Sunnyvale planning commission backs ordinance to trade some below‑market units for neighborhood retail in two village centers

The Sunnyvale Planning Commission on Feb. 24 voted 6‑0, with Vice Chair Davis absent, to recommend that City Council introduce an ordinance and adopt a companion resolution to modify the city’s inclusionary below‑market‑rate (BMR) rules for certain village center sites so developers can provide more commercial space in exchange for a reduced BMR obligation.

Trudy Ryan, the city’s director of community development, told commissioners the proposal responds to state housing law changes that have allowed some residential projects to be built with little or no commercial space, undermining the original village‑center vision in the 2017 land use and transportation element. “Village Centres are a newer type of land use for Sunnyvale,” Ryan said, and the program would offer a scaled incentive: projects that add between 5% and 10% commercial floor‑area ratio (FAR) would have their BMR requirement cut roughly in half; projects above 10% FAR could qualify to waive the BMR requirement for the site.

The staff report said only two village centers meet the program’s eligibility criteria: Village Center 5 (Duane Avenue) and Village Center 6 (Lawrence Expressway / Lakewood Shopping Center). Eligibility criteria include a village mixed‑use general plan designation, not being identified as a lower‑income housing element site, location north of El Camino Real, and walking‑distance analysis to other commercial. Ryan told the commission staff had active conversations and applications for those two sites.

Commissioners asked how the incentive would affect housing production and design. Ryan said Sunnyvale’s long history of an inclusionary requirement (15% for for‑sale, differentiated levels for rentals) makes the question complex; she also noted the city is studying potential larger changes to its inclusionary rules later this year. Commissioner Sroden praised the staff effort as a “creative alternative” to stem retail losses, while Commissioner Pine pressed for a timeline on the village‑center master plan work (staff said a master plan will return this summer).

Public commenters were split. Several Lakewood Village residents urged protections for existing small businesses and asked for stronger incentives and outreach to preserve neighborhoodserving retail. Lakewood resident Hillel Hajlili requested that new village‑center commercial spaces prohibit nightclubs, saying existing late‑night noise from a nearby club has been a long‑running problem. Resident Courtney Jensen asked staff to seek larger commercial FAR tiers and to prioritize small or local businesses where possible. Other commenters, including Agnes Feith of Livable Sunnyvale, cautioned against creating a precedent that would weaken the city’s 15% inclusionary rate.

Ryan clarified technical points during public comment: 10% FAR on a 4‑acre site is roughly 17,000 square feet and on a 6‑acre site roughly 26,000 square feet; staff noted those amounts are smaller than existing retail footprints at some centers. She also said the draft resolution would allow waivers and concessions similar to those available under the state density‑bonus law, and reiterated that nightclub or entertainment uses would still require separate permits under the zoning code and would be subject to review.

The commission’s formal action — moved by Commissioner Shukla and seconded by Commissioner Pine — was: to recommend that the City Council introduce an ordinance amending chapters 19.67 (inclusionary below‑market‑rate ownership housing) and 19.77 (inclusionary below‑market‑rate rental housing) of Title 19 of the Sunnyvale Municipal Code to modify requirements for qualifying retail preservation projects (attachment 2), adopt the companion resolution establishing a retail preservation incentive program (attachment 3), and find both actions consistent with the certified Land Use and Transportation Element EIR with no further environmental review required under CEQA guidelines. The motion passed 6 yes, 0 no; Vice Chair Davis was absent. The staff presentation said adopting the ordinance/resolution would reduce the number of BMR units achieved at the two eligible sites by roughly 5 to 27 units depending on project sizes and choices.

Next steps: staff said the Planning Commission’s recommendation will go to City Council on March 18. Ryan and planning staff also told commissioners they will return with a village‑center master plan later this summer that could evaluate additional zoning or site‑specific measures, and economic development staff will attempt outreach to existing small businesses on redeveloping sites where retention is feasible.

While commissioners described the action as a targeted, incentive‑based pilot aimed at sustaining neighborhood retail in two north Sunnyvale village centers, several commissioners and members of the public urged close monitoring of outcomes, additional community outreach, and further work on the broader village‑center master plan before applying similar incentives citywide.