San Jose studies Housing Impact Fee; but vote threatened

Please attend the Sacred Heart Community Service’s Affordable Housing Forum on December 4 in support of a Housing Impact Fee for San Jose (details below).

The Bay Area is consistently ranked as the least affordable region in the country. Rents jumped by 15-20% in 2011 and 2012. In Santa Clara County, a studio rents for $1,388 per month. While the rental market is starting to show signs of calming down, the reality is that housing is still out of reach for too many working families.

One solution is to increase the supply of homes in cities and towns, near train stations and jobs. Unfortunately, this can take time. Case in point: the San Carlos Transit Village, a proposal for 280 homes near downtown and Caltrain, has been winding its way through the approval process for the last six years. It was finally adopted this November, but only after the number of homes was reduced to 233.

Another solution is to create policy tools and fee structures that support the building and rehabbing of affordable homes. Cities’ two main tools for this, redevelopment agencies and inclusionary housing ordinances, have either disappeared or been mired in legal woes. For San Jose, the loss of redevelopment equates to a loss of $40 million a year for affordable homes at a time when soaring rents threaten to push more families out of their homes. We have reached a crisis point.

San Jose, long a leader in building affordable homes, continues to step up to the plate—this time by studying a Housing Impact Fee—a fee charged to market-rate housing development to fund affordable housing programs. The hope has been that this December, the City Council will vote on a Housing Impact Fee. In the meantime, a residential nexus analysis has been drafted to help guide decision-makers.

Determining nexus

A city cannot charge a fee out of thin air—it has to demonstrate that the fee relates to the actual issue it is addressing. As stated in its executive summary, the residential nexus analysis “demonstrates and quantifies the impact of new market rate housing development on the demand for affordable housing”.

Simply put: when a family purchases a new home in San Jose, they will shop and use services in the city. Those services may be performed by gardeners, teachers, dry cleaners, and others. Those jobs tend to pay a lower wage than what is needed to rent or buy a home in San Jose.

When hundreds of new homes are built that are only affordable to those making $96,000 annually or more, the demand for services (and thereby new jobs) increases and this leads to an affordability gap. A Housing Impact Fee is one tool that can begin to close that gap.

The residential nexus analysis for San Jose identifies the maximum fee that can be placed on new market rate development. The maximum fee ranges from $14.89 per square foot for a single-family home to $24 per square foot for a high-rise condo.

San Jose also conducted a feasibility analysis to determine what home types (single-family homes, condos, etc.) could move forward with a fee while still allowing a developer to make a tidy profit. The analysis determined that not only is the rental market hot, but it can support an additional fee, which would still only place San Jose’s fees in the middle of the pack for South Bay cities like Sunnyvale, Mountain View, Fremont, and Santa Clara.

Trouble ahead

Keyser Marston Associates played it safe in their nexus study [PDF], assuming recessionary spending and lower rents, which likely understates the impacts. Despite this, at the November 20 Rules Committee, Mayor Reed and City Council Member Pete Constant questioned whether the study successfully proves nexus and be able to withstand a legal challenge. Unfortunately, this seems to indicate that the City Council will postpone the anticipated December 10 hearing on a Housing Impact Fee.

Delaying a vote on an affordable housing funding stream in the face of such dire need is heartbreaking. We need a sense of urgency to ensure that we keep communities whole and thriving.

Become a YIMBY

The greatest threat to the livability of our region is a lack of affordable homes. We need more people saying yes to homes in their backyard. A diversity of housing choices creates strong communities and we need more housing champions in San Jose, San Carlos, and the region as a whole.

Not only should San Jose move forward with a vote, the City should push for the maximum fee justified by the conservative nexus analysis. On December 4, Sacred Heart Community Service is holding an affordable housing forum with two mayoral candidates, Sam Liccardo and Madison Nguyen. Your attendance is crucial to show them that people in San Jose support this proposal and want to live in a community that supports social and economic diversity:

What: Affordable Housing Forum with Madison Nguyen and Sam Liccardo

When: Wednesday, December 4, 5:30 p.m. – 7 p.m.

Where: Sacred Heart Community Service, 1381 S. First St., San Jose

Parking: Please arrive a few minutes early to find street parking in the neighborhood.

If you have any questions, contact Michele Beasley at mbeasley@greenbelt.org.

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