When Palo Alto halted its quest to build a downtown Palo Alto garage on a Hamilton Avenue parking lot four years ago, it was in part because the project's opponents argued that the four-story, $30-million building would not jibe with the city's concurrent efforts to get commuters to stop using cars.

Since then, the city has seen a huge, pandemic-induced drop in everyday commuters, an introduction of a new on-demand shuttle service and an effort by Caltrain to electrify its tracks, a project that would bring more trains to Palo Alto's downtown train station.

The council has also adopted a sustainability plan that calls for reducing carbon emissions by, among other means, reducing car trips. The cost of building, meanwhile, has steadily gone up and what was once a $30-million project is now a $36-million project, according to estimates from city staff.

This then, may strike some like an odd time for the city to dust off the 2019 plan and get back to work on the downtown garage, which would occupy Lot L on Hamilton at Waverley Street.

Yet the City Council will consider doing just that on Dec. 11, when it considers new uses for various downtown parking lots. This includes exploring new housing projects at several downtown lots, with Lot T on Lytton Avenue and Kipling Street emerging as an early favorite for residences.

Even as city staff are recommending resuming work on the garage, a new report from the Administrative Services Department acknowledges that parking demand remains below the pre-pandemic level. A car count by the city's Office of Transportation in October showed an occupancy rate of only 45% at all downtown lots and garages at noon, down from 92% before the pandemic.

The report notes, however, that the occupancy levels return to their former levels after 3 p.m., when time limits on parking are no longer enforced.

But city staff believes parking could become more of an issue in the future, particularly in light of Assembly Bill 2097, a new law that exempts developments near transit stations from parking requirements.

"Even though there is arguably adequate parking supply to serve the current demand and there are alternative solutions to relieve parking congestion, building additional parking spaces may be warranted to serve future development (commercial and residential) in downtown, particularly in light of AB 2097," the report states.

The report also notes that future streetscape changes to University Avenue, a long-term planning effort that has yet to really kick off, "could also likely result in a decrease to the downtown street parking supply."

While these policy considerations may influence the council's decision, a bigger factor may be the city's recent defeat in court. Downtown developer Charles "Chop" Keenan sued the city in 2019, arguing that it had acted illegally when it collected parking in-lieu fees from new commercial developments (including his project at 135 Hamilton Ave.) but did not spend the money to build parking, as it is legally obligated to do.

The city won the initial lawsuit, noting that some of the money was used to design the Hamilton and Waverley garage before it was abandoned. It then lost on appeal and was forced to refund Keenan more than $900,000. (The case is now back in the Santa Clara County Superior Court, with the two sides negotiating the details of the payout.)

According to staff, the amount of in-lieu fees available for a new garage is uncertain because of the litigation, but about $12.5 million could be available for a 324-space parking structure as was previously envisioned. The fund isn't expected to grow much, given that parking requirements are now less stringent and the city can't collect as many fees to support parking efforts, according to the city.

One idea that the council has embraced is combining parking with affordable housing, a land use that just about everyone supports. Palo Alto's recently adopted Housing Element, which is now being revised, identifies housing on public parking lots as one of the strategies the city is banking on to add 6,086 dwellings between 2023 and 2031.

The council is set to get its first look at potential housing projects on Dec. 11, when it considers responses that the city has received from two nonprofit developers, MidPen Housing and Alta Housing. As this publication first reported in July, the two developers had submitted proposals to build affordable housing on some of the 12 parking lots.

The two proposals, which the city made public this week, offer somewhat different visions.

MidPen is hoping to build between 200 and 300 affordable-housing units on five to seven downtown sites. It envisions building "a series of scattered-site developments, each targeting 41 homes, sized to both fit the small sites and to maximize leverage," according to its response submitted by Felix Au Yeung, MidPen's vice president of business development.

These buildings would generally be four stories tall and fall under the city's 50-foot height limit, according to the response. They would not, however, combine housing with parking garages, as the council had envisioned. Under the proposal, the parking would be placed in a stand-alone structure on a different lot.

"By moving residential parking off-site, the apartment buildings will have residents living on the ground level and human-scale interface at the street," MidPen's response states. "We look forward to working collaboratively with the City and stakeholders to explore solutions to provide a high-quality public realm while meeting parking and housing objectives in a cost-effective way."

MidPen Housing also noted that the sites it sees as most suitable for housing are Lots A, D, E, G, N, P and T.

Lots A (Emerson Street and Lytton), D (Hamilton and Waverley), E (Gilman Street and Bryant Street), G (Gilman Street and Waverley Street), N (the Emerson/Ramona), P (High Street and Hamilton Avenue) and T (Lytton and Kipling).

Lot T, at Lytton and Kipling, is also among the favorites of Alta Housing, the nonprofit developer that recently completed construction on the Wilton Court project in the Ventura neighborhood. Alta's response similarly envisions more than 200 new affordable housing units, though its proposed projects would be somewhat taller and denser than those proposed by MidPen Housing.

Alta's plan, like MidPen's, would shift parking to a different lot to allow affordable housing to stand alone. Its proposal eyes Lot D and Lot O, which is located between Emerson and High Streets, just north of University Avenue, for new parking.

Its three potential housing projects would include two projects for families and one for seniors. One family-focused development would be located at 431 Emerson St. (Lot A), next to Barker Hotel, a 26-room housing development for individuals with extremely low incomes (30% of area median income or below). Alta, which owns Barker Hotel, envisions the new project as an L-shaped, four-story building with townhomes along Emerson Street and a building entrance on Lytton, according to the proposal.

The Lot A proposal would accommodate 57 apartments and would have a roofline at 60 feet, with a parapet reaching 70 feet.

Another project in Alta's proposal calls for 76 apartments for seniors at Lot C at 264 Lytton Ave. The five-story project would go up next to Avenidas, the city's main provider of senior services. On-site amenities would include a laundry room, bike parking, a large community room and communal kitchen, according to the proposal.

The third Alta proposal looks at Lot T, where the developer envisions a five-story building with 73 apartments, with a mix of studios, one-bedroom, two-bedroom and three-bedroom units. Like the one proposed for Lot A, it would be 60 feet tall (or 70 feet, if you count the parapet).

Both developers would offer all their units at below market level. MidPen's proposal states that its affordability targets will range from 30% AMI to up to 80% AMI, with each project average at not higher than 50% AMI. Alta Housing's family-focused projects aim to provide rental homes for residents between 30% and 60% AMI.

City staff are recommending that the council narrow its focus to Lot T, on Lytton and Kipling, which both developers had identified as promising housing sites because of its rectangular shape and size. If the council approves its recommendation, it would ask the two developers to submit "their best development proposal" for this particular lot.

"Lot T's rectangular shape configuration, relatively large size, and corner location makes it an ideal development site for an affordable large family rental housing project," the staff report states. "In addition, its relatively low usage, proximity to neighboring commercial and residential zones and distanced from the central 'busy' blocks were also (in) consideration in recommending a focus on this lot."