Housing bonanza on the way?

New settlement could transform prime area of the city into much-needed homes

For nearly a decade, San Jose had been paralyzed from building any new housing in one of the most prime areas of the city because of years of legal squabbling with neighboring cities and Santa Clara County.

But a new settlement agreement approved by San Jose and Santa Clara this week marks a critical step toward finally unlocking the potential construction of tens of thousands of new units in North San Jose in the coming years.

In an agreement unanimously approved by the San Jose City Council, the city is set to invest $38.5 million in transportation improvements aimed at reducing congestion in North San Jose and its neighboring communities, including the Montague Expressway/ Interstate 880 interchange and widening of Montague Expressway to eight lanes from North First Street to Lick Mill Boulevard. In exchange, Santa Clara has agreed not to sue San Jose as it builds up the area.

“We're very happy that the council and city of Santa Clara have become a partner in solving the housing issues in our region,” said San Jose Councilman David Cohen, who represents North San Jose. “It's a great milestone to have that behind us.”

In a letter to San Jose leaders, Santa Clara Assistant City Manager Manuel Pineda said the city was “extremely supportive” of boosting the county's housing stock and that it has “worked diligently with San Jose” to help it achieve its housing goals.

“Santa Clara has always been and continues to be committed to providing transportation infrastructure that supports new housing in Santa Clara, San Jose and the county,” he wrote.

The deal culminates nearly two decades of legal battles between the two cities — a breakthrough celebrated by elected officials on both sides. Even so, it has not quelled everyone's concerns.

Although the settlement was intended to be a threeparty agreement with San Jose and both the city of Santa Clara and the county, Santa Clara County officials have not signed off on it.

Santa Clara County Counsel James Williams said the county is “not interested in a check” and instead wants to see the completion of projects that San Jose promised to carry out years ago but are still outstanding, including the construction of a flyover at Trimble Road and Montague Expressway.

“Our expectation is simple — it's that the city made a promise in a legally binding settlement in 2006 and it needs to keep that promise,” Williams said. “Our concern here is truly specific to ensuring that the infrastructure is in place to ensure that people who then come to live in North San Jose can get to where they need to go — and that is something that all public entities should care about.”

North San Jose, which officials define as the general area between Highways 237, 101 and 880, has long been viewed as an optimal part of the city to focus its growth. The area — situated along the Valley Transportation Authority light rail — is the city's largest employment district and has a sizable amount of vacant and underutilized industrial land ripe for conversion into housing and office space.

In 2005, the city adopted the North San Jose Development Policy, which sought to add 26.7 million square feet of new office and industrial development, 32,000 housing units, 2.7 million square feet of retail and commercial space and 1,000 hotel rooms in the area.

Milpitas, Santa Clara and Santa Clara County sued San Jose shortly after, arguing that the city had failed to account for the traffic issues that such significant increased development would create for neighborhoods surrounding the North San Jose boundaries. An initial settlement deal reached in 2006 forced San Jose to divide up its development plan into four phases, capping developers in each phase to roughly 8,000 new housing units for every 7 million square feet of new commercial space built. San Jose also was required to make specific transportation improvements like widening Montague Expressway and improving Highway 101 interchanges.

While developers quickly claimed the first 8,000 housing units, the policy's approach prevented the city from moving forward with more housing until the commercial space cap was reached — a threshold that the city still has yet to hit.

The move by San Jose leaders this week not only spells out the city's funding contributions to transportation improvements but also eliminates the North San Jose Development Policy, freeing the city of building caps and restrictions that tied housing construction to commercial development.

Mayor Sam Liccardo said in an interview May 19 that the city had made “a great step forward” toward building critically needed housing. However, he added, “all of this is for naught if the county of Santa Clara ultimately decides it wants to litigate instead.”

In a letter to San Jose leaders, Williams threatened legal action but added that it was not the county's preferred course of action.

Councilman Matt Mahan called the county's response “disheartening and frustrating” and urged the city and county to expedite their negotiations.

“In the midst of a housing crisis and rising homelessness, I think it's critical that we commit to getting to a resolution and recognize that not everyone is going to get everything that they want, including us,” Mahan said. “Because if the county is threatening to sue, that creates an environment for too much uncertainty for anyone to move a project forward.”

Developers already are lining up to get approvals for new housing developments in North San Jose, including SummerHill Homes' proposal to transform an old office building into 329 residential units at 210 Baypointe Parkway and Charities Housing eying a 440unit affordable housing community at 71 Vista Montana for families and people at risk of homeless.

The city's original plan for North San Jose set a goal that 20% of housing units built would be affordable, but the initial 8,000 were entirely market-rate. Still, San Jose leaders said this week that they planned to uphold that commitment.

“This area represents the valley's greatest opportunity to move the needle on our affordability crisis,” Liccardo said.