March 15, 2019

San Jose: Council moves forward with Commercial Linkage Fee study


On March 12th, the San Jose City Council voted 10-1 to move ahead with a Nexus and Feasibility study for a Commercial Linkage Fee that would provide an ongoing source of revenue for affordable housing. With this action, the council directed staff to commission the study and return with recommendations on appropriate fee levels for different types of development in different parts of the city. The council had approved moving forward with the study in December, but asked staff to come back with a timeline, budget, and initial scoping for how the study would be conducted.

Initially raised in 2015 as a critical source of ongoing local funding for affordable housing, the fee discussion has often pitted advocates for affordable housing against those concerned about the potential impact of fees on non-residential development in the city. Over time a council majority has emerged to proceed with a feasibility study that will help to frame the council’s discussion about fee levels that might find a balance between the two goals.

CLFs have become a standard tool in a city’s housing toolbox. Just last week, the Milpitas City Council voted unanimously to join neighboring cities including Fremont, Palo Alto, Mountain View, Cupertino, Sunnyvale, and Santa Clara to adopt this tool. Adopted fees range from a low of $8 in Fremont and Milpitas to a high of $35 in Palo Alto.

Because the San Jose study will be far more complex than any other completed in the region – a reflection of its size, different geographic submarkets, and the expectations of significant new commercial investment – the Mayor along with Councilmembers Peralez, Carrasco, and Jimenez asked for additional structure to the study including a sensitivity analysis to account for potential changes in market factors in the future, and a requirement that the type of properties studied would cover the basic development types and the potential that the economics of high-tech office might differ from current models.  The council also directed staff to shorten the timeline for the study and return by the end of the year, or earlier if possible.

Given the history of disagreement on the issue, Tuesday’s debate was remarkably amiable, and the 10-1 vote showed broad support for moving ahead with the study even as concerns about the eventual fee remain.

SV@Home circulated a comment letter, signed by over 15 organizations and individuals, which recommended many of the points eventually adopted by council.  The struggle to get a robust Commercial Linkage Fee adopted in San Jose is far from over.  We will stay engaged as the consultant is hired and the full scope of the study is developed.  The next opportunity for public comment is likely to be a progress update to the Community and Economic Development Committee in the fall, but the real push for the affordable housing community will come when the study comes back to council to consider actual fees.  Stay tuned, we will keep you up to date.