Seeking to halt the city's transformation into an enclave for the super-rich, Palo Alto officials set their sights Monday night on developing housing for teachers, firefighters, government workers and other employees whose incomes are too low to afford local rents but too high to qualify for local affordable-housing programs.

The idea, proposed by Vice Mayor Greg Scharff and embraced by all of his colleagues, is one of several to emerge from a long council discussion focused on a problem that has taken on fresh urgency in recent months: a housing crunch that is sending home prices to new heights, displacing long-time residents, leaving "empty nest" seniors with no options for downsizing and exacerbating the city's traffic congestion.

In addition to exploring programs for "moderate-income employees," the council directed staff to consider programs for encouraging the construction of downtown "micro" units; promoting mixed-use developments with retail and residential components; and focusing more housing in the transit-rich area around California Avenue.

The council's vote to proceed with these initiatives followed a discussion that featured comments from nearly 30 residents, many of whom lobbied for high-density housing, a relaxation of parking requirements for new housing developments and other initiatives that would make housing construction more enticing.

The City Council is now in the midst of updating the city's official land-use vision, the Comprehensive Plan, and the discussion was intended to generate new ideas for housing policies that could be included in the document.

While tangible solutions are still many months, if not years, from materializing, the council signaled Monday that it has no shortage of ideas for moving the conversation forward.

Councilman Cory Wolbach, one of the council's leading housing advocates, supported the "micro-unit" concept targeting people who don't drive. He emphasized that the council should make it clear that it would enforce the car prohibition for these units. Wolbach also argued that in addition to promoting these small units, the council should also consider new major facilities.

"We need to think whether we want a Channing House or something like that; or another Opportunity Center or something like that," Wolbach said.

Council members acknowledged that local solutions cannot solve the regional problem of inadequate housing. That, however, should not deter the city from trying, Councilman Marc Berman said. Doing nothing, he said, definitely won't make things better.

"If we care about the cost of housing in Palo Alto, if we care about the cost of housing in Silicon Valley, we have to try to do something," Berman said. "We have to do it in a deliberate manner."

And deliberate they were. The council came up with ideas ranging from new "overlay" districts with affordable-housing requirements to relaxation of height limits in downtown for housing units.

Mayor Pat Burt called the proposal for an affordable-housing overlay an "interesting approach" and voiced support for micro-units, which he said would make sense for single residents and young couples, both in downtown and other parts of the city. Councilman Tom DuBois requested that staff return with plan for ensuring that existing homes are used for housing, not other uses -- a proposal that all of his colleagues deemed worthwhile.

While the council has seen its share of divisions in recent years when it comes to new developments, most of the proposals that advanced Monday night did so with unanimity. The lone exception was the proposal to shift some sites designated for housing from San Antonio Road to California Avenue, which has more shopping amenities and transportation options for potential residents.

The council voted 5-4 to make the shift, with Councilman Marc Berman, Councilwoman Liz Kniss, Councilwoman Karen Holman and Councilman Eric Filseth dissenting.

Those who supported the change, including Scharff, argued that San Antonio already has too much congestion and that conditions will only get worse as the building boom continues on the Mountain View side of the road.

Those who opposed the change countered that San Antonio has plenty of amenities to offer residents and that the rapid densification on the Mountain View side could usher forth new transportation options and shopping opportunities for residents on the Palo Alto side.

Kniss said that she had lived in the area before and challenged the notion that the area in San Antonio Road is "service deprived."

"It will take a really good area for housing off our map at this point," she argued.

The Citizens Advisory Committee, a 23-member group that is helping the city update the Comprehensive Plan, was similarly split on the San Antonio proposal.

Elaine Uang, who serves on the group, told the council that committee members offered a range of views on this topic.

"Some members are open to it because the services might be there, given what's happening southward," Uang said. "But there is concern that any time it's redeveloped, it could displace existing tenants."

Much like in other recent discussions of housing, members of the public turned out to offer stories of displacement and hardships and tips for improving the situation.

Bonnie Packer, a long-time housing advocate, asked the council to keep the San Antonio sites on the city's housing inventory (a state-mandated list of sites that could potentially accommodate new units), arguing that the city can use all the sites it can get.

Vanessa Warheit also spoke in favor of more housing and urged the council to focus construction near transit.

"I don't think we need to necessarily build many high-rises, though I'd encourage you to not be too firm in holding that height limit, and I think densification around transit is really smart," Warheit said. "We should continue to look at that as a viable option. We should build as much housing as we possibly can because we need it."

Several speakers urged the council to consider low-income workers and residents with disabilities, who currently have very few viable options. Anita Lusenbrink, who has a family member with a development disability, was among them. All kinds of people can contribute to the community, she said, "not just the very wealthy 1 percent."

"People without cars and without high-paying jobs can add quite a bit to the community as well, even though it's not tax-based income," Lusenbrink said.

Yet others warned against building too much too fast, without adequately considering the impact of new developments. Some argued that simply building housing will do nothing to make local homes more affordable or to prevent displacement of long-time residents.

Palo Alto resident Lydia Kou said she was concerned about "the kind of schizophrenic approval of development continuing now in the name of providing housing."

"Residential growth has its own impacts -- a need for parks, community centers, recreation services and schools," Kou said. "Building housing has impacts as well and if the cumulative impacts are not addressed it will further compound the issue."

Barron Park resident Winter Dellenbach argued that market-rate housing will always be "as expensive as the market allows" and urged the council to focus exclusively on below-market-rate housing -- the only option that can give middle- and low-income employees a chance to live in Palo Alto.

"Working-class people once lived here in an economically diverse community with professionals and academics," Dellenbach. "But now it's a rich person's town, or it's becoming so."

Council members generally agreed that when it comes to new housing, the focus should be on those who cannot afford local real estate prices but who make important contributions to the community.

Filseth observed that "we can't possibly house everybody who wants to move to Palo Alto" and said the city should target those who cannot afford market rates.

"That's the focus: Is this going to help us keep people in town who can't afford to live here right now?" Filseth said.