A new Palo Alto law that allows developers who provide affordable housing to build more densely will get its first test on Monday night, when the City Council considers approving the demolition of four homes and construction of new three-story building on a busy and rapidly changing stretch of Page Mill Road.
Designed by the local firm Stoecker and Northway Architects, the mixed-use development at 441 Page Mill Road would include retail on the ground floor, offices on the second floor and 10 apartments on the third floor. Because three of these apartments will be offered at below market rate, the development is eligible to take advantage of both state and city laws that provide density bonuses for affordable-housing projects. In the case of 441 Page Mill, the developer is in part asking to build nearly 11,000 square feet more of office space than the zoning would allow.
Palo Alto's ordinance, which the council adopted last year, specifies the types of concessions and zoning exceptions a developer can request and lays out a process for developers who wish to request "off menu" concessions. This includes submitting a financial analysis for the project that justifies the concessions as necessary for making the development economically feasible.
The proposal by property owner Norm Schwab is part of a sizable crop of recently approved developments around the transit-rich and increasingly busy area near El Camino Real and California Avenue. Others include the block-long proposals at 2180 El Camino Real, which includes the former JJ&F Market, and 3159 El Camino Real, by Equinox Gym. Stanford University is preparing to move ahead with construction of a recently approved housing development at 2500 El Camino Real, which will entail 70 affordable-housing units just north of the Page Mill intersection. At the same time, the city is evaluating a plan to rezone the former parking lot at 2755 El Camino to enable the construction of a four-story, mostly commercial building near the chronically congested intersection of Page Mill and El Camino.
So far, the proposal at 441 Page Mill Road has encountered little resistance from local commissioners, the public and council members. In recent public hearings, just about everyone agreed that its location, on a largely commercial block that also includes the Kelly Moore Paint Store, an animal hospital and the AT&T Store, is more suitable for a mixed-use development than for the four single-family homes that currently occupy it. Its inclusion of affordable housing is another bonus, even if it comes with strings attached.
During the Planning and Transportation Commission's review of the project last June, then-Chair Mark Michael lauded the proposed development as much more appropriate.
"I think the project is very thoughtful, it's attractive, it meets the need and in many way surpasses my expectation for what can be done with the site," Michael said.
Commissioner Michael Alcheck agreed and stressed the need for affordable housing in Palo Alto.
"There are aspects of this proposal that should be examples to all proposals," Alcheck said.
Others weren't so sure. Though former commissioners Arthur Keller and Carl King lauded certain aspects of the proposal, they had major reservations about the concessions sought by the applicants in exchange for the three units of affordable housing. The three concessions are all "off menu" items, which means that the developer had to commission a pro forma justifying the requests. The requested concessions are a 19 percent increase in lot coverage (current code permits lot coverage of 50 percent, or 13,463; pushing it up to 69 percent would allow 18,520 square feet) ; an increase in allowable commercial density to allow an extra 10,770 square feet of office space; and an increase in the overall floor-area-ratio to permit an extra 8,595 square feet of building space.
The three concessions were proposed by the applicant well before the city adopted its density bonus ordinance. The city's menu of concessions includes such things as parking exemptions, a relaxing of the height limit and the ability to build closer to the front or back property line.
King suggested that three units of affordable housing in exchange for more than 10,000 square feet of additional office space "doesn't seem like a great tradeoff to me." Keller argued that the city should analyze exactly how much extra zoning it should allow so as to match the project's economic return.
The city's consultants, meanwhile, concluded that the cost of building the affordable housing units actually exceeds the value of the three concessions being requested. Consulting firm Keyser Marston Associates estimated that the net cost of the additional housing units would be about $1.85 million. The net value increment from the concessions is projected to be $1.28 million.
"Since the cost of the BMR housing exceeds the value increment, and since each of the three concessions independently contributes to the value increment, it is concluded that all three of the requested concessions are needed to address the BMR housing costs in the proposed projects," the Keyser Marston analysis concludes.
Thus, the project satisfies the city's requirement that the concessions result in "identifiable, financially sufficient and actual cost reductions" that allow the applicant to provide "affordable rents or affordable sale prices," the report states.
The planning commission ultimately voted 4-2 in favor of the proposal, with King and Keller dissenting. The Architectural Review Board followed suit in October by voting 4-0 (with Lee Lippert absent) to approve the building's design, which had undergone numerous revisions.
Now, it's the City Council's turn. In addition to allowing the city to test drive its new density-bonus ordinance, the Jan. 26 hearing will also offer newly elected council members their first chance to weigh in on a major development. During last year's election, candidates running as slow-growth "residentialists" consistently criticized the council for approving too much development downtown and for allowing too many exemptions to existing zoning laws and design guidelines. The proposal at 441 Page Mill Road requests plenty of both, which means the council's new residentialist majority (which includes Mayor Karen Holman, newcomers Eric Filseth and Tom DuBois and council veterans Pat Burt and Greg Schmid) should have much to discuss.
In addition to the three zoning concessions, the applicant is also asking for various exemptions, including one for parking.
Though the building's underground garage will include 91 spaces, that's 19 fewer than what the city would normally require. The state law that offers density bonuses for affordable-housing projects provides for a reduction of three spots. The reduction of 16 more parking spaces is based on the planning staff's determination that the peak demand for parking by residents and by workers will happen at different times of the day.
The project is also requesting two "design enhancement exemptions." One would increase the building's setback from the curb to 17 feet (the code currently requires a 14-foot setback), making the design more responsive to the council's often-stated concerns about massive new buildings going up too close to the street. A report from planning staff notes that this would "permit a wide sidewalk, street trees and the County's planned improvements to Page Mill Road at this location"
Another exemption would allow a driveway ramp into the underground garage to encroach into a landscape buffer at the rear of the property.