The two housing proposals that the Palo Alto City Council reviewed on Monday night reflect in many ways the city's recent success in encouraging new applications to build residential developments — even ones that fail to conform to local zoning laws.

But they're also engendering opposition from nearby property owners who argue that these projects will degrade neighborhood character and worsen the traffic and parking conditions on their blocks.

The tension between the city's desire to add housing and residents' wishes to see local zoning laws respected was fully evident during the council's review of 660 University Ave., a blocklong, four-story development that would include 70 apartments and 9,115 square feet of office space, and 1033 Amarillo Ave., a proposal to demolish a cluster of cottages that have occupied the site since the 1940s and to construct four single-family homes and four accessory-dwelling units.

The council didn't take action on either proposal during Monday's hearings, though council members made it clear during the discussion that they are far more inclined to support the larger downtown project proposed by Smith Development than the eight-dwelling proposal that APIC Amarillo LLC is looking to build just west of Greer Park in south Palo Alto.

The biggest selling point for the council when it came to 660 University Ave. was its location. The city's attempts to lure residential developers to downtown — mostly notably through the creation of a "housing incentive program" that loosens development standards and increases density limits — have thus far been fruitless. Vice Mayor Pat Burt and Council member Alison Cormack both pointed to its location as a major selling point.

"We've had very little progress in the two downtowns to date, and yet as we're seeing this transformation in the retail environment, we recognize that not only do we need to provide housing in a place where we have transit and services but we also need to support our existing businesses and residents in that area," Burt said. "In principle, I support a project roughly along these lines."

The project would entail the demolition of two one-story office buildings, including the medical office that houses Palo Alto Dental, which has made plans to relocate to another location within the city.

One change that Burt and some of his colleagues said they want to see is more affordable housing. Smith Development has proposed designating 14 of the 70 apartments in the development as affordable housing, though four of these would fall into the highest category of affordability, "workforce housing," which applies to those who make up to 120% of area median income. The city's only "workforce housing" development, the recently completed AltaLocale complex at the corner of El Camino Real and Page Mill Road, is charging between $3,368 and $4,858 for rent for its small studios and one-bedroom apartments. For critics of the Smith project, having these units count as "affordable" makes a mockery of the term.

Council member Greer Stone was among those who encouraged Smith to provide more below-market-rate units. He noted that the project is advancing under the zoning called "planned home," a designation that allows the city to negotiate zoning concessions with residential developers that provide affordable housing.

"I do think the project is requesting several variances and exceptions for the city, which under 'planned-home zoning' we have allowed for affordable housing as a community benefit," Stone said. "If we're going to provide those variances, I think the community benefit should be real and not illusory."

Neighbors similarly posited that the developer is requesting too much and offering too little. That was the argument advanced by residents from The Hamilton, a condominium community at 511 Byron St. Several of them addressed the council on Monday and submitted letters of opposition to the project. Leigh Prince, an attorney with the firm Jorgenson, Siegel, McClure & Flegel, which is representing the residents, noted that the developer is requesting to build at a density that is roughly seven times what the underlying zoning typically allows.

"Respectful of the city's need for housing, shoehorning seven times the maximum permitted number of units on this site is unreasonable," Prince wrote. "The Hamilton community will experience this unprecedented density daily in significantly increased traffic and congestion, raising concerns for senior safety as well as a loss of peace in their golden years. This level of density and intensity in this location burdens, not benefits, the community and should not be encouraged to proceed."

Chris Ream, president of The Hamilton Homeowners Association, also addressed the council and expressed concerns about the project's potential traffic problems, particularly given the proposed underground garage with an exit on Middlefield Road. He suggested that this would create a dangerous situation and cause traffic backups on Middlefield. He also told the council Monday that the development would exacerbate the neighborhood's existing parking problems.

"Downtown parking has been a problem for years in Palo Alto, and this project is going to make it much, much worse," Ream said.

Others argued that the project would, by and large, benefit the downtown area and observed that The Hamilton was itself approved under a "planned community" zone, which is used for projects that exceed zoning requirements. Cormack also cautioned against increasing the affordable housing requirement for the developer, noting that this may jeopardize the entire project.

"We get this or we get nothing," Cormack said. "If we want these 70 homes and we want 14 of them to work for the people who work downtown and have to drive from far away — this is what it's going to take.

"I think this is a thoughtful proposal. I think it's in the right place. It fits in with the other four-story multifamily buildings that are nearby and it does represent some change."

Could subdivision of eight homes grow to 16?

But even as the council welcomed change on University, it showed little appetite for the subdivision proposal pitched by APIC Amarillo LLC for a single-family lot in Midtown. The project calls for demolishing a cluster of four cottages that today serve as rental units, splitting the lot into four parcels and constructing four single-family homes and four accessory-dwelling units.

Much like 660 University, the Amarillo project galvanized opposition from close neighbors, with numerous residents petitioning the council not to advance the project. Brad Stripling, who lives next to the property, argued that the block doesn't have enough parking to accommodate the project.

"Often there are cars blocking my driveway entrance, and even parked in my driveway. This is unacceptable at this time, and significantly adding to the vehicular load next door compounds the problem enormously," Stripling wrote to the council. "This street of only a few blocks, bounded by a community park at one end and an elementary school at the other, is becoming choked, and adding to this becomes a hazard and safety issue."

Others suggested that by demolishing the four existing cottages, the project would create more problems than it would solve.

"When it comes to affordable housing, I'm of the view that we first must do no harm," said Sarah Longstreth, an Amarillo Avenue resident. "There's so little affordable housing in our community; we cannot allow what little there is to be razed for yet more high-value homes."

Cara Silver, who also lives on Amarillo Avenue, said that she believes her block can accommodate more building density but noted that the proposal on the table would replace existing rental units to make way for four multimillion-dollar homes. For Palo Alto, this would be a step backwards.

"What concerns us most about this project is that it does nothing to replace the four affordable rental units and so nothing to ensure that the four ADUs will actually be rented to low-income households," Silver said.

Ted O'Hanlon, the project consultant representing APIC, told the council that the project was designed to offer a variety of price points, with accessory-dwelling units replacing the relatively affordable cottages at the site today.

"This is an opportunity to work closely and implement local control, and do it the way Palo Alto would like to do it, if Palo Alto would have the opportunity and appetite to do so," O'Hanlon said.

Council members indicated that they do not, in fact, have the appetite. Part of this has to do with recent state laws, most notably Senate Bill 9, which allows property to split lots and build up to four units: two main houses and two accessory-dwelling units.

While the law wouldn't be immediately applicable to the Amarillo project (it cannot be used for projects that eliminate existing rental units), its implications for the future of 1033 Amarillo may be significant. Planning staff warned that if the city allows the splitting of the property into four lots, and the owners of each of these lots later rely on the provision of SB 9 to further divide their properties, the property could ultimately have as many as 16 dwellings.

Given the recent changes in housing laws, council members were reluctant to provide additional concessions. Mayor Tom DuBois suggested that the developer return with a zone-compliant project.

Burt and Stone both argued that the new accessory-dwelling units would fetch far more in rent than the existing cottages. Burt cited the high rents at AltaLocale and predicted that the accessory dwelling units at the Amarillo development would be similarly unaffordable for most service employees.

"I think we should assume that unless any of the new units are deed-restricted, they're going to be in that kind of price range," Burt said.

He and council member Eric Filseth both urged the developer to offer below-market-rate residences.

"Affordable housing is what we're missing most in this town," Filseth said. "Nine percent of our housing stock in town is deed-restricted affordable housing, which is high for the county, but we're still well short of what the demand is. If there's some way that some of this kind of stuff could produce affordable housing, that would be a good thing."