San Jose considers removing commercial requirements for affordable housing

Dated: December 15 2021

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San Jose is looking to clear a development requirement to make way for more affordable housing amid a growing homelessness crisis.

Under an existing decades-old policy, new affordable housing projects built within the city’s urban villages, or designated areas planned around public transportation, must dedicate the ground floor to commercial spaces—something lawmakers hoped would spur job growth and urban activities in key transit areas.

Now, the San Jose City Council on Tuesday will consider eliminating that requirement, as some lawmakers say it runs counter to San Jose’s goal to build as much affordable housing as possible. The policy change received unanimous support from the city’s Planning Commission.

At least seven city lawmakers, including Councilmembers David Cohen, Pam Foley, Raul Peralez and Mayor Sam Liccardo, have expressed support for the policy reform. Councilmembers Dev Davis, Sergio Jimenez and Sylvia Arenas seek to expand the change in policy across the city.

“The city’s commercial space requirement for deed restricted affordable housing projects has held up hundreds of affordable homes throughout San Jose,” Foley told San José Spotlight. “Affordable home builders are not commercial space developers. Sometimes they have to raise the monies for commercial space separately or dig deeply into their pockets to finance the commercial space themselves.”

Affordable housing developers can’t use public funds for commercial space in projects. They also have to build parking for commercial spaces. That means less resources—and space—for affordable housing, Foley said.

The proposed policy change comes as San Jose continues to drag behind in building affordable housing. The city has built only 506 below-market units since 2018—falling way short of its goal to build 10,000 affordable units by 2023.

The housing crisis is driving rent in San Jose through the roof, making it the second most expensive place to rent in the U.S. Meanwhile, the homelessness crisis is ever-growing. Nobody knows exactly how many people have ended up in the streets since the pandemic, but advocates said this year saw a record number of unhoused people die.

A momentous policy change

Over the past five years, Fremont-based affordable housing developer Allied Housing gave up building 500 to 1,000 affordable units because of the city’s policy requiring commercial components.

“There were properties that were available for sale and would have been great affordable housing sites, but because of that commercial component, they became infeasible,” Jon White, chief real estate officer of Allied Housing, told San José Spotlight.

The group also delayed a plan to redevelop a housing project at 2188 The Alameda for years because it couldn’t find money for the commercial requirements.

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Sharad Gupta

Real Estate Sales Leader with over 15 years of diversified experience in real estate sales, property development, and business consulting. With a keen eye to spot real estate opportunities and a natur....

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