Since Palo Alto launched the "planned home zone" last year to encourage the construction of more housing, it has seen steady increases in development applications and in neighborhood concerns about the new projects.

By some measures, the program has been a success. Since the new zone was created in February 2020, the city has reviewed three "planned home" applications that collectively propose 593 housing units. In the coming months, staff is expecting to bring additional applications for the council's consideration that, between them, would propose close to 500 more, according to a new report from the city. For a city that has produced only a fraction of its affordable-housing obligations and that is nowhere close to meeting its own goals for housing production, the recent surge of interest from residential developers is, in itself, a welcome development.

But the new zoning designation — which allows residential developers to exceed zoning regulations on height, density and parking and other development standards — has also prompted uncomfortable conversations about what kind of housing should be allowed and where it should go. In the College Terrace neighborhood, where developer Cato Investors had proposed a three-story, 24-apartment building on Wellesley Street, the battle has been particularly fierce.

While Jefferey Colin, principal at Cato, wrote in the application that rezoning two lots at 2239 and 2241 Wellesley St. is "consistent with and will assist in meeting the City's housing goals," dozens of College Terrace neighbors have indicated in recent weeks that they strongly disagree. On March 10, the College Terrace Residents Association submitted a letter of opposition, which argues that the project does not belong at the proposed location.

"Our intentions are clear: We welcome new residents with open arms and seek housing projects better suited to the space and the neighborhood," the letter states. "The CTRA strongly advocates for more affordable housing but views this proposal as ill‐suited to both the space and the community."

Rhetoric heated up after a housing advocate from the group Peninsula for Everyone put up flyers in the neighborhood that analogized residents who oppose the Cato project to former President Donald Trump and the gun-toting McCloskey couple from St. Louis, Missouri. One flyer depicts the McCloskeys with their guns drawn and a caption coming out of Patricia McCloskey's mouth that reads, "They want to abolish the suburbs altogether, by ending single-family zoning."

On Monday night, the council plans to step into the debate by narrowing the intentionally wide parameters of the planned home zone in a way that could effectively kill the Wellesley project. The biggest question that the council will consider is: Should the zoning designation be allowed in single-family residential (R-1) zones?

Most council members — including Mayor Tom DuBois, Vice Mayor Pat Burt and council members Lydia Kou and Greer Stone — have already indicated in interviews and during public comments that they believe the answer is no. The April 12 hearing will give them a chance to officially revise the policy and exclude R-1 zones from consideration for major new housing projects.

Planning staff has recommended instituting the restrictions. According to the new report, city planners advised Cato that its application "was not consistent with the intent of this program," even though the law clearly allows the developer to submit an application for a "prescreening" by the council.

"Going forward, staff recommends PHZ applications be considered for all commercial, industrial zoning, and multifamily districts," the report states.

Planning staff is also recommending that the city continue to give developers flexibility when it comes to a building's height and density. While the city has a 50-foot height limit for new buildings, many developers are interested in buildings that exceed 60 feet, the report states. In some areas of the city, additional height may be especially impactful, particularly when these projects are far from sensitive land uses or single-family neighborhoods, the report states.

"Often the additional height not only increases the number of units that can be built it also increases the value of the project making it more financially feasible and thus more likely to be built," the report states.

Another key question that the city will consider is: Should they allow planned-home projects to include an office component? Under the framework that the council approved last year for the zoning designation, some office use is allowed, though any project that adds jobs is required to provide enough housing to offset the residential demand that these jobs would generate.

Several developers have followed this direction. Acclaim Companies received generally positive reviews from the council in January for its proposal on El Camino and Olive Avenue, which includes 119 residences, 5,000 square feet of office and 1,000 square feet of retail. Meanwhile, developer Lund Smith is proposing a planned-home project at 123 Sherman Ave. that includes 75 residences an 35,996 square feet of office space at a commercial site.

Some council members, including DuBois and Kou, have suggested in the past that the new zone should primarily apply to projects that consist almost entirely of housing — particularly affordable housing. Last June, when the council was considering the city's first planned-home proposal, which included 190 apartments and 55,153 square feet of office space in Stanford Research Park, DuBois said he is "not supportive of additional office space."

That approach, however, has not had the desired effect. Following the hearings, Sand Hill Property Company withdrew its application for a mixed-use project at 3300 El Camino Real. Instead of offering 190 apartments, it is now moving ahead with a zone-compliant project that consists of 52,872 square feet of office space and no housing at all.

Given the tension between the developers' wishes for more offices and the council's housing goals, city planners have proposed several possible approaches, including limiting office use to one-third of the project's floor area and revising the council's criteria for the jobs-housing ratio for planned-home projects. The new report notes that some property owners are interested in increasing office space either because the underlying zone permits offices or to help make housing more economically feasible.

"To encourage a property owner to build housing with inclusionary units where office is allowed by right, the City's housing incentives must be significant enough to support that financial decision," the report states. "For this reason, many PHZ applications on commercial property are likely to include an office component."