November 13, 2008

City Council discusses Inclusionary Housing

By Carol Rosen
Editor

On Monday the San Jose City Council held a special meeting to discuss Inclusionary Housing, a topic that apparently leaves little room for centrists. It voted 8-2 to discuss a draft of a proposed ordinance without knowing the plan itself or its timeline.

The topic has been raised off and on through the years, since the 1990s, and this June Council member Sam Liccardo brought it up again. Meanwhile, the Housing Department is researching the subject and the council will vote on a proposal in early December. Last month, Council members Pete Constant and Pierluigi Oliverio prepared a memo to slow the discussion and to increase community input (see Almaden Times Weekly, Oct. 31 issue).

San Jose already has an Inclusionary Housing program for redevelopment areas, in which developers are required to set aside 20 percent of market rate projects for affordable housing or pay to build more affordable housing elsewhere. That translates to nearly 3,000 units in redevelopment areas with about 700 in the pipeline and 17,000 throughout the city.

In June 2007, the city directed its housing department to look at Inclusionary Housing as part of its five-year plan. “Generally we have a significant need [for affordable housing] that’s unmet and we need to consider all the tools,” said Leslye Krutko, director of housing.

“The number depends on the inclusionary ordinance,” she said, which will offer a variety of options including an in lieu fee or another development elsewhere. Her department will present its recommendations this Friday including how to frame the program, defining the pipeline for development, specific triggers, percentages and income ranges. “There will be options to developers over and above what the offsets might be, with 30 different items,” she said.

Included in that proposal are several ideas submitted by Vice Mayor Dave Cortese on Monday, as well as the results from meetings with developers, housing supporters and members of the community - in all, a four-month process.

Krutko added that the process of the project included a number of developers, who she said do work outside San Jose and meet Inclusionary Housing rules for nearby cities. “Developers are our partners. We worked closely with them and got information and advice on how a well-planned program should run to help us formulate alternatives. We need to work with them to ensure a policy that works.”

There is a need for San Jose workers to be able to afford to live in the area, she said, adding that service workers deserve to be able to buy homes, not just high tech employees. “In order to have a healthy economy, we have to have houses that all levels of workers can afford.”

The plan would include providing housing for moderate-income families with annual salaries of $80,000 to $126,000 for a family of four. Those making under $80,000 would be considered for rental properties, she said. She justifies the plan by noting that the housing department is looking to provide such housing near transit in order to reduce pollution and to meet the city’s green vision at the same time.

Three community meetings on the subject were held this month, with another scheduled for Nov. 17. Open to the general public, it will include a facilitated discussion about the housing staff recommendations for the citywide ordinance. For more information about the meeting, contact Jacky Morales-Ferrand at (408) 535-3855 or inclusionarystudy@sanjoseca.gov.

Monday’s meeting included nearly 40 people who came to speak for or against the measure. The group was made up of neighborhood leaders, developers and housing supporters. Their views were solidly on one side or the other with developers claiming economic times were too hard to provide such programs and supporters declaring these economic times require such inclusionary methods.

In a memo to council members, Liccardo wrote of a number of myths for Inclusionary Housing or Zoning. In them he explains the myth and tells his side of the story. One myth is that such programs don’t create many affordable units. Citing the city’s redevelopment program, he notes that “if this policy is ‘successful’ in some of the city’s neighborhoods, why should it be a ‘failure’ in the others?”

He counters another myth, that voluntary programs work better, with the fact that incentives do work, but that the price of housing in some other areas of the country is a fraction of the price here stating that affordable units in some places are actually market rates in those areas.

Liccardo says the myth that Inclusionary Housing policies drive up market rate prices “has little basis in fact or theory.” He cites a position paper by the Home Builders’ Association that found “’no evidence that IZ programs have had an [adverse] impact on either the prices or production rates of market-rate houses in the San Francisco Bay Area,’ where 55 cities and counties currently have IZ programs. Higher development costs do not necessarily translate to higher prices for San Jose homebuyers.”

Liccardo says that Inclusionary Housing will not scare developers away from the city constricting its housing supply. First of all the memo states “an inclusionary policy already exists in San Jose. It governs most of the redevelopment project areas. In fact, although redevelopment project areas with inclusionary requirements make up only 18 percent of the city’s land, they contain 43 percent of the housing produced in San Jose over the past five years, and an estimated 56 percent over the next five.”

He counters the myth that objective academic studies show it drives up prices and reduces supply, claiming the studies are funded by groups that do not support the measure in the first place leaving them biased.

Liccardo says that the proposal the city council approved last June omits projects already in a “multi-year pipeline” from any inclusionary proposals disputing the myth that Inclusionary Housing will hit developers when they can least afford it.

He also doesn’t buy the myth that the current market drop in prices will resolve affordable housing as median home prices decline. Citing average rents of $1,700 per month, he notes “San Jose continues to have the most expensive rents among the 25 metropolitan areas in California, and occupancy levels remain at 95.6 percent.”

Liccardo disagrees that Inclusionary Housing policies will create neighborhood deterioration. A National Association of Realtors review of data determined that “most studies indicate that affordable housing has no long-term negative impact on surrounding home values. In fact, some research indicates the opposite.” 

He also states that there are enormous differences in various Inclusionary Housing policies and that it will not adversly affect the city’s budget.