Despite a stated commitment to encourage more housing, Palo Alto city leaders firmly rebuffed on Tuesday a contentious proposal to construct 24 apartments on a College Terrace site zoned for single-family homes.

Instead, the City Council reasserted its opposition to multifamily developments in single-family zones like the ones that the firm Cato Investments was planning to build at 2239 and 2241 Wellesley St. In doing so, it effectively killed the project without taking a single vote.

At the same time, the council offered a political boost to another housing project: a mixed-use, four-story development at 955 Alma St. that includes 36 tiny studios and about 6,000 square feet of office space. While the project remains in its early phase, most council members indicated that they would be willing to grant the developer, Tarlton Properties, zoning exemptions in areas such as height and density to enable the development.

Both developments are relying on Palo Alto's newest zoning tool — the "planned home zone" — to receive height and density exemptions for their respective projects. The zoning designation allows residential developers to request exemptions from regular development standards, as long as their projects designate at least 20% of their residences as "affordable housing" and not worsen the city's jobs-to-housing imbalance.

For the council, the biggest difference between the two projects was location. The project on Alma Street targets a site in an eclectic and vibrant area close to the Town & Country Village shopping center, next to a gym that formerly housed Anthropologie. The Wellesley project was eyeing a single-family zone, a factor that proved to be a deal-breaker for many College Terrace residents and most council members.

The Cato project, in fact, appeared doomed ever since the council specified on April 12 that it will not allow "planned home zone" projects in single-family zones. Supporters of the Cato project challenged that position and urged the council to approve the much-needed housing.

Michael Quinn, a College Terrace resident who supports the project, alluded to the Regional Housing Needs Assessment (RHNA) process, which will require Palo Alto to identify sites for 6,086 new housing units between 2023 and 2031, of which 1,556 are required to be designated for "very low" income levels and 896 for the "low" income levels.

"If we don't meet our RHNA goals in the next cycle, discussions like this one — where we as neighbors talk about our feelings and perceptions and what not — are going to become quaint," Quinn said. "We have to hit our numbers, and the notion that we're going to meet our numbers and avoid state intervention … it's totally unrealistic unless R-1 (the single-family zone) does some of the heavy lifting to meet the goals in Palo Alto."

Cato argued that the project meets an important community need. Five of its 24 units are slated for low- and very low-income residents. The rest, while not technically designated as "affordable housing," would have rents that make them affordable to essential workers. Matt Larsen, Cato's land-use consultant, said the developer is so committed to its goal of keeping rents as low as possible that it would be willing to sacrifice its profit.

"If we build this project, we will commit right now to zero profit for 20 years," Larson said. "All rents will be based on a break-even balance sheet. And we're more than happy to share that balance sheet with the city and enter into a tight development agreement so that the city can ensure it."

The project, however, has caused a stir in College Terrace, with dozens of residents arguing that the three-story building does not belong in their single-family neighborhood and criticizing Cato for insufficient community outreach. Hank Edson, a College Terrace resident who lives near the project site, called Cato's conduct in pursuing the project "dishonest and counter to city residents' interest in both affordable housing and zoning protections." Rachel Cox, a downtown resident who formerly lived in College Terrace, similarly argued on Tuesday that the project does not belong at the proposed site.

"This is going to create an uproar for all residential homeowners if this is approved," Cox said

During its "prescreening" review, which is meant to gauge the council's interest before a formal application is filed — the council made it clear that it has no interest in approving any multifamily projects in R-1 zones. Mayor Tom DuBois, Vice Mayor Pat Burt and Council member Eric Filseth all advised Cato to consider other city sites for developments of this sort, including those zoned for commercial, industrial or high-density residential use.

"I'll take Cato at their word on their intention to provide truly affordable housing in our community and encourage them to pursue projects that are within the zones … that we have discussed. … There is a lot of opportunities for them to come forward with the sort of projects that they stated is their intention without attempting to do that in R-1 neighborhoods," Burt said.

DuBois suggested that the application from Cato is "pushing extremes."

"The PHZ doesn't apply to this location, so I hope it's clear that the project isn't supported here," DuBois said. "But I'll echo my colleagues and say that I hope you'll bring a project like this back in a more suitable part of town."

The council was far more sanguine about the Alma Street proposal, which included 36 studios with an average size of 342 square feet. Council members found much to like in the tiny studios, each of which is equipped with a fully-loaded kitchen and bathroom, a balcony and floor-to-ceiling storage. This includes a "media wall" from which a coffee table and a dining table slide out and an "office wall" that contains a desk and chairs.

Architect Heather Young noted that in addition to adding 36 apartments, the project would reduce office space at the site by removing the existing office building and reducing the total office space at the site by about 2,000 square feet. This means five fewer jobs and reduced demand for housing.

"Our hope is that you'll agree that this location is the right place for increased height, increased density, a parking reduction and an opportunity to offset the housing jobs imbalance by 41 counts," Young told the council.

Unlike with the Cato proposal, the council agreed that the Tarlton project generally meets the intent of the "planned housing" zone.

"Personally, I think this is a really good location," council member Alison Cormack said. "I think going to 50 feet is acceptable in this environment and this neighborhood."

While her colleagues generally shared that view, some argued that Tarlton isn't doing enough to support affordable housing. While seven of the 36 studios are technically designated as "affordable housing," only three of them target residents in the very low-income category, defined as having an income level of 50% or lower than Santa Clara County's average median income. One unit would target those making 120% of area median average, while the other three would be designated as "workforce housing units" for those with incomes at 140% of the area's median average.

Filseth and council member Greer Stone both argued that to advance, the project needs to offer more affordable housing.

"I think the affordable percentage needs to actually be 20% — as opposed to three units," Filseth said. "That's key."

Stone agreed. Tarlten's plan to designate most of its "affordable housing" units for higher income levels "may fit within the letter of the law, but surely not within the spirit of what we're trying to accomplish with the PHZ, which is trying to increase true affordability," Stone said.

At the same time, Filseth said the project is in a good location for taller buildings — an area that already includes other tall structures, including the affordable-housing development at 801 Alma St. And unlike with the Wellesley project, most of the speakers agreed that the location is ideal, even if the project has some room for improvement.

Some residents and council members suggested that the project may exacerbate downtown's parking problems and recommended that the new apartment complex be ineligible from taking part in downtown residential parking programs, which allow employees and residents to purchase permits for all-day parking on residential streets.

Most residents, however, agreed that the Alma Street proposal would bring an important benefit to Palo Alto: housing. Local teacher Elan Loeb was among those who urged members to support the project.

"As a teacher who grew up here and can't afford to live here — and I'll likely be leaving because of housing costs — I support this and any other actions to increase affordable housing here," Loeb told the council. "Most of my colleagues commute over an hour every single day to get to schools in Palo Alto, to teach the kids in Palo Alto, and it's not fair to the kids and it's not fair to the teachers."