A residential block in the College Terrace neighborhood could become the site of a 24-unit apartment building under a proposal that the Palo Alto City Council will weigh in the coming months.

Proposed by the San Francisco-based company Cato Investments, the development proposal targets a site at 2239 and 2241 Wellesley St., in a residential neighborhood west of El Camino Real and the California Avenue business district. While apartment buildings are generally not allowed in single-family neighborhoods, the developer hopes the council's recent push to relax development standards to encourage more housing will prompt council members to make an exception.

The developer is applying under the "planned housing zone," a designation that allows developers to provide affordable housing to request exceptions to development standards. The zoning designation is a revival of sorts of the "planned community" zone, which allows the council and developers to haggle over zoning standards and "public benefits."

The council suspended the use of the planned community zone in 2013 after voters rejected in a referendum the city's last planned-community project, a housing development on Maybell Avenue. The planned community zone was also used for commercial and mixed-use projects, including College Terrace Centre, the redeveloped Edgewood Plaza and Alma Village.

Unlike the planned community zone, the planned housing zone pertains only to housing projects. Eligible developments have to devote at least 20% of the project to below-market-rate units.

The proposed development by Cato Investments would fulfill that requirement by designating five of the 24 apartments as below market rate.

Three of them would be offered to residents in the "low" income category, defined as having incomes below 80% of area median income. The other two would be devoted to those making under 50% of area median income, according to Cynthia Gildea, a Cato representative.

The remaining 19 units would focus on the "missing middle": residents whose incomes are too high to qualify for below-market-rate units but too low to afford Palo Alto's famously high rents. Gildea said that this includes firefighters, city workers and teachers.

While these 19 units would not be formally designated as "affordable housing," they would target individuals with "moderate" incomes of about $80,000, Gildea said.

The new proposal differs starkly from the other two applications that the city had received under the new zoning designation. Both of those included larger projects and targeted primarily commercial zones. One project, proposed by Sand Hill Property Company, would have included 187 apartments and a two-story office building at 3300 El Camino Real, near Stanford Research Park. The company pulled the proposal after getting a lukewarm reception from the council during a prescreening session.

The other proposal, from Menlo Park-based Acclaim Companies, envisions 119 apartments, 5,000 square feet of office space and 1,000 square feet of retail at 2951 El Camino Real, in the Ventura neighborhood. The project, which combines three commercial parcels and two residential ones, would include 24 apartments for residents making up to 80% of area median income.

The council is scheduled to hold its second pre-screening hearing for the Acclaim proposal on Tuesday night and its feedback will help determine whether the application would move forward.

Unlike those projects, Cato's new proposal would be located entirely in a residential neighborhood. That factor may pose a high hurdle in Palo Alto, where council members have consistently opposed legislative efforts to relax development standards in single-family residential (R-1) zones. The city's Comprehensive Plan and Housing Element have largely excluded R-1 zones from major growth, though the city's recent relaxation of laws pertaining to accessory dwelling units does allow for more units to get constructed in these areas.

Despite the council's traditional reluctance to mess with R-1 zoning, Gildea said she believes that the city's decision to adopt the "planned housing zone" ordinance is aligned with adjusting zoning to facilitate more housing, even in an R-1 zone. Cato also believes that the project's location, in close proximity to the California Avenue business district, Stanford Research Park and the prominent arteries of El Camino Real and Page Mill Road, makes it prime for more housing.

"This is definitely the right project in the right location," Gildea said. "It's super close to all the job centers, and close to transportation."

And while the neighborhood is dominated by single-family homes, there are two apartment buildings directly across the street from the project location.

The proposed development would be three stories in height and would include 13 studios and 11 one-bedroom apartments. It would also include 16 parking spaces, eight fewer than would normally be required for multifamily projects with studios and one-bedroom units. To approve the project, the council would have to give Cato an exemption on parking, as well as allow it to exceed the city's height limit and setback requirements for single-family residential neighborhoods.