Palo Alto, CA, has balked at an ambitious proposal to crack down on billionaires creating multiproperty compounds, such as Mark Zuckerberg’s highly controversial 11-home spread.
The Palo Alto City Council on Monday rejected a motion put forward by Vice Mayor Greer Stone and Councilman Keith Reckdahl to impose a series of restrictions on construction timelines, prolonged vacancies, and the use of private security guards.
“Properties within these aggregations are often left vacant for extended periods, either awaiting redevelopment or maintained as non-primary residences,” stated a memo outlining the proposal cited by Palo Alto Online. “This practice reduces the availability [of] housing stock in Palo Alto at a time when the city is trying to accelerate housing production and address affordability concerns.”
The initiative tried to fix a real problem with the “wrong tool,” Alexander Kalla, a San Francisco Bay Area–based real estate agent who works with high net worth clients, tells Realtor.com®.
“Nobody wants their block to turn into a construction zone for a decade,” he says. “But the way this was written had some serious issues.”
First proposed late last year, the initiative specifically targeted residents purchasing three or more homes within a 500-foot radius. It was an apparent shot across Zuckerberg’s bow, after the billionaire Meta CEO raised hackles in his neighborhood of Crescent Park by buying up multiple adjacent properties since 2014 to the tune of $112 million.
Zuckerberg’s yearslong ambition to cobble together a massive private family estate sparked outrage among his neighbors, some of whom likened the tech mogul’s army of construction workers to an occupying force, as the New York Times reported last year.
Reckdahl and Stone’s plan also would have empowered neighbors to sue compound owners like Zuckerberg for violations directly—a contentious provision that ultimately helped sink the motion this week.
“We’re asking regular citizens to have the money and gumption to go up against the billionaires,” said Councilwoman Julie Lythcott-Haims, one of the proposal’s critics.
Kalla agrees, saying that while a policy allowing legal action in theory sounds like a check on bad behavior, in practice it would have likely backfired.
“It would have created neighbors against each other and kicked off years of litigation,” he says. “That’s exactly the opposite of the quiet, tight-knit community feel people are paying $10 million-plus to be part of.”
At Monday’s meeting, Councilman Ed Lauing voiced concerns that the “billionaire compound” ban would impinge on private property rights. But Councilman Pat Burt went a step further, suggesting that targeting certain homeowners is “really inappropriate and legally questionable.”
The real estate agent Kalla says Burt’s reaction aligns with his Bay Area clients’ views on homeownership.
“Telling them who they can sell to, or how many lots next door they can own, feels like government overreach, and that makes people nervous about buying here in the first place,” says the agent.
Reckdahl stressed that the goal of the proposed reform was to protect the character of the community rather than target deep-pocketed residents.
“These wealthy people bought in Palo Alto because they like the same things that we do. They love the parks; they love the quality of life,” he said during the meeting. “And unfortunately, some of their actions are degrading the very things that attracted them to Palo Alto. So we really want to protect the neighborhoods and keep it livable, but we don’t want to be punitive.”
Stone, who has been a vocal critic of Zuckerberg’s real estate shopping spree, said neighbors are bristling at property aggregation because it alters the social fabric of their blocks.
Speaking during the public comment portion of the meeting, Michael Kieschnick, Zuckerberg’s neighbor, warned of “copycat compounds” that are likely to become a trend.
“What has happened to our neighborhood has left a blueprint that is easy for anyone else to follow,” he said.
Elsewhere in the Bay Area, OpenAI CEO Sam Altman has pieced together a similar four-property sprawl worth over $65 million in San Francisco’s tony Russian Hill enclave.
Council opts for a pared-back approach
Ultimately, the council settled on a much tamer course of action, agreeing to review regulations on construction, home vacancies, private security, as well as the “ghost homes” that are bought as investment properties and then left unoccupied for years in the middle of a housing shortage.
Kalla applauded the council’s decision to step back and study construction impact and vacancy rules citywide.
“Fix the noise, parking, and timeline problems for everyone, and the compound issue mostly solves itself,” says the agent. “You don’t need a law aimed at one tax bracket.”
If the proposed crackdown on compounds were adopted, Kalla says it could have stifled Palo Alto’s economic growth in the long run.
“If a new-money tech founder is deciding where to put down roots and sees a City Council writing custom rules aimed at people like them, they’ll just take their $50 million build to Portola Valley or Atherton instead,” he notes. “That’s the real risk—not an exodus, but a slow chilling of new investment.”
Kalla also points out that ambitious construction projects favored by the super-rich are more than just property tax line items.
“They employ hundreds of local contractors, architects, designers, landscapers, and household staff,” he says. “Pushing that work out of Palo Alto would hurt a lot of small businesses that have nothing to do with billionaires.”
