Clayton needs more low-income housing, says the state Housing and Community Development Department.

To meet the state-mandated requirements, the city must add 84 affordable housing units to a city that is essentially built out. The only way is to find parcels of land that can be rezoned to allow at least 20 units per acre.

The city’s housing allocations are set by the Association of Bay Area Governments (ABAG) as part of a regional plan to assure enough housing to meet the needs of low- and extremely low-income families. Cities must include a housing element in their general plans that shows specifically how they will meet the ABAG requirements.

Last month, the state rejected the affordable housing plan submitted by the city in September, saying it was 50 units short of the 84 units required. Failure to come up with an acceptable plan could result in the state withholding funds. “We’re held hostage by the state,” vice mayor Dave Shuey told members of the Clayton Business and Community Association at the January meeting. “We won’t get road money and other funds if we don’t comply.”

Two parcels are currently zoned for the up to 15-units per acre and need to be rezoned for up to 20 the old fire station at 5850 Clayton Road and a lot on High Street in the Town Center. At the Jan. 19 City Council meeting, four additional parcels came under consideration for rezoning from 15 units per acre to up to 20. The largest of these a portion of the 13-acre Easley Ranch on Marsh Creek Road. Three other parcels along Old Marsh Creek Road are also possibilities for high-density designation: the 0.93-acre Capella property, a 0.97-acre piece owned by Clayton Valley Associates and the 1.13-acre Torres-Muga Property.

All of the properties are close to the Town Center, near shopping and other affordable housing and on a public transportation route.

“One bright spot in higher-density development is that it brings more people close to downtown to spend money,” said Councilwoman Julie Pierce.

Reaction to potential rezoning from the property owners has been mixed, said Mayor Hank Stratford, who is opposed to rezoning the Torres-Muga property, which is on a steep hillside. “It’s too restrictive,” Stratford said. “The property is too visible and it impacts the owner too much.”

The city does not have to build the housing, but it must provide enough land zoned high density to meet the requirement. The higher-density zoning makes the property more valuable to investors because the potential profit is higher. But, cautions Pierce, “it also makes it more expensive to buy.”

The 20-units-per-acre designation is not a requirement, but rather a maximum for that parcel. An investor could purchase a parcel zoned for 20 units but submit a project to the city with a density less than that.

“It would be up to the Planning Commission to approve or disapprove the project based on all the factors,” Pierce explained. “But if they approved it for less than the density, the city would have to go find another parcel to rezone to replace it.”

Currently, the city’s affordable housing requirements are met in several ways. Diamond Terrace provides senior housing, Kirker Court provides independent living units and a variety of single-family units in the affordable housing program are scattered throughout the city.

While the city must update the plan every four years, it doesn’t look like Clayton’s requirements will change much for the next 30 years. “Planning is moving much more toward urban density and away from suburban development,” Pierce said.