Report: San Jose Falls Far behind Affordable Housing Targets

While San Francisco commands more headlines for its exorbitant rental prices, San Jose has struggled to meet affordable housing goals of its own.

An annual report coming before the City Council this week highlights just how far behind the city has fallen in meeting overall housing demand and what that means for Silicon Valley’s poorest residents.

In 2013, the city approved 494 affordable housing units—80 percent short of what’s prescribed by the Association of Bay Area Governments (ABAG). ABAG, a coalition of local municipalities, allocates regional housing needs and assigns benchmarks for each city. According to the association, San Jose was supposed to have built about 35,000 housing units between 2007 and this year. To date, the city has issued permits for just 46 percent of that goal, with inclusionary housing fees held up in court and redevelopment agencies a thing of the past.

The city considered a housing impact fee in December to help pay for more below-market-rate homes, but business groups argued that it could scare away developers and asked for a few-month delay to study the issue. The proposal, which would charge anywhere from $14 to $24 per square foot of new housing, is expected to come up again this spring.

Though San Jose still tops the charts as one of the priciest markets in the nation, homeownership made strong gains in 2013 with median housing prices ($685,000) closing in on pre-recession heights. Still, a median-priced home would require a downpayment of $137,000—about twice San Jose’s median household income of $80,000.

“[S]aving for a 20 percent down payment of about $137,000 for the median priced home, while paying astronomical rents … puts additional burden on first-time homebuyers and makes it impossible for many to attain homeownership,” states Laurel Prevetti, assistant director of the city’s Department of Housing and Community Development, in the report.

Recovery in the rental market, while a sign of overall economic health, puts housing prices increasingly out of reach for the lowest-income earners, she adds. Average monthly rents topped $2,000 last year, a year-to-year increase of 11 percent. That means to afford a one-bedroom unit in San Jose—so the cost wouldn’t eat up more than a third of one’s income—a person would need to earn $73,000. That’s far more than a bank teller, retail worker or preschool teacher typically earns, Prevetti points out.

It’s important to note, she says, because while the post-recession recovery has created more jobs for high-skill, high-wage workers and the low-wage sector, there haven’t been many gains for middle-class jobs. That means cities have to think more and more about how to house lower-wage earners.

“As low-wage employment increases, the challenge of housing affordability affects more households and families,” she writes.

In the absence of middle-wage jobs and housing for low-wage workers, the city has seen a “bulging underclass, an increasingly stagnant group of low-wage predominantly immigrant workers in the service sector,” according to a recent report by the Remapping Debate.

The number of households earning $10,000 or less a year doubled between 2000 and 2010, according to Working Partnerships.

“Unlike people in the middle range, these workers cannot afford a long commute, so they need to live somewhere in the Valley, but they also can’t afford the housing,” the Remapping report reads. “So how do you do that? … You double up, triple up, quadruple up.”

More from the San Jose City Council agenda for March 18, 2014:

  • Environmental consulting services will cost the city $1.2 million through 2016. The city used to employ consulting firms on a case-by-case basis, but environmental reviews became so complex that it made more sense to enter into years-long contracts. The four firms covered by the $1.2 million will be responsible for making sure San Jose is up to code as it deals with groundwater contamination, air quality, lead paint risks and other issues at various city-owned properties.
  • For two decades, San Jose has been designated by the state as a Recycling Market Development Zone, a region that provides incentives to recycling-based businesses. Every decade, that designation expires, so the city wants to ask CalRecycle to renew it for another term. San Jose can leverage this designation to apply for grant money and offer breaks to recycling-oriented businesses.
  • Council members Johnny Khamis and Ash Kalra plan to visit Washington D.C. next week as part of a Silicon Valley Leadership Group advocacy trip.
  • Seven single-family homes on the unincorporated east side of Quimby Road may get annexed into the city.

WHAT: City Council meets
WHEN: 1:30pm Tuesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose
INFO: City Clerk, 408.535.1260

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @jennwadsworth. Or, click here to sign up for text updates about what she’s working on.

6 Comments

  1. Implicit in this drivel about affordable housing is that everyone is now ENTITLED to affordable rent or an affordable mortgage at taxpayer expense; no matter that they may be a pair of high school dropouts with limited skills, with two kids and another on the way whom they cannot afford to feed properly.

    • Well, lets not let facts get in the way of your judgement. Those “Entitled” folks need a place to live, and that represents a market demand. How about the rest of us stop getting in the way of that demand from being fulfilled?

      • In a tight market, subsidized housing reduces the supply of available housing for everyone. That usually results in higher rents for everyone. If you make it more expensive to build new housing, that will reduce the amount of new housing that will be built.

  2. The general problem with programs to help the poor is that the cost is always disproportionately borne by those just over the qualifying income threshold.

    The specific problem with low income housing and San Jose, is that San Jose doesn’t share the same demographics as the rest of Silicon Valley. San Jose is by and large relatively middle class. It has relatively few upscale neighborhoods. Most of the affluent neighborhoods in Santa Clara County are in municipalities like Los Altos, Saratoga, Los Gatos, Cupertino and Palo Alto. How are those municipalities doing on their low income housing targets?

    The middle class, and especially the lower middle class in San Jose have been really squeezed in the last decade. To think that the middle and lower-middle class support the same redistribution of wealth that they did ten years ago is delusional. The middle and lower-middle class in San Jose are struggling.

  3. I noticed these articles keep saying “housing the poor.” The reality is that the “poor” they refer to are mostly WORKING people. Many have taken lesser paying jobs even though they are college educated, or are going to school to get a better job, are retired seniors trying to make ends meet, or are persons with disabilities. It is grossly unfair to characterize these folks as “poor,” lazy, or welfare bums. Many of these underpaid citizens wash our cars, mow our lawns, serve us in restaurants, work at jobs that no one else wants to do. Many homeless persons are Veterans who have served this country with honor, and who were abandoned by us when they came home.

    It’s time to stop using the word “poor” to describe folks who don’t earn enough to meet outrageous rents here in Santa Clara Valley, and start addressing rent control, fair market housing etc. We also need to do it in a way that doesn’t leave landlords/property developers, and the middle class holding the bag~

  4. Frankly, the last thing the City of San Jose needs right now is additional housing of any kind. Public safety – Police and Fire both – are unable to keep up with the current demands of the city’s population, much less whatever additional demands are imposed by additional housing of any kind. That being said, no matter how anyone feels about the affordability of housing in San Jose, there is a simple truth about low-income or affordable housing: residents in such housing consume a disproportionate amount of city services relative the revenue generated. In fact, affordable housing represents a net loss to the city coffers and to a much greater degree than market rate housing which, itself, also represents a net loss to the city in terms of the cost of the resources consumed.

    Rather than focusing on permitting housing developments of any kind – even mixed use housing developments – the city ought to be moving heaven and earth to entice businesses to San Jose of any kind. Doing so would create a trickle-down demand for even low-skilled labor of the sort that is most in need of higher wages and more affordable housing. This would, in turn, ensure that businesses ended up having to pay higher wages as labor becomes more scarce. This would be especially true if the businesses moving into San Jose were large high-tech employers.

    Only after the inevitable tax revenues increase enough to permit restoring public safety to more responsible levels should San Jose’s leadership countenance adding more housing and with a very watchful eye on how much additional ‘affordable housing’ gets added to the mix.