This issue affects not only Palo Alto, but other cities/suburbs, but with less of a intensity. For suburbs close to Boston, it is really becoming hard to find a starter home, you could blame zoning laws there as well. It is happening all across the country in major cities.
The core issue is a sudden acceleration of high paying jobs can be overburdening for communities. Most high paying professional jobs do not really require you to go to the office, and I think that is the solution.
Companies should allow professionals to live anywhere they want and work from home, or a place like WeWork. Having high paying jobs more evenly distributed instead of concentrating on a few select cities would be the solution.
The only way to do that is to have the company structured so that most professionals work from home or a remote office of their choosing. It may not be easy for a company to transition to this type of system but I believe it will be right int the long term.
Many communities around the country could benefit from having high earning professionals.
That is the only long term solution to the affordability and traffic crisis.