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Housing Element Program 3.9A Commercial Development Incentives

At a glance

Based on auto-generated captions; names and numbers may be misheard.

  • What: Housing Element Program 3.9A calls for amending the municipal code to cut commercial floor area allowances or add incentives at strategic locations, shifting the economic benefit of redevelopment from commercial toward housing.
  • Where it stands: on 2026-10-13 the Policy and Services Committee voted 3-0 to recommend that the City Council find the program's intent is being met through other measures, with no further cuts to commercial allowances.
  • Next: staff return to the committee in 2027 with a construction labor standards ordinance (possibly including project labor agreements) for private office development and city-owned projects, not housing.

Staff recommendation

  • Find that existing measures (housing incentive program, the downtown and San Antonio Road area plans, state housing laws) are shifting development toward housing, and that further limits on office would not produce more homes.
  • Review commercial linkage fees in the ongoing development impact fee update rather than a separate study.
  • Consider added building standards for new offices in the 2028 building code update.
  • Economic development staff: Palo Alto office vacancy was about 15.7% in the second quarter of 2026, there is already an annual office cap of 50,000 net new square feet in the downtown, California Avenue and El Camino Real areas, and labor requirements would affect project finances.

Labor standards discussion

  • Direction from the March 10 committee meeting: project labor agreements, extra building standards, a higher linkage fee. Staff said the City cannot require union labor on purely private projects but can set labor standards such as apprenticeships and health care, and recommended civil enforcement (no city cost) over city administration or self-certification.
  • Vice Mayor Stone: citywide scope, a size threshold (perhaps 10,000-15,000 square feet), include city-owned projects, exclude housing, see data on enforcement cost and other cities.
  • Councilmember Reckdahl: supports the staff recommendation; prefers self-certification with big fines to civil suits; wants the office-versus-housing revenue study updated, likely with the comprehensive plan update (current plan runs to 2030).
  • Chair Lythcott-Haims: wants to wait for data from Berkeley's hard hats ordinance (no permitted project has used it yet, and costs are expected to run 18-25% higher than non-union labor); favors an apprenticeship pathway from local high schools and a lower size threshold than Berkeley.

Status and next steps

  • Open: the committee vote was 3-0 (Reckdahl, Stone, Lythcott-Haims). It goes to the City Council for the finding; the labor standards item returns to the committee in 2027.

Sources

Discussion time

About 47 minutes across 1 meeting (from transcript timestamps; approximate).

Meeting Minutes
2026-10-13 - Policy & Services Committee Special Meeting 47

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