Op-Ed: Without Major Change, San Jose Affordable Housing Policies Are Doomed to Fail

With the collapse of public housing nationwide due to its intentionally segregationist past and woeful underfunding by both federal and municipal governments, cities across the country are facing severe shortages in stable, affordable housing.

As we’ve been reminded constantly by everything from the tent city under the freeway to the steady drumbeat of slimy politicians making cynical promises, San Jose is one of the most unaffordable cities in the country.

But the promises made have not been kept.

San Jose is still a long ways away from achieving Mayor Sam Liccardo’s goal to build 10,000 affordable housing units by 2022. Rents and home prices were still climbing steadily before the pandemic, and even the pandemic has not been enough to provide meaningful relief to lower income renters.

Why is that?

The answer lies in how the city funds affordable housing.

One of San Jose’s most important tools in addressing this crisis is its Inclusionary Housing Ordinance (IHO). The ordinance requires all new developments to either set aside 15 percent of their new housing units as below market-rate or pay into a fund which the city then uses to fund affordable housing.

But the IHO is largely useless in preventing displacement.

For example, the IHO requires developers who choose to build their affordable housing on site do so with affordability levels ranging from 80 percent of the Area Median Income (AMI), to 50 percent of the AMI. On the low end, these units would be affordable to households making roughly $50,000 per year.

However, 22 percent of San Joseans make less than $50,000, effectively shutting the most vulnerable people that the IHO was supposed to protect out of its potential benefits.

In addition, inclusionary housing policies across the country are essentially reliant on real estate speculation and high-end development.

As numerous studies have shown, market-rate developments in working class neighborhoods can actually cause rent hikes in nearby low-income apartment buildings—particularly when they lack strong tenant protections and rent control. This is due to the fact that new construction and its associated infrastructure investments inflate property values and demand near the new housing.

The only conceivable way to limit this would be through stronger rent control (which is banned under the Costa-Hawkins Act), or a strengthening of the Ellis Act, which the City Council voted to gut just last year.

Perhaps most egregiously, City Council has given grotesque tax breaks to market-rate housing developers; waiving over a hundred million dollars of in-lieu IHO fees and cutting some fees down to zero for all downtown high-rise housing during the pandemic.

Lusting after “investment” and “revitalization,” City Hall constantly prostrates itself before the power of the real estate industry; throwing workers under the bulldozer to ensure that glassy condo towers keep rising.

If we want to truly create an affordable city, we must first reject the naive notion that developers and real estate speculators want affordability. They don’t. In fact, it is in their material interests to see land values, and therefore rents, climb as high as possible.

This isn’t to say that private development should be completely shunned. There are valuable benefits that come from a healthy amount of private development. Encouraging homeowners to build denser homes on single family lots is also an important way to create walkable communities and build affordable housing.

But if we truly want to make San Jose affordable for all, then we need to invest heavily in non-market-based alternatives such as community land trusts and social housing.

The money is all here. We just need to make sure that we the people reap its benefits.

Gil Rodan is a San Jose resident, writer and activist. Opinions are the author’s own and do not necessarily reflect those of San Jose Inside. Send op-ed pitches to [email protected].

8 Comments

  1. > The only conceivable way to limit this would be through stronger rent control (which is banned under the Costa-Hawkins Act), or a strengthening of the Ellis Act, which the City Council voted to gut just last year.

    Maybe the 22 percent of San Josean’s who can’t find affordable housing on this patch of the planet’s surface, should forage for affordable housing on a different patch of the planet’s surface.

    That’s the way it’s always worked.

  2. There is no law of economics which says that the government is an efficient funder of affordable housing. In fact, economic principles suggest that when you subsidize something, you just make it more expensive. And in the case of affordable housing, that just makes a bad situation worse.

    Santa Clara County for decades was able to provide affordable housing for most of its citizens–a combination of cheap land, loose building regulations, and lax zoning made it possible. It may have created sprawl, but it was cheap and fair and led to diverse housing stock and neighborhoods. Sadly, New Urbanist thinking took over in the 70s and the government’s increased (racially tinged) land use and zoning regulations, thus creating our current pricey, segregated mess. Gov’t got us into this debacle and more gov’t policies won’t get us out.

    Randall O’Toole has a must-read piece on the history of our affordable housing crisis here:
    https://www.opportunitynowsv.org/blog/everything-you-need-to-know-about-santa-clara-countys-housing-crisis-the-causes-the-mistakesthe-way-out

    And by the way, even though I disagree with Gil Rodan’s premise, the op-ed is smartly written and well-researched: good job, Gil.

  3. There are two ways to fix this

    1) Increase supply

    2) Reduce demand

    Everything the Bay Area does, from ideology to implementation, is opposite world to the real one. You can not wave every poor person in Latin America and the Middle East across open borders, import the best and brightest from ever corner of the earth with H1B visas, and make it impossible to build new stock with stacks of fees, byzantine regulations, permissive CEQA abuse, and urban growth boundaries and have prices go anywhere but up. No matter how many Measures you pass, Czars you appoint, ribbons you cut. It is not going to happen, and everyone knows it. This affordable housing propaganda is designed to assuage quilt of the rent seekers who agitate for these “progressive” policies knowing they make them an easy million on their house.

  4. Quit building so much Corporate Office Space. Don’t allow Corporations to expand. Period . They want to expand? Expand in Roseville, Texas, North Carolina, or even Bangalore. Perhaps some Retail or Office space should be rezoned to housing.

  5. > Quit building so much Corporate Office Space. Don’t allow Corporations to expand. Period .

    Crashing the local economy will definitely increase the supply of “affordable housing”.

    No one will want to live here and there will be plenty of vacancies.

  6. “But if we truly want to make San Jose affordable to all…”
    We don’t. Or at least the sensible among us don’t.

  7. The shortage of housing and, for that matter, all human necessities, is mainly a function of the institution of private property. The only urban places in the world where human housing needs have been adequately addressed are where public authorities have taken ownership or control of land and/or where worker and renter movements have successfully organized popular will to force strict renter protections.

    Rodan provides a link regarding the case of Vienna, among the most beautiful cities in the world, that houses its residents comfortably and affordably in generally high quality housing (https://www.governing.com/topics/health-human-services/gov-affordable-luxurious-housing-in-vienna.html). To this can be added Helsinki, the Finnish capital and the European city with the lowest incidence of homelessness (https://getpocket.com/explore/item/it-s-a-miracle-helsinki-s-radical-solution-to-homelessness).

    The Helsinki municipality has a monopoly on zoning (like San Jose) but (unlike San Jose) owns 70% of the land within the city limits. It also owns 60,000 housing units in a metropolitan area of 1.3 million people (somewhat bigger than San Jose which has 1 million). One in seven Helsinki residents live in city-owned housing. In addition, the city owns and operates its own construction company and has a current target of 7,000 new housing units every year (including units sold to private owners). In other words, the publicly-owned construction company competes with private builders to keep housing costs low (which keeps real estate developer profits low). The city builds and provides housing more or less at cost since the city owns the land underneath the housing and continues to own it in perpetuity.

    In newly developed districts, the city requires city-owned housing to be 25% of all units; subsidized-purchase housing to be 30% of all units and private housing to be 45% of all units. Thus, the rich and the poor and the middle classes all live in the same district and with all those groups able to apply for city-owned or city-subsidized ownership units, i.e. in true universal fashion, even the wealthy can qualify for city-owned property or city-subsidized ownership units.

    In 2019, it was estimated that in a country of 5.5 million people, there are about 5,500 officially “homeless” people, more than 70% of whom currently live with family or friends on a temporary basis while they wait for publicly-provided or subsidized housing. That is, one-tenth of one percent of the population are regarded as homeless, even though more than 70% of these are actually living with roofs over their heads. By inference, this means there were about 1,700 people living on the streets in Finland, 3/100 of 1 percent of the population.

    By contrast, with upwards of 10,000 people living on the streets, about 1 full percentage point of San Jose’s population had no roof over its head in 2019, with an unknown number of people sharing living quarters with family and friends but who are effectively homeless. In relative terms, San Jose’s homeless incidence was 300 times greater than Helsinki’s.

    Let’s dispense with the free market fairly tales pushed by most of the “usual suspects” who waste time and space in San Jose Inside commentaries obfuscating the issues. Markets, free or otherwise, are not the solution to the housing crisis; private property and markets are the problem itself. If we want to break the power of big landowners and landlords, we have to decisively and politically organize popular will to confront and challenge that power. The Austrian and Finnish working classes–and other working classes–have done and are doing just that. Let’s learn from them and put progressive taxation of wealth and public resources to work building the homes and lives we need and deserve.

  8. ECONOCLAST

    The Helsinki municipality has a monopoly on zoning (like San Jose) but (unlike San Jose) owns 70% of the land within the city limits. It also owns 60,000 housing units in a metropolitan area of 1.3 million people (somewhat bigger than San Jose which has 1 million). One in seven Helsinki residents live in city-owned housing. In addition, the city owns and operates its own construction company and has a current target of 7,000 new housing units every year (including units sold to private owners).

    Are the San Jose Residents willing to eminent domain 70% of the land within city limits?

    If so, great.

    Are the San Jose Residents willing to allow building out of so many properties such that their property loses 50%-75% of its value?

    If so, great.

    Once we get their, I will donate to a seed fund to help the city buy the equipment needed to get into the construction business. One more competitor in the development business will not change much. And if you have been paying attention, a for profit developer would run circles around anything the city would cobble together. If anything developers would see their profits soar under public competition as city councils would lose their ability to define profit margins in permit negotiations, al you would have to do is beat the city.

    I own properties in multiple states and countries. I would love to buy a flat or house in Vienna and Helsinki, even f I was to lease the land from the government. I would love to have a passport from either country as well. I think they are both far more spectacular places than San Jose is or could ever be. Owning in a full on Austrian Economic Libertarian’s Utopia is as unrealistic as an Anarcho-communist one

    Capitalism is not some sort of Natural Law, just like anything else that is socially constructed. Let run to it’s logical end, one person would hold everything and everyone else would be bankrupt, that was the point the designer of Monopoly was trying to make. Back in the real world, you have San Jose which has developed largely in the envelop of private property, many people have come here to take advantage of that opportunity, and has seen engagement of the local government largely distort the market to much higher price points. Any democratic improvement of San Jose must maneuver in that real world context.

    What is Natural Law is the more people that want a thing and the less there is of that thing, the more they are willing to part to get it. Which is why you see rents in the $2000s and dumpy little houses in the $2Ms. Another Natural Law is loss aversion drives us to keep what we have over acquiring gains. Unless you can answer Yes to my first two questions you are just wasting your time and not helping the problem.