Palo Alto SB 79 loophole begets a rush on new housing proposals

City council members in Palo Alto, the center of California’s Silicon Valley, came up with a plan they hoped they might blunt a state law that took effect July 1 that requires more density near public transit.

So much for their plan.

The council opened a two-week window, betting few developers would rush in before new zoning could delay full compliance with Senate Bill 79 until 2032.

Instead, the city received nine applications for multifamily projects. In all, developers proposed hundreds of housing units near transit stops.

“It’s not like Palo Alto is becoming Tokyo overnight,” Jeremy Levine, executive director for pro-housing group Palo Alto Forward, told HousingWire TBD.

Levine said his organization pushed for the window because incremental growth was the goal, and “most of the proposals are in multifamily zones.”

The gambit illustrates a broader pattern: cities try to comply with, or dodge, state zoning laws that pre-empt local authority. Florida cities face similar fights, with lawsuits erupting over compliance with the Live Local Act. In Texas, suburban cities took steps to thwart new state zoning laws aimed at increasing housing supply.

Shaky legal ground

Leading up to the July 1 deadline, council members sought to pass an urgency ordinance that would immediately halve SB 79-permitted heights and densities. The temporary measure would let the city slow-step into full compliance by 2032.

The law allows this. Bay Area cities must adopt a permanent transit-oriented development plan by 2032 or face having to default to the state’s full standards. Non-Bay Area counties have only until January 2027. This regional carve-out gives Palo Alto far more time to comply.

Some council members wanted to declare an emergency to close any gap between SB 79 taking effect and the city’s ordinance. The move stood on dubious legal ground.

Pro-housing groups YIMBY Law and Palo Alto Forward threatened legal action. They argued state law required cities to document a specific, immediate threat to public health or safety before invoking emergency powers.

The argument drew mixed support.

“I have found no evidence presented that will allow me to make such a finding,” Councilwoman Julie Lythcott-Haims said during a June meeting on the ordinance.

Councilman Pat Burt, who had pushed hardest for an emergency declaration, rejected the notion that proceeding cautiously equated to opposition to transit-oriented housing.

“The representations by members of the community that somehow us looking at this in a deliberate manner means we’re against transit-oriented development is false,” Burt said. “And it’s demonstrably false. And we will continue to show that it’s false.”

Two council members recused themselves from the discussion because they own property in areas affected by SB 79.

The gamble

Mayor Vicki Veenker said there was a low risk of many applications being filed. Planning and Community Environment Director Jonathan Lait told the council he wasn’t sure how many applications might arrive.

Nine developers filed applications between July 1 and July 15. The projects totaled 341 housing units across roughly 395,310 square feet, mostly clustered near the downtown and California Avenue Caltrain stations.

The total is far lower than the several thousand units proposed between 2023 and 2024, when Palo Alto hadn’t yet complied with the 1982 Housing Accountability Act.

A 2017 amendment strengthened enforcement, requiring judges to award attorney’s fees to successful plaintiffs and empowering courts to fine noncompliant cities. The builder’s remedy gave developers and advocacy groups sharper legal tools to challenge cities such as Palo Alto during their noncompliance window.

“When it was in effect in Palo Alto, it essentially meant that the city had no local zoning benefit in force,” Levine said. “So, cities were required to approve projects even when they did not comply with local zoning rules, and developers took advantage of that to propose pretty big projects by Palo Alto standards.”