When it comes to new developments in Palo Alto, exceptions have become the norm in recent years, with one builder after another asking for permission to make his project taller, denser or closer to the road than local rules typically allow.

If they offer affordable housing, they have state law on their side. Senate Bill 1818, which was enacted in 2004, sweetened the deal for developers proposing affordable housing by allowing them to seek density that is up to 35 percent greater than zoning regulations would otherwise allow (a prior version of the law, which came into effect in 1979, offered a 25 percent bonus). The law also entitles them to seek up to three "concessions" for offering housing below market rate -- concessions that could potentially include things such as greater height, smaller setbacks (the distance between the building and the property line) and a reduced parking requirements.

Now, Palo Alto, a city where affordable housing is famously in short supply, is trying to figure out what types of incentives it can offer developers to help solve this problem. In the process, the city is also trying to demonstrate to the state its commitment to complying with state law – both SB 1818 and the Regional Housing Needs Assessment, a process in which the state allocates the number of houses each region (and, ultimately, city) should plan for.

On Wednesday night, the city's Planning and Transportation Commission considered a proposed ordinance that would both make local law consistent with SB 1818 (by offering, among other things, a density bonus of up to 35 percent) and clarify the process by which developers should seek bonuses and concessions. The commission didn't vote on the proposal, though members were generally in agreement with the new ordinance and indicated that they are likely to approve it after minor revisions.

Though members of planning staff acknowledged that the new ordinance is unlikely to result in a boom of affordable housing, they underscored its importance in showing the city's commitment to improving the situation. Senior Planner Tim Wong called the density-bonus ordinance a "key tool for the city" for achieving the regional mandate. Planning Director Curtis Williams called it a "very important policy and document for the city to try to set parameters on the appropriate level of exceptions to allow."

"It is a situation where we tried to implement the state's overall objective but we're trying to tailor something that fits Palo Alto's situation and trying to be a bit more specific about relating the nature of concessions and the extent of concessions to the extent and type of the below-market-rate housing being provided," Williams said.

Under the city's new proposal, the "density bonus ordinance" would include a menu of concessions that a developer could request, including such items as the ability to build closer to the front or back property line, increased height, greater density, a reduction in required open space and a less stringent parking requirement. A developer seeking concessions that are not on the menu could do so by going through a public review process. More controversially, the developer would be required to provide financial information about the new development.

The latter proposal met with opposition from Commissioner Michael Alcheck, who argued that the requirement is neither useful nor fair and that the numbers wouldn't be accurate anyway because of the unpredictable fluctuations of the real estate market. Alcheck argued that the city should focus its consideration on whether the concessions help the city meet its housing goals.

"We are capable of evaluating these concessions without knowing how much the development expects to be making in the future that no one can guarantee," Alcheck said.

Commissioner Arthur Keller disagreed and said he strongly recommends keeping the requirement for financial information. The information, he noted, would only be required for concessions not on the city's list and the onus should be on the developer to make the case for them.

"If you allow concessions not on the menu, they should have to justify them," Keller said.

With the majority in favor of keeping the requirement (only Chair Eduardo Martinez spoke in favor of Alcheck's position), the commission stopped short of removing it from the proposed ordinance.

The Wednesday discussion highlighted the city's struggle to simultaneously deal with two complex problems -- a shortage of affordable housing and a desire to limit the number of large new developments popping up. The latter topic has become a high-priority issue over the past year, with major new downtown developments either winning or seeking approval. This includes the approved Lytton Gateway building on Lytton Avenue and Alma Street and the proposed four-story developments at 135 Hamilton Ave. and 636 Waverley St.

The wave of developments has prompted the city to take a fresh look at its downtown. Just before its discussion of the affordable-housing law, the planning commission discussed the scope for a "downtown development cap" study that would evaluate how much, if any, new development downtown can accommodate.

Among the city's toughest land-use challenges these days is filling its gaping housing needs without exacerbating existing traffic and parking woes at various local neighborhoods. The Wednesday meeting began with about a dozen residents from around Edgewood Drive, near the East Palo Alto border, urging staff and commissioners to do something about their neighborhood's dismal parking situation.

Residents in the downtown neighborhoods of Professorville and Downtown North have been especially vocal about the dearth of parking and the resulting decline of their quality of life. Neilson Buchanan, who lives in Downtown North, brought a tin can to the meeting and vowed to give out a "Kicking the Can Down the Road" award later this year to a council member or commissioner for failing to address the persistent problem. Ken Alsman, a Professorville resident who has long lobbied the council to do something about the parking shortage, said the neighborhood doesn't feel like home anymore.

"I feel like I've had my neighborhood taken away from me," Alsman said.

Given the community sentiments about new developments, the commission was cautious about granting builders too many concessions for providing affordable housing. Commissioner Greg Tanaka suggested including one relatively minor concession on the ordinance's "menu" and then requesting developers to go through public hearings for any other request.

That suggestion fizzled after Williams pointed out that one concession probably wouldn't be viewed as "meaningful" by the state's Department of Housing and Community, the agency that approves cities' housing documents and that has the power to withhold grant funding from those who don't comply.

Commissioners offered various minor word changes and additions to the concessions menu and ultimately voted 5-0, with Alex Panelli absent, to revisit and vote on the document once staff revises it.