Seeking to make a small dent in addressing the city's housing crisis, the Palo Alto City Council approved on Tuesday morning its largest residential project of the year: a 102-apartment development on San Antonio Road.

By a unanimous vote, the council backed a proposal by 788 SAPA Land LLC to construct a four-story building with 102 apartments and 1,800 square feet of retail at 788 San Antonio Road, near Leghorn Street. The project's residential component consists of 32 studios, 66 one-bedroom units and four two-bedroom units. Sixteen units would be restricted to below-market-rate households.

While the developer plans to offer these units as apartments, the city's approval allows for them to be converted to condominiums at a later time.

"The goal of the project is to serve a range of renters and a range of income levels," said Ted O'Hanlon, who represented the project applicant. "That's both for the inclusionary housing but also for the other renters — or maybe owners — of the property."

"Generally, we are studios and one-bedrooms. … So this will certainly lend itself to single dwellers or perhaps couples."

In supporting the project, the council signaled its desire to both approve a major new housing development for the first time this year and to raise the stature of San Antonio Road as a housing destination. In addition to backing the residential project, the council voted to extend some of the zoning benefits of this project to 16 other properties on the two-block stretch of San Antonio, between Middlefield and Charleston roads, with the goal of attracting additional developments.

By a 4-3 vote, with Vice Mayor Tom DuBois, and council members Eric Filseth and Lydia Kou dissenting, the council established a "housing incentive program" on this stretch of San Antonio, a designation that provides zoning incentives such as density bonuses to housing developers.

The council's action underscored the city's shifting philosophy on housing, particularly on San Antonio. In 2014, council members reluctantly agreed to include the San Antonio Road sites on the city's Housing Element, a state-mandated document that lays out the city's strategies for producing more housing. Council members agreed, however, that San Antonio is only on the list as a placeholder and that the city should eventually shift its housing plans away from San Antonio and toward the more transit-friendly areas of downtown and California Avenue.

To encourage construction in those areas, the city established a new "housing incentive program" that provides density bonuses and relaxes certain zoning standards for residential projects in downtown, around California Avenue and along El Camino Real. To date, however, there have been few takers. The only major residential project that the city has approved in the past two years is Wilton Court, a 59-unit affordable housing development on El Camino, which relied on a different zoning tool — the "affordable housing zone" — to get the necessary zoning concessions. Meanwhile, Palo Alto continues to lag far behind its goal of producing 300 housing units per year.

Given the city's prolonged housing drought, the council is once again expanding its horizons to encompass the commercial area on the city's southern border.

"I think a lot of us over the past few years have hoped that some of our zoning changes would result in housing in downtown and Cal. Ave.," Mayor Adrian Fine said. "That obviously hasn't happened to the extent some of us would have liked, but we are seeing some interest on San Antonio. So I think it's worth extending the HIP (Housing Incentive Program) to these sites on San Antonio."

Vice Mayor Tom DuBois supported the development at 788 San Antonio but was less keen on extending zoning benefits to other San Antonio sites.

"I'm still not convinced that this corner is the best place for housing," DuBois said. "I am concerned that we're going to dump a lot of density on the border of south Palo Alto."

The factors that have prompted the council to previously reject San Antonio as a suitable housing site still apply, DuBois said.

"There's not a lot of community services, there's not a school, there's not really transit," he added.

The biggest resistance to the project came from residents of Greenhouse and Greenhouse 2, condominium communities across the street from the project site. Pamela Harter, who lives in Greenhouse 2, noted that the area has heavy traffic, poor bike amenities and very little public transportation. The Planning and Transportation Commission, which voted in August to approve this project, shared the sentiment and encouraged the council to fund a corridor study for this area.

While the developer and several project supporters touted the project's bike-friendly amenities and its proximity to major employers as significant benefits, Harter said she was "flabbergasted that everyone thinks that this is such an ideal place to bike."

"We don't have any transportation coming up and down the street in terms of buses and there's no bike lanes," Harter said. "People have to dodge bikes on the sidewalk because there's no place for bikes and people to walk."

But the vast majority of the roughly 30 residents who attended the virtual meeting urged the council to approve the project and add much-needed housing units. John Kelley, a housing advocate, suggested that the project can serve as a "strong anchor for more housing in south Palo Alto."

"I think San Antonio is an underappreciated resource in Palo Alto and this project at 788 San Antonio can be an anchor — an anchor tenant if you will for revitalization of higher density housing in Palo Alto," Kelley said.

Former Council member Gail Price, who now serves as board president at Palo Alto Forward, a nonprofit that advocates for more housing, said the project will help the city come closer to meet its regional housing allocations. She also wrote to the council that the project would "demonstrate the viability of the area for new housing."

"Approval of the project and needed zoning changes will send a signal to regional and state agencies that Palo Alto is taking our increased housing goals seriously and providing zoning and incentives to make such housing feasible," Price said.

The zone change would apply to 16 properties that are currently zoned as "service commercial," a designation that typically includes uses such as auto services, motels and appliance stores. The new designation would allow — and encourage — housing by roughly doubling the allowed density for residential projects. The housing program also allows developers to use balcony spaces and rooftops to meet the city's open space requirements.

While some council members lamented the lack of services, Council member Liz Kniss observed that there is one benefit to approving a project at a relatively remote site: little neighborhood resistance.

"Normally we get pushback from people who live close by, who don't want something of that size," Kniss said. "It's kind of a pleasure to not be in somebody's backyard. That makes a big difference."

Kou, who supported the housing development, voted against the extension of the zone change to other areas on San Antonio, saying that the move goes against the city's Comprehensive Plan and its prior housing vision.

"We've just upzoned a lot of these parcels to provide these parcel owners with more profitability," Kou said. "Essentially, what we've done is increase the value of land all around the corridor."