Fees for affordable housing passed
Commercial developers will be charged linkage fees for projects
After years of controversy and debate, San Jose finally is imposing new development fees that many residents believe are long overdue and could help remedy the housing crisis that large businesses and developers, in part, created.
“It seems to be very clear that there’s never going to be a good time to do this in some folks’ eyes,” Council member Sergio Jimenez said during a San Jose City Council meeting Tuesday. “I’m very excited about whatever money — in the present and in the years to come — is going to be derived from this fee so we can make sure that everyone can continue to live in San Jose and grow in San Jose.”
Following nearly three hours of spirited debate that extended past midnight, the council decided in a split 7-4 vote to begin charging commercial developers with linkage fees to fund affordable housing projects.
The new fees come amid a global
pandemic and economic fallout that some fear could lead to abandoned construction projects and more job losses.
However, Council members Sylvia Arenas, Magdalena Carrasco, Maya Esparza and Raul Peralez dissented, siding with dozens of residents and housing advocacy groups that argued the fees were not high enough to make a significant impact.
Under the new fee structure, developers of downtown office buildings more than 100,000 square feet will have three payment options: paying $12 per square foot upon the certificate of occupancy, $15 per square foot in phases or no fee if the developer agrees to build a certain number of affordable housing units equivalent to the applicable fee.
The fees for the development of other commercial buildings, such as industrial projects and residential care facilities or office buildings in other areas of the city, are much lower — between $1 and $3 per square foot — and vary based on the location and the type of development.
The funds generated by the fee, which the city estimates will bring in roughly $14 million over the next three years, will be used to build and fund affordable housing projects — a category where the city is severely lacking.
San Jose has met 94% of its market-rate regional housing goal, yet only 18% of its affordable housing goal. The city’s housing department estimates that it would need to generate an additional $400 million to meet a city goal of building 10,000 affordable housing units by 2023 and fund the remaining 4,300 units needed.
As developers and tech companies, such as Mountain-View based Google, are pouring more money into San Jose than ever before, longtime residents are getting pushed out of the area amid rising rents and a crippling shortage of affordable housing units.
But though advocacy groups, residents and council members have been calling on the city to adopt these so-called “commercial linkage fees” for years, many were frustrated this week by the dollar amount settled on.
Reports from a nexus and feasibility study released earlier this summer by city-hired consultants Keyser Marston Associates called for fees that ranged as high as $177 per square foot — more than 10 times higher than the new San Jose fees. San Francisco, for comparison, charges developers of large office projects about $63 per square foot — more than four times higher than San Jose’s fee.
Deputy City Manager Kim Walesh said that the fees proposed by city staffers, which peaked at $10 per square foot, were an attempt to “balance the tension between the serious ongoing need for affordable housing and serious economic uncertainty brought about by the COVID-19 pandemic.”
“The fee levels still enable nonresidential development and do not impede economic recovery while generating new funding for much-needed affordable housing,” Walesh said.
Still, the fee levels approved by the council didn’t seem to appease people on either side of the aisle — both the longtime supporters of commercial linkage fees and the business groups adamantly opposed to the plan.
Resident Sandy Perry, executive director of the Affordable Housing Network of Santa Clara County, said the fee levels “appear to be more of a public relations gesture than a serious affordable housing program.”
“Any fees that are lower than the fees listed in the nexus study is by definition a plan to aggravate and worsen the San Jose housing and displacement crisis,” Perry said. “The fees proposed in the mayor’s memo are so low they’ll displace tens of thousands of residents, especially Black and Brown residents.”
Meanwhile, Scott Knies, executive director of the San Jose Downtown Association, took issue with the fact that the fees for downtown office developments were five times higher than those on office developments in other areas of the city, including the booming business areas in North San Jose and around Santana Row.
“The commercial linkage fee, while raising much-needed funds for affordable housing, is also a subsidy to build large office outside of downtown and continue San Jose’s pattern of disconnected urban sprawl,” Knies said after the meeting.
The linkage fees passed this week are the result of years worth of discussions and advocacy from housing groups. In 2015, the council voted 7-4 — with many of the same council members voting against it this time — to shelf the idea of commercial linkage fees. Mayor Sam Liccardo, who was in his first year in office at that time, indicated that he wanted to hold off on implementing such fees until San Jose reaches a ratio of one job per employed resident.
The new commercial development fees will become the second recently added affordable housing funding stream for the city. In November, voters passed Measure E — a tax on the sale of San Jose properties worth $2 million or more — that city leaders have vowed to put toward building affordable housing and addressing the city’s homeless crisis.
City officials estimate the new tax would generate at least $22 million during a recession year.