When Palo Alto launched its effort to craft a new vision for the Ventura neighborhood, residents and city leaders expressed high hopes for turning the centrally located but underserved area into a vibrant neighborhood that includes more retail, park space and affordable housing.

But as the area plan advances toward the finish line, it's become an exercise in lowering expectations, members of the City Council acknowledged on Monday. With the two largest property owners in the 60-acre area showing little appetite for replacing the lucrative office uses at their respective properties on Portage Avenue and Page Mill Road with below-market-rate housing, the area's transformation is now expected to unfold in small steps over a long period of time.

Adding to the challenge is a recent analysis by the city's consultants that determined that any planning scenario that doesn't include significant growth in office of market-rate housing is unlikely to generate enough funding to support a significant influx of below-market-rate units. For most of the residents who had been involved with the planning exercise, such growth is a nonstarter. At the same time, many lamented on Monday the fact that there still isn't a plan for developing park space, despite tentative support for an expensive plan to naturalize Matadero Creek.

With these challenges and limitations in mind, the City Council on Monday rallied behind a relatively modest vision for the area, which is bounded by Page Mill Road, Park Boulevard, Lambert Avenue and El Camino Real. By a 5-2 vote, with council members Alison Cormack and Greg Tanaka dissenting, the council voted to endorse a scenario that would raise the number of dwellings in the area from the current level of 142 to a "realistic potential" of 670, with 100 restricted for affordable housing.

Office use under this scenario would be gradually reduced from 744,000 to 466,000 square feet, while retail space would dip from 111,200 to 103,700 square feet.

The most prominent property in the planning area — the former cannery building at 340 Portage that used to house Fry's Electronics — would be largely preserved, though its research-and-development uses would be phased out to make way for more retail and housing. The vision also contemplates adaptive reuse of the building with a possible height increase to encourage housing.

By largely endorsing the relatively cautious scenario that staff presented on Monday, council members once again reiterated their opposition to approve any additional office space in the Ventura area. Rather than relying on commercial developers to subsidize affordable housing, the council is hoping to achieve residential growth by loosening zoning rules, which may include allowing greater heights, more density and less stringent parking requirements at certain portions of the area, including along El Camino Real.

In its opposition to office development, the North Ventura Coordinated Area Plan is starkly different from many of the other area plans undertaken in other jurisdictions, including the North Bayshore Precise Plan in Mountain View which includes 1.3 million square feet of office space in addition to 7,000 new homes.

City planner Sheldon An Sing warned the council that the two largest property owners, The Sobrato Organization and Jay Paul Company, are unlikely to construct housing unless they are also allowed to build offices.

"Without being able to put some office back into the development or site, there's no incentive for them to move from the position that they're at at this point," Sing said.

Council members, however, showed little appetite for offices, which they argued will only worsen the city's jobs-to-housing imbalance.

"The challenge with using office projects to pay for housing projects, and especially affordable housing projects … is to do it in such a way that you don't create more demand than supply, especially when we're talking about affordable housing," council member Eric Filseth said during Monday's discussion. "That's like an addictive drug. It feels really good in the shorter-term, but once that wears off, you're worse off."

The downside of the approach, however, is that without an incentive to property owners, major change is unlikely to occur in North Ventura. Cormack noted that the city's affordable-housing fund is currently depleted, making the prospect of building below-market-rate units daunting. She called the concept approved by her colleagues "not realistic" and argued that it won't generate the kind of housing that the city would like to see.

"If the method of funding affordable housing is an additive drug, then I think we are in withdrawal because we don't have developments coming through to refill our affordable-housing fund," Cormack said.

Some residents also urged the council to think bigger. Gail Price, who served on the North Ventura Coordinated Area Plan Working Group and who sits on the board of Palo Alto Forward, a local nonprofit that advocates for more housing, called the preferred alternative presented by staff the "weakest and the least innovative and creative" of the options on the table. Palo Alto Forward, she said, supports a more ambitious alternative known as "Alternative 3B," which envisions more height and greater density and which is expected to produce about 1,500 new residences in addition to new office development.

"The area could be an inclusive neighborhood with residents of all income levels — a healthier and sustainable neighborhood by incentivizing public transit and bike and pedestrian use while addressing (the Sustainability/Climate Action Plan's) climate change goal," Price said, in supporting the more aggressive growth scenario.

Most of the Ventura residents who addressed the council, however, pushed back against concepts that significantly raise building heights and density unless the new developments are dedicated to true affordable housing. This does not include "workforce housing," a term that the city has applied to residential projects made up primarily of small units such as studios, with the idea that these projects would naturally be more affordable.

The council has only approved one "workforce housing" project to date — a 59-apartment complex that is now known as AltaLocale on the corner of 2755 El Camino Real. After winning various zoning concessions, including a reduction in parking requirements, the development now brands itself as "luxury living," with its small studios currently listing at $3,368 per month and one-bedroom apartments going for $4,345.

Given the high rent costs, the council agreed Monday to no longer include "workforce housing" as a category for which the city would provide zoning incentives. Rebecca Sanders, moderator for the Ventura Neighborhood Association, was among those who supported the move away from workforce housing.

"They wouldn't be affordable to graduate students, teachers, day care employees, health care employees, retail employees, retirees — people who really are the heartbeat of our community and the people who we really need housing for," Sanders said.

The council did, however, agree that it would be appropriate to raise the city's 50-foot height limit for deed-restricted 100% affordable housing projects. As part of its vote, the council directed staff to explore new height limit that would be appropriate for a five- or six-story affordable-housing project.

The Ventura plan will continue to advance in the coming months, with staff further refining the planning document based on Monday's direction. In addition to exploring different height limits, staff and consultants will also further evaluate revising parking standards to make residential development more feasible. The council firmly rejected on Monday staff's suggestion to lower parking standards to a minimum of 0.5 spaces per residence. Current rules require one space per unit for studios or one-bedroom apartments and two spaces per unit for apartments with two or more bedrooms.

While the council broadly supported the idea of providing incentives such as Caltrain passes and bike amenities to reduce driving in the area, they questioned whether these elements of the proposed "transportation-demand management" (TDM) program will actually reduce car ownership and obviate the need for parking. The council directed city planners to delve deeper into this topic with the Planning and Transportation Commission before making a final decision.

"I'm more open-minded to incorporating TDM measures as reductions, certainly for traffic impacts and perhaps for parking, but not on faith," said Mayor Pat Burt, who pushed back on staff recommendations on parking.

Another option that the city will continue to explore in the coming months is amortization of existing office uses, with the idea that they would be replaced with residences over time. Keith Reckdahl, an incoming member of the Planning and Transportation Commission who served on the Ventura working group, argued that amortization is necessary for the city to achieve its goals for housing in the area.

"Without amortization, landowners will continue to milk their office space forever," Reckdahl told the council.

One idea that proved universally popular among council members and residents is the prospect of naturalizing Matadero Creek, which currently a concrete channel. Cedric de la Beaujardiere, a strong proponent of reverting the creek to its natural state, said the city should make restoring the natural habitat at the creek a top priority.

"Here we are lucky that the creek is mostly bordered by open parkland and parking lots," Cedric. "We should there seize the opportunity to fully restore the creek and not allow development to encroach upon and prevent future restoration."

Burt agreed and noted that riparian corridors are critical for fostering biodiversity.

"We have generations of kids and adults who are living in an environment where they don't have a natural setting nearby," Burt said. "For those of us who were able to walk a few blocks and walk down a creek bed and have that experience, it is really important as we go forward to take advantage of some opportunities we have to restore natural habitats, especially riparian corridors."

Even that effort, however, is expected to unfold slowly, if at all. The city's last estimate for the creek restoration pegged the cost of the project at about $16 million. Staff warned, however, that the number has likely gone up significantly since 2018, when the city last analyzed the project. Cormack said that given the high cost, she would not want to "get people's hopes up" about the project until there is a plan to fund it.

Filseth also suggested that whatever plan the council adopts will take a long time to unfold.

"We ought to be thinking in terms of decades here, because what we do here is going to persist and shape this neighborhood for decades," Filseth said. "And that gives us latitude to implement pieces as land and money become available.

"We don't have to get it all done next year or the year after, and so forth."