January 31, 2019

San Jose Commercial Linkage Fee


Update 3/8/19:

Tell San Jose: Study Commercial Linkage Fees to Fund Affordable Housing!

We are asking you to do two things to stand in support of Commercial Linkage Fees in San Jose:

  • Sign on to our letter to the City Council – HERE
  • Come out to the City Council Meeting on Tuesday, 3/12,  to voice your support directly to the Council (Item 4.3, 4pm or later, Council Chambers, San Jose City Hall, 200 E. Santa Clara St)

Quick Background on the CLF and key issues in San Jose

On Tuesday, San Jose City Council will be making decisions on the scope and timeline of their Commercial Linkage Fee study.

Commercial Linkage Fees have long been considered a critical tool for local governments to fund affordable housing.  Cities typically charge commercial developers these fees to offset the impact of new commercial development on the need for new housing for workers. Palo Alto, Santa Clara, Sunnyvale, Cupertino, Milpitas, and Mountain View all have CLF ordinances. That leaves San Jose as the last big city in the County without a CLF ordinance.

The affordable housing community and a number of Council members have been calling for these studies, as the first step in approving the fees, for years.

We are calling on the council to move forward with the study as quickly as possible, while considering 3 of our concerns

  1. It is important to consider the full variety of development types in this study, and not leave out important prototypes such as high-tech office, retail, industrial, and office that were identified at the council’s December 11th meeting
  2. The study must include analysis of the impact of potential shifts in development costs, or income potential, on the feasibility of fees at different levels.   We can’t know for certain what commercial development will look like in San Jose five years from now, but we must explore the potential impacts of planned changes already underway.
  3. Lastly, we request that the council consider how it can reduce the 18-month timeline for preparation of these studies. Waiting until June of 2020 to make this decision—knowing that it will take more time to prepare an ordinance and begin collecting any fees—does not recognize the severity of the housing crisis we face. The current pipeline for commercial development in San Jose is significant. We cannot afford to miss this opportunity to address the additional demands for affordable housing this development will produce.

Please consider coming out and giving testimony about how important the CLF is directly to Council. The City Council session will start at 1:30 next Tuesday, and while it is difficult to predict the timing of action on any given item, we don’t expect this item to come up before 3:30. Your signature is impactful, and your voice at council would be even more so.

Full Background

In December the San Jose City Council voted to conduct the studies necessary to adopt City-wide Commercial Linkage Fees (CLF) as a funding solution for affordable housing.  The studies, including a standard Nexus and an in-depth Feasibility study, will provide a foundation for Council deliberation about a potential fee and appropriate fee levels.

Commercial Linkage Fees are a standard tool used by cities throughout the Bay Area to help generate much needed resources for affordable housing development.  The justification for charging affordable housing fees for non-residential development is established by a Nexus study, which looks at the ways that new jobs create a demand for housing, but don’t always pay enough to for employees to afford housing in our super expensive market.  The Nexus calculates the amount non-residential developers would need to pay to fully mitigate the impact of their development on the demand for new housing.

The Feasibility study, which will accompany the nexus analysis, will look at the potential impact of new fees on future commercial development.  This study, as approved by the Council, will explore fee levels for different types of commercial development – what would work for warehouse versus high-tech office space – and different parts of the City – what would work in more residential areas versus downtown.  The goal will be to find fee levels that generate as much money as possible for affordable housing without deterring commercial development.

Moving forward on the CLF in San Jose has been a major goal of the affordable housing community.  Staff will return to Council in February with a detailed implementation plan including a scope of work, a budget, and a timeline for the proposed studies.  While the Council action assures that the fee studies will move forward, it will be important to understand and engage about the details of the studies, what they will cover, and how they will be conducted. And, of course, once the studies are completed, the Council will need to vote to approve a CLF ordinance.

Stay tuned for further opportunities to weigh in and help ensure that we gather all of the appropriate data to inform a substantive policy discussion when the studies are completed.