Palo Alto council adopts ADU code update to comply with state guidance; asks staff to study bigger ADUs and condo conversions

The Palo Alto City Council voted unanimously May 12 to adopt a revised accessory dwelling unit (ADU) ordinance that staff said brings the city's local code into compliance with recent guidance from the California Department of Housing and Community Development (HCD). The ordinance clarifies where local objective standards may apply and removes provisions that HCD found inconsistent with state ADU rules.

Garrett Sauls, principal planner with Planning and Development Services, summarized the changes staff proposed after HCD raised compliance questions. Major corrections included removing local incentives or penalties that cannot legally apply to units built entirely under state ADU/JADU provisions, clarifying tree-protection and historic-resource language for properties where local rules still apply, and aligning the code's objective standards for kitchens and bedroom layouts with HCD expectations.

The ordinance adoption was procedural and intended to ensure the city does not apply invalid requirements to ADUs built under state law. In discussion council members noted that ADUs have become an important housing source in Palo Alto; staff reported more than 250 ADU permits issued in recent years and an expectation of continued growth under state law.

Separate council direction to study further reforms

After adopting the ordinance, council members debated and then approved (6-1) a separate direction asking staff to analyze additional ADU policy reforms and report back through the Planning & Transportation Commission and to council. The requested analysis should be coordinated with the city's SB 9-related work and the housing-element schedule. Council asked staff to consider, at minimum:

- Whether to increase the maximum size allowed for ADUs with two or more bedrooms (discussion during the meeting referenced a target in the 1,200-square-foot range as part of SB 9 / missing-middle work); - The possibility of condominium conversions or separate conveyance for ADUs so owners or residents could obtain lending against an ADU; and - Options for how impact fees are applied to ADUs (staff noted the city already exempts very small ADUs but the fee structure is a recurring subject of public comment).

Why it matters

The HCD-directed ordinance update was narrowly focused to eliminate conflicts between local code and state ADU/JADU provisions. The follow-on study the council requested is wider in scope and could shape whether ADUs in Palo Alto remain small caregiver units or are encouraged, through size limits and legal mechanisms, to function as standalone starter homes (a subject several public commenters raised). Council members emphasized the need for more analysis on neighborhood impacts, tree protection and historic resources before making further changes.

Public comment

Several residents and housing advocates urged council to go further. Speakers asked the city to allow larger ADUs, to explore condo-conversion mechanisms that make ADUs mortgageable, and to reduce or waive impact fees that can make ADU construction financially difficult for homeowners. Staff advised those are substantive policy changes that will require time and commission review.

Next steps

Staff will fold the council's direction into related SB 9/housing-element work and return with options and an analysis to the Planning & Transportation Commission, then to council; staff noted the SB 9 work is on the housing-element implementation timetable and that the ADU follow-up will be scheduled consistent with that program.

Ending note

Adoption of the ordinance itself was unanimous and intended to ensure Palo Alto's permitting and review processes comply with state law. The council's additional directive signals openness to larger or more market-oriented ADU models but preserves a formal study process and public review before rule changes are adopted.