For more than a year, the owners of Town & Country Village have been battling a proposal to build a condominium development on a parking lot just north of the El Camino Real shopping center.

Over public meetings and in written correspondence, Ellis Partners has argued that the planned project is incompatible with the area and provides insufficient parking, which would harm the shopping center. Dean Rubison, the company’s director of development, reiterated the concerns at a Wednesday meeting of the Planning and Transportation Commission, where he described the 10-condominium project as “architecturally incompatible” with the shopping center.

But with Ed Storm’s condominium project at 70 Encina Ave. now nearing the finish line in Palo Alto’s lengthy approval process, Ellis Partners is trying a different tact: negotiating with Storm on a much larger housing project that would occupy numerous sites north of the shopping center.

Rubison said his company has recently learned from discussions with the city’s planning staff that housing is now considered a permitted use on the shopping center’s parking lots. The determination, he said, is based on staff’s evolving interpretation of the city’s land-use bible, the Comprehensive Plan.

Since finding out that housing is an option, Ellis Partners has also been talking to architects, contractors and brokers to discuss a potential housing development, Rubison said. The broader owners group of Town & Country is also supporting the exploration of a residential development.

Rubinson said he also met with Storm, including shortly before the Feb. 26 commission meeting. The tone, he said, was positive. The future development would hopefully result in more than 100 housing units, with a wide range of unit sizes and affordability levels, he said.

“We look forward to further exploring the potential of a combined and master-planned project that would ensure operational compatibility with the existing and much-loved retail center and any future housing development,” Rubison said.

While Storm did not preclude the possibility of a future collaboration with Ellis Partners, he urged the planning commission to approve the application currently on the table: a three-story condominium building that earlier this month earned the endorsement of the Architectural Review Board. Storm said he will continue to discuss a larger housing development with Ellis Partners.

“I think it’s the right thing to do ultimately and we hope we’re part of that,” Storm said. “But we’re paving the way here and we don’t want to be penalized for it.

“This is a good chance not to stop something but to move something forward to show that the city really does care about housing.”

The planning commission handed Storm a mixed verdict. It voted 6-1, with Bart Hechtman dissenting, to move the application to the City Council, whose vote will represent the final step in Palo Alto’s lengthy and highly discretionary “planned home zoning” process.

But the commission also gave the project a decidedly mixed review, voting 3-3 on a recommendation to approve the development. The three dissenting members, Chair Bryna Chang and commissioners Kevin Ji and Doria Summa, criticized the development’s traffic circulation plan and argued that the building has insufficient setbacks and landscaping.

“I understand there’s a challenge given the size of the parcel, but I’m hopeful we will see something much bigger, better and grander,” Chang said.

Vice Chair Allen Akin and commissioners Bart Hechtman and Forest Peterson all supported the project, even as they welcomed the possibility of a larger housing development involving Town & Country sometime in the future. Peterson rejected the idea of opposing a project based on a “what-if and a maybe about how the lot might be used, when it’s never been used in that way.”

Akin agreed.

Hechtman strongly supported the proposal and suggested that both Ellis Partners and Storm can benefit from a partnership. He urged Ellis to give Storm’s company an “offer they can’t refuse.”

“I don’t know that you have as much background in developing housing, but if you did some sort of deal here, part of what you’d be getting is not just access to this land, but you’ll be getting the expertise of one of the more experienced residential developments in the South Bay,” Hechtman said. “There’s a real opportunity here to have the current applicant happily sit on an approval while they work on something bigger and better from their perspective, as well as yours.”

The Architectural Review Board has also been generally supportive of the project, voting 4-1 to advance it at its Feb. 6 meeting. While most board members lauded the project, David Hirsch advocated for a more comprehensive rezoning process that would allow more housing to be constructed.

“This is a large piece of property relative to other properties here and it could allow for significantly greater density of housing than 10 units,” Hirsch said at the November review.

This story originally appeared in Palo Alto Weekly. Gennady Sheyner covers local and regional politics, housing, transportation and other topics for the Palo Alto Weekly, Palo Alto Online and their sister publications.