SAN JOSE — With the city falling dramatically behind its goal to build nearly 2,400 homes for the poor each year until 2022, San Jose’s landmark law that requires some developers to reserve units for affordable housing is ready to be enacted — after surviving more than two years of legal challenges.
But elected leaders Tuesday approved a “grace period” for housing projects approved before June 30 to allow developers and city staff time to plan for the changes, which were on hold while the merits of the law were debated in court. The City Council voted 10-1 to implement the plan at a council meeting Tuesday. Councilman Manh Nguyen opposed.
“With the crisis we face in our housing markets, I only regret that it required a Supreme Court ruling to uphold the ordinance,” Mayor Sam Liccardo, who championed the policy against opposition from his loyalists in the building community, wrote in a memo Monday. Liccardo said the city could have had the benefit of several years of the new law.
Developers who have projects approved before June 30 must still apply for an exemption and turn in a compliance plan, said Jacky Morales-Ferrand, the city’s housing director.
The city’s policy, which was adopted in 2010 and paved the way for dozens of other cities to craft similar legislation, requires developers of market-rate, for-sale developments of 20 or more units to set aside 15 percent of the units for moderate-income people. It does not apply to rental units and mostly targets for-sale units such as condos, single-family homes and townhouses.
Housing is considered “affordable” when a resident isn’t paying more than 30 percent of his or her income for housing. In San Jose, “moderate-income housing,” which is what the policy seeks to create, targets individuals who earn $74,000 to $89,000 a year — higher in larger households. Although the law went into effect in January 2013, it was blocked by a legal challenge from the California Building Industry Association. The Santa Clara County Superior Court issued an injunction, which was later overturned by the 6th District Court of Appeal.
The building industry appealed the decision to the California Supreme Court. The high court in June unanimously issued a decision in favor of the city. The building group in September filed a petition with the U.S. Supreme Court seeking review of the California Supreme Court’s unanimous ruling, but it declined to hear that petition.
The new policy will begin just as San Jose struggles to build affordable housing amid soaring rents and a staggering housing shortage. The city from 2007 to 2013 built only 2,956 affordable units — a mere 15 percent of its 19,271-unit goal, Morales-Ferrand said.
San Jose’s new goal is to build 20,849 affordable housing units by 2022, and it’s already severely behind. The city in the past two years began construction on 576 affordable units. It needs to build roughly 2,400 units annually to meet that goal.
“There is a significant shortage of housing affordable to low and moderate income households, which will only increase as the finite number of residentially zoned lots within the city are purchased and developed for market rate residential developments,” Morales-Ferrand wrote in a staff report.
Developers who do not want to comply with the new law have a few other options, including paying an “in-lieu” fee or building affordable housing somewhere else in the city.
Requiring developers to put aside price-restricted units isn’t a new idea in San Jose. The city in 1988 adopted a similar policy, but it applied only to Redevelopment Agency properties. The new law applies citywide except Communications Hill and replaces the old policy.
To address the housing shortage of apartments, the city charges developers $17 per square foot to help build new affordable apartments. That program excludes downtown residential projects for five years.
Contact Ramona Giwargis at 408-920-5705. Follow her at Twitter.com/ramonagiwargis.
