Palo Alto’s New Ordinance


Affordability issues persist in Silicon Valley as supply and demand for housing continue to put upward pressure on prices. Demand for housing here likely won’t change soon.

Our communities boast top-performing schools, diverse populations, great weather, and access to world-class restaurants and entertainment. Thousands of employers operate here, from corporate giants like Google, Apple, and Facebook to micro start-ups where entrepreneurs are working on the next billion-dollar idea. These employees all compete for homes in what remains an extremely tight inventory of housing.

High demand and low supply have made housing incredibly unaffordable. Californians on average spend roughly 30 percent of their income on housing, and a home in California costs 2.5 times more than the national average. These numbers are even higher for the Silicon Valley micro-economy. For many of the younger generation who have grown up in these communities, housing has become too expensive to buy a home here themselves. Many continue to rent in the area or live at home, despite wanting to buy places of their own.

To address these concerns, the state legislature has passed into law Senate Bill 1069 and Assembly Bill 2299. They hope this will help ease tight inventory issues by lessening regulations on homeowners who want to build additional housing on their property. To comply with these mandates, the Accessory Dwelling Unit (ADU) Ordinance adopted by Palo Alto this last spring finally became effective on June 8, 2017.

Under the new ordinance, ADUs are defined as “attached or detached residential dwelling units which provide complete independent facilities for one or more person.” The city allows homeowners to construct a granny unit for living, sleeping, cooking, eating, and sanitation. This space could be used to house extended family, or as a rental unit. Parking restrictions and minimum lot size requirements prevented many homeowners from building these units before; however, the ordinance has eased the parking and minimum lot size requirements for building ADUs, and created an incentive with regard to additional square footage.

Single-family homes are required to have two parking spaces, one of which must be covered. However, if a home has an ADU, then a covered parking space is no longer required. This would allow many homeowners to build a separate unit, or convert their garage into an ADU without changing their current parking situation. For many homeowners who don’t use their garages for parking, this could be a sensible way to utilize the square footage.

For minimum lot size requirements, the city has allowed those in R-1, R-2, and RMD districts to develop ADUs on lots over 5,000 square feet. This allows a vast majority of homeowners to develop ADUs. To further incentivize building ADUs, homeowners who choose to develop are also allowed to build an additional 175 square feet over their maximum floor area.

For the most part, the ordinance has been viewed positively; the biggest concern for Palo Alto residents is the impact on parking. While some homeowners may take advantage of additional rental income, it’s very possible that many more will use it to create additional housing space for their families.

According to the TomTom Traffic Index, traffic in the Bay Area is some of the worst in America (San Francisco has the second-worst traffic after LA, and San Jose is the fifth worst in the nation). With more people living closer to where they work, perhaps our highways won’t be quite so overcrowded.

Undoubtedly, there are still a lot of questions from homeowners who are looking to make these changes. Many rules dictate how these units should be constructed to comply with code. Development plans will require review into the actual ordinances and likely visits to city hall.

At DeLeon Realty, we would happily help clients by going through these rules with you, and will even make a trip to the housing department