Ever since Palo Alto began to gradually relax zoning rules about accessory dwelling units five years ago, it has seen dozens of little homes spring up in backyards across the city.
Last fall, planning staff reported that it has received about 200 applications for the small dwellings and has issued close to 150 permits for construction between 2015 and 2020, a sharp increase from the city's historic trend of averaging about four per year. In October, as the City Council approved the latest batch of zoning changes pertaining to accessory dwelling units (ADUs), members acknowledged that these little homes are now playing a major role in the city's ability to comply with regional mandates for residential development.
"We're counting on ADUs to meet our housing targets," council member Eric Filseth said during the Oct. 5 discussion.
But when it comes to meeting the city's most difficult housing challenge — the dearth of affordable homes — Palo Alto leaders fear that accessory dwelling units may be falling short. Even though their small size makes them inherently more affordable than most local homes and apartments, the city's real estate market still allows owners to charge rent that is well out of reach for residents with modest incomes, including employees in the service and hospitality industries. To that end, the council agreed last year that the city should explore ways to encourage homeowners to build "affordable accessory dwelling units" — ones that would be deed-restricted to charge rent at below-market-rate levels.
The idea of a deed-restricted accessory dwelling unit isn't exactly new. San Diego, for example, recently implemented a policy that empowers anyone who builds a deed-restricted accessory dwelling unit in the city's transit-priority area to build an additional dwelling unit on their property.
Palo Alto is unlikely to go that far. At its June 30 meeting, members of the Planning and Transportation Commission summarily smacked down the San Diego approach, which was among the most ambitious items in a menu of incentives that planning staff had presented for deed-restricted ADUs. Commissioners generally agreed that because many residential properties are comparatively small and because new state laws already allow up to three dwellings on any residential property (the main home, an ADU and a junior accessory dwelling unit, an independent living space carved out of an existing dwelling), allowing additional units is a bridge too far.
Commissioner Doria Summa said she was concerned that allowing additional dwellings could exacerbate parking problems and result in tree removal. Her colleagues generally concurred, with Commissioner Ed Lauing noting that the city and the state have only just begun to allow the new dwellings and that it may take some time for any problems to materialize.
"We don't have a lot of experience yet," Lauing said. "Instantly, without much experience, going to yet another ADU … I just don't think that's prudent."
Other staff proposals similarly fizzled. The planning commission rejected a recommendation to reduce the setback requirements (which currently calls for 4 feet of separation between the accessory dwelling and rear and side property lines) for affordable units. And it struggled to reach a consensus on staff's suggestion to increase the maximum size allowed for accessory dwelling units from 900 square feet (or 1,000 square feet when there are two bedrooms), under the current rules, to 1,200 square feet. Ultimately, the commission voted 3-2, with Vice Chair Giselle Roohparvar and Commissioner Michael Alcheck absent, to reject the recommendation. Commissioners Ed Lauing, Doria Summa and Cari Templeton all opposed increasing the maximum size, with Templeton and Summa both suggesting that allowing homeowners to build large accessory dwellings is akin to allowing a second main residence on a single-family property.
Large accessory dwellings can also create tensions between neighbors, particularly in areas where lots and homes are comparatively small and where accessory dwelling units would be larger than many of the homes, Templeton said.
"I'm concerned about how this will affect some of our lower-income neighborhoods," Templeton said. "It may be implemented unequally around the city and might really impact those neighborhoods negatively."
Chair Bart Hechtman and Commission Bryna Chang both spoke in favor of allowing the larger dwellings. Chang said doing so could help the city create affordable housing that could accommodate families and not just individuals. Hechtman was particularly enthusiastic about the change and noted that expanding maximum dwelling size could serve as a strong incentive for homeowners to offer accessory dwellings at affordable rates for a predetermined period of time. Once the affordability requirement expires, the homeowner would be able to charge higher rents for their comparatively large accessory dwelling unit.
"I like this idea because I'm willing to give homeowners that ability to do that math and if it works for them, great — we get an affordable unit for 10 years, or whatever time period the council decides," Hechtman said.
Among the most divisive issues that the commission grappled with was the question of how long the affordability requirement should remain in place. On this, the commissioners failed to reach any consensus. Some, including Chang and Summa, argued that making the duration too short would create problems for residents who depend on the lower rents (Summa suggested a deed-restriction period of 30 years) and others, most notably Hechtman, suggesting that making it too long would deter homeowners from participating.
Even if some accessory dwellings lose their affordability status in a given year, others will get built to take their place, Hechtman said.
"I don't believe anything more than 10 years will get anyone to bite," said Hechtman, who was in the latter camp. "I have no fear or concern about transition because if we can get 20 affordable ADUs for just one year, that's better than not having 20 affordable ADUs for that year. Every ADU we get for every year that's affordable is a win."
Ultimately, even the compromise duration of 15 years failed to get the needed three votes, with only Chang and Templeton voting to support it.
Commissioners also had different ideas about what level of affordability the new dwellings should target. The majority agreed that they should be affordable for those in the "moderate" income category, which is roughly between 80% and 120% of the area median income (in Santa Clara County, the area median income for a household of four is about $151,300). Lauing and Summa suggested considering incentives to make them eligible for those in lower income categories, including those with incomes that are 50% of the area's median.
The commission was more united on other aspects of the proposed program, including the removal of all impact fees and plan check fees for homeowners who commit to building an affordable accessory dwelling. Commissioners were also open to granting homeowners more flexibility when it comes to development standards if they are converting a nonconforming structure to include an accessory dwelling unit.
Another idea that proved to be broadly popular was streamlining the permit process for homeowners who want to convert their garages into affordable ADUs. Currently, they have to go through a two-step process of getting their new house (or new garage) approved and then getting a permit for converting the garage to a dwelling unit, an action that is permitted under recent state and local laws. The commission agreed that the city should consolidate this into a single approval.
The issue of how to make accessory dwellings more affordable will now go to the council, which will review the commission's recommendations and tackle the unresolved issues of affordability levels and duration of the deed restrictions.
The latter point is likely to prove particularly contentious. Planning staff has been conferring with a group of architects in recent months on possible changes to the city's zoning code and group members reported that their clients have not supported a 15-year minimum for affordability limits, preferring a shorter duration of five to 10 years. Planning staff, for its part, has been reluctant to accept anything shorter than 15 years, particularly if the city approves significant new benefits such as permission to build an additional dwelling.
"Staff does not believe that a 5 to 10-year period is sufficient, as some of the proposed incentives (e.g., an additional unit) provide significant ongoing value to the property owner," a report from the Department of Planning and Community Environment states. "At a minimum, staff would seek to establish a graduated metric for the length and time for such units to remain affordable, with more deeply affordable units (50%-80% AMI) having a shorter sunset period."