September 26, 2019

San Jose Council Tackles Housing During Marathon Session


On Tuesday, during the first of two scheduled “Housing Days,” San José’s City Council took action on multiple housing issues ranging from new funding sources, to ADUs, to homelessness. The second Housing Day is set for November 5th.

Commercial Linkage Fees

SV@Home and its partners have worked for years to get San Jose to adopt a Commercial Linkage Fee (CLF), a funding source that all other large jurisdictions in the area have in place. A CLF is a fee on commercial development that can be used to fund new residential development to offset the demand for housing from new workers. In San Jose, this fee could create a significant ongoing, albeit varying, source of revenue for the City’s Affordable Housing Fund.

Last fall, the San Jose Council directed staff to hire a consultant to study a CLF ordinance, and to return in January 2020 or as soon as possible with the study for Council action. The staff reported that it was behind schedule and did not plan to return until June, a delay that would potentially result in millions of lost revenue for affordable housing. On Tuesday, the Council directed staff to speed up the completion of the study by two months. The Council also acted to require that a rider be immediately added to all planning permits to notify developers that their developments would be subject to the Fee if an Ordinance is adopted prior to receipt of final building permits.

These actions are important. Dozens of new commercial developments are in the pipeline with the potential to create 125,000 new jobs. By adding a rider to the planning permits, developments that are in process now are captured and would be subject to a fee that is later adopted by the Council. Our thanks to Councilmember Raul Peralez for his strong support for the CLF and expediting the study and also to Mayor Sam Liccardo for recommending the adoption of the rider.

SV@Home worked hard to achieve this result, but we couldn’t have done it without all of you who sent letters and emails and without all of our partner organizations, including Law Foundation Silicon Valley, MidPen Housing, Sacred Heart Community Service, EAH Housing, Destination: Home, Working Partnerships USA, First Communities Housing, Affirmed Housing, Charities Housing, and Housing Trust Silicon Valley. Read our letter here.

San Jose Revenue Capture Agreement with eBay

Last year, the U.S. Supreme court issued a major ruling that expanded the ability of states to collect sales and use taxes from online sales. As a result, on line retailers like eBay now must collect and manage sales taxes from all of their sellers.  So what does this mean for housing?

On Tuesday, the Council approved a revenue capture agreement between the City of San José and eBay that would enable the City to collect a large percentage of these new sales taxes. It is expected that the amount collected could be as high as $29.5 million. SV@Home advocated that these revenues should be directed towards addressing the City’s affordable housing shortage. Councilmembers Carrasco, Esparza, and Jimenez put forward a memo that made this ask. As a big victory for affordable housing, the Council acted to prioritize both affordable housing and neighborhood services for these funds when budget discussions begin in March 2020. Read our memo here.

Diridon Affordability Targets

In prior action, the San Jose’s Council adopted a 25% requirement for affordable housing in the Diridon Station Area. (Note that some are now saying this is a goal. SV@Home does not concur with this position.) The Housing Department is in the process of developing a Housing Plan for the Diridon Station Area that will determine the number of homes and how the affordability requirement can be met. Already in the Diridon Station Area, 35% of the units under construction are affordable, so we believe the 25% requirement is a reasonable and reachable target.

On Tuesday, the Council directed the Housing Department to include an analysis of various options for reaching the 25% requirement, including studying the potential for up to 45% Extremely Low Income (ELI) housing units (of the 25%), as part of the upcoming Plan. SV@Home has put forward our position that the Station Area needs to include at least 10,000 new homes, with affordable housing opportunities for a full spectrum of lower income households including those with extremely low incomes.  This is a critical discussion we will be following closely.

Downtown High Rise Exemption

In 2007 and 2012, the City Council implemented a Downtown High Rise Incentive Program to create the opportunity for more residential construction in the Downtown Core. High rise development has moved forward slowly, with the costs of construction, lender requirements, and risks of development making it a challenge for developers to build. Under the incentive program, various city fees were waived or reduced. One of these fees—the Housing Impact Fee, which provides funding to the City’s Housing Fund for development of affordable homes—was waived. To qualify for the incentive, residential units must receive a final building inspection no later than December 31, 2020. There are nine developments now at some point in the development process that are challenged to meet this date.

Following a long discussion, the Council voted 6-5 to accept staff’s recommendation to extend the final date to December 31, 2023. While SV@Home is very concerned about actions that exempt market-rate development from meeting affordable housing requirements, we recognize that in the current market, the cost challenges facing high rise, steel and concrete construction make it very challenging for these housing developments to move forward. SV@Home reluctantly supported the extension, which is limited to these nine projects. We also called for a plan for how to replace the affordable homes that would have been created assuming that these nine developments do move forward. These kinds of tough choices add fuel to our calls for a diversity of funding sources for affordable housing, including a robust commercial linkage fee and efforts to place an affordable housing focused revenue measure on the March 2020 ballot. Read our letter here.

Amnesty Program for ADUs

The Council also considered a proposal for an amnesty program that would enable homeowners with ADUs that do not have permits to apply to the City to make them legal. This program, which has been on the Council’s priority list for some time, is an effort to bring unpermitted ADUs into compliance with existing City codes. It is unknown how many illegal ADUs exist in the City, but the staff report indicated that over the years more than 750 ADUs have been removed from the housing stock because they were illegal. Recent State legislation has made it easier to build ADUs and many of these formerly illegal units would likely have been easily updated today to meet requirements.

The Council approved a memo from Mayor Liccardo, and Councilmembers Carrasco, Arenas, and Foley directing staff to complete additional analysis and return to the Ad-Hoc Committee for Housing Construction and Development Services and Council with a full report. SV@Home supports adoption of an Amnesty ordinance to protect a vital source of housing, particularly for lower-income residents. We asked the Council to focus on health and safety, not building code, and to waive all fees. We will continue to follow this and advocate for ways to incentivize owners to come forward so that we can ensure that the units are safe but are not lost to the housing stock. Read our letter here.