San Jose home builders will have to offer some of their new dwellings at below-market rates to ease a chronic affordability crisis under a policy the City Council approved Tuesday, but not until the market recovers from its current slump.
The new policy, approved on a 9-2 vote after five hours of council debate and a year and a half of study, would effectively extend citywide a version of an affordable-housing requirement that has long applied to redevelopment areas under state law.
Mayor Chuck Reed, who backed the policy, said he hoped it would be an acceptable compromise that would ease business and developer worries about worsening today’s hard times, and avoid lawsuits or a ballot measure fight. He and Councilwoman Madison Nguyen said they had lived in subsidized housing and appreciated the benefit to struggling families.
“I certainly understand the need for it,” Reed said. “I think we’ve done a good job of taking care of all the concerns.”
Councilmen Pete Constant and Pierluigi Oliverio opposed the policy, saying it would only burden businesses at a time of economic crisis. Oliverio drew from his own childhood experience and said others could do as his Italian immigrant parents did and save until they could afford a home.
Housing developers and business groups opposed the new rule, particularly given the collapse of the housing market and national economy.
“We view it as inefficient, ineffective and a tax on new housing,” said Jennifer Rodriguez, southern region policy director of the Home Builders Association of Northern California, who was among 40 public speakers.
Even so, developers and business groups said they could live with modifications of the proposal suggested by Mayor Chuck Reed, Vice Mayor Dave Cortese and council members Kansen Chu and Nancy Pyle, many of which were approved.
The ordinance would not take effect until the market recovers to a point where the city issues 2,500 development permits in a 12-month period, about twice the rate over the past year. Other provisions would exempt projects already in the pipeline when the new rules kick in. The council is not expected to approve the actual ordinance until next month.
Affordable-housing advocates and others including the Silicon Valley Leadership Group and the Greenbelt Alliance, urged approval, calling it an important tool for dealing with Silicon Valley’s chronic problem of unaffordable housing. Shiloh Ballard, housing director for the Silicon Valley Leadership Group, said the lack of affordable housing has for years been a top concern of local employers who complain it is an impediment to recruitment.
Tuesday’s vote to expand what officials call “inclusionary zoning” citywide followed two unsuccessful efforts in the last 20 years. The latest effort was led by Councilman Sam Liccardo. Such policies, however, are common throughout the Bay Area. About a third of California cities and 10 of 15 Santa Clara County cities have such policies, said Bonnie Mace, who chairs the city’s housing commission.
“It works and it’s been working for years,” said County Assessor Larry Stone, who promoted such policies as an elected official in Sunnyvale.
San Jose already requires builders in redevelopment areas to set aside 20 percent of their market-rate projects for affordable housing — more than the 15-percent minimum state requirement — or else pay a fee to build such housing elsewhere. San Jose has seen about 2,700 affordable units built in redevelopment areas since 1980 and about 17,000 citywide.
But Leslye Krutko, San Jose’s housing director, said a citywide policy would ensure the city meets its future needs.
“We recognize that right now is one of the worst markets we’ve ever seen,” Krutko said. “However, we believe once the economy recovers it’s likely our housing prices will recover as well, continuing to make San Jose one of the highest-priced places in the nation.”
The approved policy would apply to all new residential rental and for-sale development citywide including redevelopment areas. It calls for making 20 percent of homes in developments of 20 or more housing units available at below-market rates, although the rate would be reduced to 15 percent for developers who include the units on-site in projects outside of redevelopment areas.