Spring Real Estate 2002

Publication Date: Wednesday, March 13, 2002
Single-story overlays ... or not?
Do building restrictions affect future housing prices?

by Geoff S. Fein

For almost a decade, Palo Alto has been dealing with ways to limit second-story additions to homes and prevent the construction of monster homes in single-story neighborhoods. In 1992 the city created single-story overlay zones to prohibit second stories in predominantly Eichler neighborhoods.

Almost a decade later the city is still approving overlay zones, the latest in the Greer Park neighborhood along Van Auken Circle.

But does restricting second-story construction impact the sales of homes in overlay zones? Some Realtors say the zones affect property values.

Coldwell Banker Realtor Leannah Hunt said she understands the desire of homeowners who live in overlay zone areas to protect their privacy; especially those who have lived in Eichler homes for a long time.

But overlay zones could also prevent some families from buying homes.

For example, a young couple looking to start a family could shy away from a home in an overlay district because they wouldn't be able to add on to the existing single-story home.

"We have a tremendous number of homes affected by single-story overlay," Hunt said.

To date, the City Council has approved nine overlay zones affecting 636 homes.

Deborah Greenberg of Coldwell Banker's Midtown office said overlay zones can affect sales. Buyers who want to live in those areas like the idea that their privacy will not be disturbed by a second story, she said.

But the overlay does affect property values.

"The value stays lower because of the inability to put on a second story," Greenberg said.

However, overlay zones haven't adversely affected who is buying. Because prices tend to be lower in overlay zones, younger people are buying those homes. The values stay low because of the inability to put on a second story, Greenberg said.

On July 13, 1992, the Walnut Grove neighborhood became the first to adopt a single-story overlay zone district. The overlay was applied to 181 lots in the area.

Since then eight more neighborhoods have applied and received overlay zone districts. In 1993 an overlay zone was applied to 243 lots in the Greenmeadow neighborhood and last September, an overlay zone was applied to 68 homes in the Garland/Elsinore Drive area.

Getting an overlay zone for a neighborhood is not an easy process.

At least 70 percent of the homes in a proposed overlay zone must be in support of applying an overlay. The city's guidelines state that "for neighborhoods that contain and have been developed consistent with a single-story deed restriction, these guidelines are to be treated with a greater degree of flexibility (than neighborhoods without the restriction)."

Before the council approves an overlay zone, the Planning and Transportation Commission reviews the application.

The commission must be assured that the request meets four criteria: an "overwhelming majority" of residents in the area approve; the boundaries define an identifiable neighborhood; the homes are mostly single story already and similar in age, design and character; and the lots are of moderate size.

Previous applications have resulted in the council approving an overlay zone despite the planning commission's recommendations.

In 1998 the council -- with Mayor Dick Rosenbaum opposing -- approved the Barron Park overlay request, going against the Planning Commission's recommendation. The commission had recommended against the provision for Barron Park, finding the area in question too small and that the group of homes does not form a neighborhood.

Commissioners also objected because the area did not have moderate lot sizes, and homes were not subject to a deed restriction limiting homes to a single story.

And sometimes requests for overlay zones are rejected. For example on Paul Avenue, residents had asked the city for an overlay. In this case, only five property owners supported the idea of an overlay, so it did not meet the "overwhelming majority" required. Those who opposed the overlay said building a second story should be up to an individual homeowner and that there should be more flexible ways of allowing property owners to add onto their homes.

Not all overlay districts have gone through without a hitch. Last July an overlay district was approved for 68 homes in an area bordered by Greer Road and Oregon Expressway in the Garland neighborhood. The application divided the neighborhood. Then-Councilman Gary Fazzino said this particular overlay proposal was the most contentious to come before the City Council.

Along with a map defining the neighborhood, all 68 properties in the application are one story and all 68 have single-story deed restrictions. All 68 of the homes were built by Eichler in the 1950s and none have been torn down or replaced since then. Of the 68 lots, 47 are between 6,000 and 7,000 square feet and 14 are between 7,000 and 8,000 square feet. Of the remaining lots, two are between 8,000 and 9,000 square feet, four are between 9,000 and 10,000 square feet and one is larger than 10,000 square feet.

Some residents question why the city must step in and place a restriction on second stories in overlay zones. Many of the homes already have deed restrictions limiting second-story development.

But those deed restrictions, or CC & Rs (Codes, Covenants & Restrictions), often come with a 25-year sunset clause and are often unenforceable by the city. That is because they are private agreements between neighbors. If one resident is upset with a neighbor's plans to build a second story, the issue will have to be settled in court. The city has no power to step in and stop the construction.

On Monday, Feb. 18, the city council approved the initial request by Greer Park neighborhood residents, who live along Van Auken Circle, to become the tenth neighborhood to ask for an overlay zone. So far, 69 percent of those who'll be affected have requested the overlay zone. The matter will go to the Planning and Transportation Commission in March for further review.

E-mail Geoff S. Fein at gfein@paweekly.com