Palo Alto is taking steps toward a significant transformation of its downtown neighborhood through a new housing plan that targets increased residential development in the city’s transit-rich areas. For years, the downtown region has seen almost no new housing, adding only seven units since 2013 while also losing dozens of apartments due to conversions. Now, with the approval of an ambitious Housing Element and funding of $800,000 from the Metropolitan Transportation Commission, city leaders are working to reverse this trend with a focused Downtown Housing Plan.
The plan aims to introduce more residential spaces in a 90-acre area while addressing the city’s broader goal of adding 6,086 dwellings by 2031. Despite the downtown’s proximity to transit and amenities, most housing proposals have historically been directed toward south Palo Alto. The new initiative seeks to correct that imbalance by identifying viable locations for housing, particularly for seniors, essential workers, and service employees who would benefit from living in a walkable, amenity-rich environment.
A specially appointed Community Advisory Group, consisting of city officials, developers, and community representatives, has been tasked with shaping the strategy. The group’s early discussions emphasized prioritizing senior housing, citing the area’s access to healthcare, transit, and social services that can enhance well-being for older residents. They also supported mixed-age and workforce housing to accommodate diverse community needs. Members pointed out that downtown living can promote social interaction and improve health outcomes, particularly for aging residents who prefer to remain close to essential services.
However, participants also acknowledged several obstacles that complicate downtown housing development. High land costs, small parcels, strict development standards, parking requirements, and the long-standing 50-foot height limit are major barriers. Under current conditions, building residential projects downtown is often economically unfeasible. Unlike areas such as El Camino Real and San Antonio Road, where height limits have been raised to encourage construction, downtown still caps buildings at four stories, limiting project viability.
The city’s assessment report identifies the western edge of University Avenue, near the Caltrain corridor, as a promising focal point for higher density. This area, bounded by Everett and Forest avenues, was favored by participants during recent community meetings as a site that could accommodate taller, denser developments without disrupting the character of the historic core. There was also strong support for building housing on public parking lots, with city officials already moving forward on such projects, including a development on Lytton Avenue. The project will be handled by a nonprofit developer and may include additional stories to maximize housing capacity.
City leaders, including Mayor Ed Lauing, have indicated that housing must be integrated into future parking structures to make the most of prime downtown land. Lauing called it a waste not to use such locations for mixed-use projects, stressing that this plan is not an isolated effort but part of a comprehensive downtown strategy.
While zoning changes in the area are expected to be more modest compared to other districts, they will likely focus on enabling projects to be financially feasible. Consultants and staff are preparing a pro forma analysis to guide recommendations, with a particular emphasis on reforms that would allow housing to be built without requiring extensive commercial components such as ground-floor retail.
The Downtown Housing Plan divides the neighborhood into four subareas, each with distinct considerations. Preserving University Avenue’s existing character remains a top priority, but greater density is anticipated near the rail corridor and in parking lot redevelopments. Community members have expressed support for context-sensitive designs that balance growth with the downtown’s established identity.
Beyond planning for new buildings, the city is also considering infrastructure and amenities needed to support increased residential density. Improvements to public spaces, transportation, and services will be essential to make downtown attractive and livable for new residents. Planning Director Jonathan Lait emphasized that maintaining downtown as both a local and regional destination is central to the project’s success.
Although the Housing Element projected only 334 new housing units in the downtown area by 2031, the new plan aims to accelerate this pace. The city council is scheduled to review initial alternatives for distributing housing density within the planning area in September, followed by a community workshop in the fall and final recommendations in November.
With strong community input, targeted zoning reforms, and innovative use of public land, Palo Alto hopes the Downtown Housing Plan will finally spark the long-awaited residential growth in a neighborhood that has remained largely unchanged for decades. If successful, the plan will not only meet housing targets but also create a vibrant, inclusive downtown where seniors, workers, and families can thrive.
