How a Single-Story Overlay Zone May Affect Your Neighborhood

Joseph Eichler built 2,700 homes in Palo Alto, more than in any other city in America. These beloved architectural gems have found themselves in the spotlight of a controversy in Palo Alto and surrounding cities. The debate is about whether homeowners should be allowed to build two-story homes in neighborhoods that, originally, were solely composed of Mid-Century Modern single-story homes. This battle has culminated in two Palo Alto neighborhoods recently becoming single-story overlay (SSO) zones, preventing future construction of any two-story homes within those areas. This article explores how a neighborhood can petition to become an area with an SSO and whether precluding construction of two-story homes benefits or harms future resale value.

Two major factors drive neighborhoods to become SSO zones. The first factor considered by Eichler owners is the loss of privacy that may occur if they are surrounded by two-story homes like those being built throughout Silicon Valley. The wonderful walls of glass in Eichlers that invite the outside in can also allow towering neighbors to peer right into the rooms, resulting in a proverbial fishbowl. Second, Eichler owners worry the delightful consistency of their neighborhoods, as well as their look and feel, is being disturbed. Singlestory homes with low-slung roofs, juxtaposed with large Mediterranean or Craftsman houses, seem architecturally incompatible.

Before a Palo Alto neighborhood can become an SSO zone, two important criteria must be satisfied. First, 80 percent or more of the homes within the proposed boundary must currently be single-story. Second, at least 70 percent of homeowners within the boundary must sign the petition. Both of these criteria were met when the Greer Park and Los Arboles neighborhoods recently opted to become SSO neighborhoods.

While the debate on becoming an SSO neighborhood may seem of interest solely to neighborhood residents, an interesting question of broader relevance is whether limiting development options will decrease or increase property values. Although limiting redevelopment to single-story homes may seem to inherently reduce new construction, there are some benefits to building a single-story home. Beyond occasionally lowering building costs, the greatest savings is in approval time. Many Silicon Valley cities, including Palo Alto, encourage singlestory construction since it has very little negative impact upon neighbors. Accordingly, single-story homes in Palo Alto are not subject to Individual Review or other time-consuming discretionary review processes. Thus, construction can begin immediately once plans and permits are complete, and the time required to build a new home significantly decreases. Combined with the assurance that new homes nearby will also be single-story, this makes the prospect of building a onelevel home much more attractive to neighbors and even some developers. Nevertheless, an important question remains—how does an SSO zone impact future resale values?

Based upon data we evaluated, South Palo Alto homes within an SSO zone do not lose substantial value, nor are they more difficult to sell. The difference between the average home sales price of an SSO zone in South Palo Alto and that of South Palo Alto in its entirety is less than 1.5 percent. The difference in days on market between the two zones is only three days.

Numbers only tell part of the story, however, and our experiences with buyers show a slight preference for non- SSO homes, which keep development and expansion options open for growing families. Nevertheless, because of the large buyer pool in Palo Alto and the demand for homes in all neighborhoods, the impact of such a preference does not appear to be material. Given the preference of many neighborhoods to remain single-story and have consistent architecture, coupled with the minimal impact on resale, expect to see a few more Eichler neighborhoods consider this option.