parcels near Caltrain stations, substantially limiting the City’s discretion under existing zoning and adopted planning frameworks. Cities can adopt an Ordinance temporarily exempting sites that are: within a Very High Fire Hazard Severity Zone, subject to Flooding, are Historic Resources listed in the local register, or that are zoned for high density residential use providing at least 50% of the capacity required by SB 79. Downtown Housing Plan Scope Is Smaller Than SB 79 Impact Area:
While the University Avenue/Downtown Priority Development Area encompasses approximately 206 acres, the Downtown Housing Plan covers only 76 acres. In contrast, SB 79 affects a much larger area; approximately 325.23 acres, around the Downtown/University Avenue Caltrain Station. This includes the Downtown Housing Plan area, South of Forest Avenue (SOFA) areas, the transit center, and Stanford Shopping Center.
Historic resources require consideration:
Downtown Palo Alto and the San Antonio Road area contain a high concentration of historic properties or properties within historic districts. SB 79 includes limited provisions for the protection of historic resources on the local register. The City is allowed to adopt an ordinance to temporarily ensure these resources are protected.
Ongoing protection is achievable only by adopting, prior to January 31, 2032, a TOD Alternative Plan; even then, protected historic resources cannot exceed 10% of the area 7 https://experience.arcgis.com/experience/934f95609d6b45c5be0f8f0030c01436?draft=true of a TOD zone under the current law. SB 79 currently does not provide express guidance on the treatment of historic districts on the State or the National registers, but it appears that a local ordinance may protect historic districts in addition to individual historic structures. This is subject to change with additional guidance from HCD. Small parcel sizes limit realistic redevelopment potential:
Feasibility analysis indicates that parcels smaller than approximately 5,200 square feet are less likely to redevelop, unless multiple parcels are combined. This reduces development potential particularly in the Downtown/University Avenue area, limiting the number of sites that can realistically take advantage of SB 79 standards. Historically, there has been little interest for lot consolidation in Palo Alto, even with development incentives.
Redevelopment is likely to occur on a limited subset of eligible land:
Although SB 79 enables substantial theoretical housing capacity across all three station areas, the realistic capacity is substantially lower and difficult to translate into future unit production. To illustrate potential housing growth over the next 25 years within these TOD areas, staff conducted a screening-level analysis that excluded parcels less likely to redevelop, including those with historic resource designations, properties redeveloped within the last 25 years, small lots that would not support feasible redevelopment or meet SB 79 unit density standards, public facility and planned community zoned properties, transit-owned land, sites with condominium subdivision maps, and properties with office development exceeding 1.5 times the parcel area.
After applying these filters, staff estimates a more realistic picture of developable property as follows:
oDowntown/University Avenue Transit Station Area: Approximately 163 acres oCalifornia Avenue Transit Station Area: Approximately 222 acres oSan Antonio Transit Station Area: Approximately 32 acres Further discounting is necessary, however, because redevelopment is costly and carries risk for developers. Many property owners will be satisfied leaving their properties as-is despite the potential for increased housing development. Staff anticipates that the vast majority of single-family homeowners are unlikely to pursue apartment buildings on their property, although some may choose to do so. A review of development activity over the past 25 years shows that only ten percent of all parcels were redeveloped, with exceedingly few single-family zoned properties converting to multifamily housing.
Applying a ten percent redevelopment factor consistent with this historical activity, and a one percent factor for single-family zoned property, staff can estimate a theoretical range of future housing production from SB 79 for each transit station area over the next 25 years. These figures are not a projection or formal estimate; they are simply a calculation based on screening criteria and existing baseline data and are subject to numerous variables that cannot be fully accounted for through this type of screening- level analysis.
oDowntown/University Avenue Transit Station Area: Approximately 1600 units oCalifornia Avenue Transit Station Area: Approximately 900 units oSan Antonio Transit Station Area: Approximately 200 units The above analysis does not account for recent changes to state law that promote greater development potential including exemptions to the California Environmental Quality Act, allowances for taller buildings, greater floor area, reduced parking requirements, and state density bonus concessions and waivers and application streamlining. These measures add greater predictability to the development process and may encourage additional property owners to consider redevelopment. During discussions with the Council Ad hoc Committee, it was recognized that the city can reasonably anticipate greater housing production over the next 25 years than it has experienced historically, due in large part to state mandates promoting increased housing production. In reviewing projected housing demand, the Ad Hoc considered a realistic capacity up to 20% increase – a potential doubling of the initial staff estimate. California Avenue faces the greatest zoning shift:
The California Avenue SB 79 area contains a substantial proportion of single-family zoned property, including larger 10,000 square foot lots in the Old Palo Alto neighborhood that would not require land consolidation to support apartment development. New construction built to SB 79 standards may appear contextually inconsistent with the historic development pattern northeast of the Caltrain station.
The commercial areas along and near California Avenue have seen little significant redevelopment in recent years, due in part to small lot sizes and the former requirement for on-site parking, both of which made redevelopment economically impractical. The interaction of SB 79 with other state laws could catalyze future housing or mixed-use development, with uncertain implications for the area's retail environment. New development may also lack coordinated design or placemaking, with larger parcels likely proving more attractive for redevelopment than smaller ones. San Antonio Road area raises unique historic district uncertainties:
San Antonio Road area includes large concentrations of Eichler homes and a designated historic district listed on the National Register. SB 79’s treatment of historic districts, where individual properties are not separately listed, may be the subject of additional guidance from HCD. Because exclusion of historic sites is limited to 10% of TOD land area after January 31, 2032, not all historic sites can be protected in the long term. The Economic Feasibility Analysis prepared for the Downtown Housing Plan remains rele vant:
While SB 79 provides development opportunities to owners of qualifying properties, the feasibility of such projects depends on market conditions, broader market trends, site constraints, competing uses, impact fees, and inclusionary housing requirements. This is outlined in the Economic Feasibility Analysis prepared for the Downtown Housing Plan, which was included as Attachment A to the October 22, 2025, City Council Staff Report9. State Density Bonus Law:
SB 79 projects are eligible to use State Density Bonus Law to seek a density bonus, incentives or concessions, waivers or reductions for development standards and parking ratios10. The density allowed under SB 79 serves as the base density for calculating the density bonus. However, a project proposing a height allowed by SB 79 that is more than the local height limit is ineligible for a waiver for additional height beyond that specified in SB 79. This does not apply for 100% affordable projects located within one- half mile of a major transit stop.
Assembly Bill (AB) 130 (2025):
AB 130 (2025)11 significantly streamlines housing development approvals in urban communities by creating a new statutory exemption from CEQA for qualifying infill residential projects. This means that qualifying residential or mixed-use infill projects (generally up to 20 acres) that are consistent with either applicable Comprehensive Plan or zoning regulations (as modified by SB 79 and/or state density bonus law) could bypass CEQA review entirely, with an accelerated permitting timeline. The exemption applies to projects meeting minimum density thresholds, and site qualifications (i.e., not located in floodplains, fault zones, wetlands, or very high fire severity zones, not a hazardous waste site, and not demolishing a historic structure).
AB 130 amends the Permit Streamlining Act by imposing strict timelines for City review and approval. If the City does not act within 30 days following its objective standards review and the required tribal consultation, a project may be deemed automatically approved. This substantially reduces staff’s ability to present projects for review by the ARB, PTC, or City Council.
9 October 22, 2025, City Council Staff
Report: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=18007 10 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=65915&lawCode=GOV 11 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260AB130
Developers must comply with the new labor standards for 100% affordable housing projects and buildings over 85 feet in height, meet air quality requirements, and perform contamination cleanup as appropriate. The law does not alter State Density Bonus Law provisions, including waivers and parking reductions. This means that in addition to the increased FAR permitted under SB 79, developers could seek to waive maximum lot size limitations in residential zones, setbacks, open space requirements, site coverage, daylight plane requirements, or even retail preservation requirements through the State Density Bonus Law.
Assembly Bill (AB) 2097 (2022): AB 2097 (2022) 15:
Eliminates minimum parking requirements for new development (residential, commercial, and most other uses) located within one-half mile of high-quality transit service (i.e., major transit stops such as the Caltrain Station). This essentially prohibits local governments from enforcing minimum parking requirements for qualifying projects. In Palo Alto, the State law is applicable to all properties that lie within one-half mile radius of the University Avenue, California Avenue, and San Antonio Road Caltrain Stations.
Assembly Bill (AB) 2576 (2026): AB 2576 (Harabedian):
Currently under consideration in the California Legislature, proposes amendments to the provisions of SB 79. As currently drafted, AB 2576 would expand the definition of eligible historic resources to expressly include resources in the local and State registers.
Additionally, it would remove the existing limitation that restricts the exclusion of historic resource sites to no more than 10 percent of the total TOD zone area. At the time of this report, AB 2576 remains pending in the State Legislature and has not been enacted.
Other bills under consideration during this legislative session that would amend SB 79 do not have any impact to Palo Alto at this time but could be further amended before this session ends.
SB 79 Implementation Options:
On January 27, 2026, staff presented four potential approaches to implementing SB 79 based on what the State law permits to the Ad hoc, each reflecting varying levels of effort and scope.
These approaches considered:
Existing and ongoing planning initiatives;
15 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220AB2097 Anticipated additional workload and its potential impact on City Council priorities for the current year;
Expected near term planning initiatives;
Staff capacity and available resources;
Fiscal implications;
Opportunities for community engagement; and
Review and approval timeline established by HCD pursuant to the state law.
While all four approaches advance the State’s pro-housing objectives, they differ in the degree to which the City exercises local control. The City may choose to allow SB 79 to preempt local codes, adopt an ordinance clarifying how SB 79 applies locally, including exclusion of historic properties, adopt an ordinance upzoning and temporarily exempting non-historic parcels in the TOD zones, and/or prepare a Transit-Oriented Development (TOD) Alternative Plan, based on the considerations outlined above. A TOD Alternative Plan requires environmental assessment and is subject to HCD review.
In addition, the Ad Hoc reviewed options related to the Downtown Housing Plan and consideration of whether this effort should continue in light of SB 79 broader reach over the Downtown area. Discontinuing work on the Downtown Housing Plan would not require the City to return MTC grant funds that have already been paid to the City.
Four SB 79 implementation approaches are listed below. The Ad Hoc recommends a combination of Approach 2 and 3 below.
Approach 1: No action on SB 79
Under this approach, the default development standards established by SB 79 would take effect on July 1, 2026, for all qualifying TOD zones. This approach requires no action by the City and no review by HCD, resulting in automatic compliance with State law.
However, it provides the least amount of local control and community input and does not protect historic resources.
Approach 2: Adopt a Local Implementing Ordinance / Protect Historic Resources Under this approach, the default SB 79 standards would still take effect on July 1, 2026, but the City would adopt an ordinance clarifying the application of SB 79 locally and identify sites that are exempt. This approach provides additional local control and community input and allows for the temporary exemption of historic resources.
Adoption of the ordinance would be subject to HCD review; however, prior approval is not required. If this option were selected, staff recommend adoption of both a temporary ordinance and an interim urgency ordinance, with the first reading of the temporary ordinance at tonight’s meeting, followed by a second reading on the consent calendar on June 15, 2026, at which time the interim urgency measure would also be introduced and adopted. This approach ensures that there is no “gap,” after July 1, 2026 and before the temporary ordinance becomes effective, where historic resources are not protected. The permanent ordinance adoption through the Planning and Transportation Commission (PTC) and City Council will happen later in the year. SB 79 includes a statutory exemption from CEQA review for ordinances that implement the new state law. All ordinances implementing SB 79 are subject to review and approval by HCD.
Approach 3: Rezone all TOD eligible sites to allow 50 percent of the SB 79 development p otential
Pursuant to Government Code Section 65912.161(b), sites can be exempted from SB 79 default standards through January 31, 2032, if they allow at least 50 percent of SB 79 base density standards. Under this approach, the City would amend the zoning to allow TOD-eligible sites to meet this 50% threshold standard and subsequently exempt those sites from SB 79 until January 31, 2032. This option provides the city approximately six years to consider advancing a TOD Alternative Plan to address future housing production and plan for infrastructure upgrades in anticipation of future growth. The cities of Los Angeles and San Francisco are both reportedly exploring this option17.
Should the Council select this approach, staff recommend adoption of both a temporary ordinance and an interim urgency ordinance as explained for Approach 2 above. Approach 4: Prepare a TOD Alternative Plan
Under this approach, the default SB 79 standards would take effect on July 1, 2026, while the City concurrently prepares a TOD Alternative Plan applicable to all TOD zones.
The TOD Alternative Plan could include targeted development standards, infrastructure planning, and a structured community outreach process. Adoption of a TOD Alternative Plan would render planning efforts such as the Downtown Housing Plan redundant and may overlap to some degree with other work related to Housing Element Program 3.7:
Objective Design Standards for the SOFA area. The approach, however, provides greater local control and public input, but would require several hundred thousand dollars for consultant work and significant staff resources, both of which are currently unaccounted for and resourced. The TOD Alternative Plan would be subject to HCD review and approval. The other options do not preclude the Council from adopting a TOD Alternative Plan in the future, however, selecting Approach 4 without combining it with Approach 2 and/or 3 would allow for development under the state standards until 17 Cal Matters article, dated April 15, 2026: https://calmatters.org/housing/2026/04/sb-79-implementation/ the TOD Alternative Plan is adopted, potentially creating inconsistencies in development patterns.
Options for the Downtown Housing Plan:
As noted above, continuing with the Downtown Housing Plan with SB 79 Implementation Approach 4 is not recommended, but remains an option for the other approaches.
The Council Ad Hoc recommends Option B to continue work on the Downtown Housing Plan. Option A: Refocus the Downtown Housing Plan on Development Standards:
Redirect the Downtown Housing Plan effort toward developing objective standards for the downtown area and exploring lot consolidation opportunities. This option would produce updated development standards but not a completed area plan policy document. It utilizes existing grant funding productively; supports future objective standards for SOFA II; allows for nuanced solutions addressing small lot sizes and other downtown constraints.
Option B: Resume and Complete the Downtown Housing Plan:
Resume the full Downtown Housing Plan effort, modeling the plan on SB 79 standards while addressing other local considerations. This option results in a completed area plan policy document.
Option C: Discontinue the Downtown Housing Plan:
Discontinue work on the Downtown Housing Plan, recognizing that SB 79 largely establishes development potential for the area. This approach recaptures approximately $378K to the General Fund. Not recommended in part due to concerns expressed about San Antonio Area Plan and increased housing production in that area but also has reputational considerations that may impact future funding opportunities.
Proposed Ordinances
Since the May 4, 2026, City Council discussion of this item was continued to a later date. Staff has identified a potential timing issue associated with implementation of the proposed local ordinances prior to SB 79’s July 1, 2026, effective date. Specifically, because ordinances are generally subject to two readings and a 30-day referendum period, an ordinance introduced at this hearing would not be effective until July 16, 2026, approximately two weeks after SB 79 goes into effect. To address this issue, staff recommends that the City Council adopt interim, urgency ordinances, which go into effect immediately, on June 15, 2026, as well as the temporary ordinances provided with this report.
Historic Resource Exemption Ordinance
Under Government Code Section 65912.161, local jurisdictions may adopt an ordinance temporarily exempting qualifying historic resources from the default development standards established under SB 79. The draft ordinance (Attachment B) includes detailed findings and declarations regarding the need to adopt the ordinance on an interim basis without first obtaining a recommendation from the Planning and Transportation Commission.
The urgency version of the ordinance would additionally contain the City Council’s findings that the default SB 79 standards would create development pressure that could lead to the loss of historic resources within TOD areas, which represents a current and immediate threat to the public health, safety, or welfare.
The ordinance excludes all historic resources designated in the Palo Alto Historic Resources Inventory from the default standards under SB 79. It also authorizes and directs the Planning Director to update the Zoning Map to indicate which sites and TOD areas are and are not subject to SB 79 default standards.
50 percent SB 79 Development Standards Ordinance
Government Code Section 65912.161(b) authorizes local jurisdictions to exempt TOD eligible parcels from the default SB 79 standards where local zoning allows development capacity equal to at least 50 percent of the applicable SB 79 density and floor area ratio standards.
Staff has prepared a draft ordinance (Attachment C) establishing a TOD Combining District to implement SB 79 using the 50 percent capacity framework. The ordinance includes findings similar to those made in the proposed historic resources exemption ordinance. The urgency version of the ordinance would additionally contain the City Council’s findings that the default SB 79 standards would create development pressure that would result in increased demands on public infrastructure, transportation facilities, and bicycle and pedestrian circulation systems within TOD areas, which represents a current and immediate threat to the public health, safety, or welfare.
The proposed ordinance would:
Add Section 18.14.070 to the PAMC establishing a TOD Combining District; Apply the TOD Combining District to all sites within a TOD zone except sites excluded from SB 79 as local historic resources;
Establish development standards for sites subject to the TOD Combining District that permit development capacity equal to at least 50 percent of the default SB 79 standards;
Temporarily exclude TOD eligible parcels subject to the TOD Combining District from application of the Government Code Section 65912.157 through one year following adoption of the City’s seventh cycle Housing Element; and, Authorize corresponding zoning map updates identifying sites subject to the standards of the TOD Combining District and sites excluded from SB 79.
The proposed development standards for the TOD combining district are as follows, unless the underlying zoning is more permissive:
For sites within one-quarter mile of a TOD stop, a maximum floor area ratio of 1.75:1; For sites located between one-quarter mile and one-half mile of a TOD stop, a maximum floor area ratio of 1.5:1;
For sites adjacent to a TOD stop, a maximum floor area ratio equal to the greater of
2.25:1;
Minimum setbacks consisting of ten-foot front and rear setbacks and four-foot side setbacks; and,
Daylight plane standards starting at a height of 16 feet at the property line and extending at a 45-degree angle.
The TOD Combining District would generally retain underlying zoning district standards except where modified by the interim TOD development standards.
Relationship Between Temporary/Urgency Ordinances and Future Permanent Zoning Ordinances
Staff anticipates that the temporary and interim urgency ordinances and companion zoning ordinances would operate together as a phased implementation framework. The temporary and urgency ordinances would provide immediate interim protections and development standards necessary as of July 1, 2026, while the permanent zoning ordinances could allow more nuanced standards if warranted, and review by the Planning and Transportation Commission.
This phased approach is intended to:
Avoid a regulatory gap between SB 79’s effective date and completion of local zoning amendments;
Preserve local planning authority to the maximum extent permitted under State law; Provide certainty to property owners, residents, and the development community; Maintain consistency with the City’s ongoing Downtown Housing Plan work program; and,
Allow additional time for evaluation of whether preparation of a TOD Alternative Plan is warranted.
NEXT STEPS
If the City Council proceeds with the phased implementation strategy, staff will:
Return for second reading of the temporary ordinances for historic sites and 50% SB 79 capacity on June 15, 2026, as well as interim urgency ordinances covering the same subject matter;
Prepare permanent ordinances for review by the Planning and Transportation Commission;
Continue work on the Downtown Housing Plan and coordinate future public engagement and Planning and Transportation Commission review processes.
Staff will continue coordinating with the SB 79 / Downtown Housing Plan Ad Hoc Committee through the balance of 2026 and monitor additional guidance from HCD and any future amendments to SB 79.
FISCAL/RESOURCE IMPACT
Fiscal and resource impacts will vary based on Council direction and the associated level of effort. Approaches 1, 2, and 3 would not result in additional fiscal nor resource impacts.
If Council directs staff to pursue Approach 4, staff will return with a detailed scope of work and cost estimate. Preliminary estimates indicate that the effort would cost approximately $500,000 in additional funds beyond those already allocated for the Downtown Housing Plan, including the grant funding from MTC.
STAKEHOLDER ENGAGEMENT
Staff and the members of the Ad Hoc Committee met with Senator Josh Becker and Assemblymember Marc Berman, to discuss the implications of SB 79 as it relates to the City of Palo Alto.
Notably, SB 79 is intended as a streamlining mechanism to accelerate housing production near transit, its implementation includes requirements for broader community engagement and public input, including public hearings, if a local agency chooses to prepare a TOD Alternative Plan. While no public engagement is required if the city takes no action on SB 79 (Approach 1), Approaches 2, 3, and 4 would each involve varying levels of public engagement.
Additionally, if Council directs staff to complete the Downtown Housing Plan, the project team will build upon outreach activities already conducted and will ensure the planning process remains transparent, inclusive, and responsive to the perspectives of residents, businesses, and other key stakeholders.
ENVIRONMENTAL REVIEW
The actions recommended in this report are exempt from review under the California Environmental Quality Act (CEQA) pursuant to Government Code section 65912.160(c)(2) because they involve ordinances that make the City’s zoning code consistent with the provisions of SB 79 by implementing Government Code Section 65912.161(b) and by amending the zoning map to indicate sites that are not subject to Government Code Section 65912.157.
Staff, however, will prepare an environmental analysis for a TOD Alternative Plan, if the City Council determines Approach 4 as the preferred approach.
ATTACHMENTS
Attachment A: Caltrain Stations and TOD Eligible Areas.
Attachment B: Draft Ordinance: Historic Resource Exemption.
Attachment C: Draft Ordinance: 50 Percent SB 79 Development Standards.
APPROVED BY:
Jonathan Lait, Planning and Development Services Director