Cranes in the sky
Los Angeles 44
San Francisco 29
San Jose 4
“Planning for the year 2020, a Downtown Working Review Committee appointed by the mayor begins work on a comprehensive strategy plan that will set the future of how downtown will look and what development patterns it should follow. A key topic will be housing in the core area.”
– Downtown Dimension, October 1988
Despite a strong economy and plenty of interest in the local real estate market, development of new housing units in San Jose is lagging behind expectations, inciting stakeholders to come up with ideas to propel more construction activity downtown and throughout the city.
“Every month that goes by and we don’t produce enough new housing units will simply make the housing crisis worse,” said Erik Schoennauer, a San Jose development consultant.
Mayor Sam Liccardo wants 15,000 new market-rate units and 10,000 affordable units built by 2023. With eight projects under construction totaling 2,265 units plus another 20 housing proposals totaling 8,000 units in process downtown, it would seem that San Jose is well on its way to reaching its goal. However, few of the 20 projects have broken ground and San Jose has the fewest number of construction cranes operating of any big city on the West Coast.
The mayor, City Council members, the Downtown Association, SVO and the development community all have ideas how to get more cranes in the sky. Pushing projects forward involves a combination of reducing costs, shortening timelines and providing consistency to the planning process, said Michelle Azevedo, SJDA director of policy and operations.
“If we’re serious about meeting our housing goals, we need to do things differently and bring certainty to the process,” Azevedo said.
SJDA-SVO sent a letter to the mayor and council expressing a number of recommendations to streamline the process:
- Base the affordable housing fee on square footage rather than per unit, thus lowering the cost of the fee on dense high-rise housing and co-living spaces.
- Extend the high-rise incentive, which lowers impact fees and construction taxes 50 percent, making them payable when new units are occupied. The City has provided high-rise incentive savings since 2007.
“The City needs to remove the term ‘incentive,’ “ said Mark Tersini of KT Urban. “Permanent reduction of impact fees and taxes would assist to increase the rate of return needed for projects to move forward.”
- Eliminate parking minimums, especially near transit, as suggested by Councilmember Pam Foley. Developers would have more say in how much parking to include in their projects.
“We should be moving toward parking maximums like other urban centers,” said Shawn Milligan, real estate development professional.
- Pay for Planning, Building and Code Enforcement (PBCE) out of the General Fund rather than from fees collected.
“To have PBCE be funded through the General Fund would help
tremendously with internal planning / employee retention, and long-term strategy for the City,” said Joshua Burroughs of Urban Catalyst. “If you can’t get projects through the system, and if the city cannot update its framework via long-term planning initiatives, then no economic development – jobs, housing, retail, park fees, affordable housing fees – occurs.”
- Provide a single point of contact for developers of high-rise projects.
“Unfortunately, each (San Jose) project takes on a life of its own with new planners, public works staff and environmental review,” Tersini explained. “Project expediters with planning could help move projects forward with an agreed schedule prepared at the onset of a new project.”
- Reform the environmental review process.
“The City can improve the environmental review process and adopt some best practices, but CEQA needs to be reformed,” Milligan said. Infill, urban developments should be exempt from CEQA in most cases, where enough data already exists on residential, commercial and mixed-use designs to approve them, he said.
- Support Mayor Liccardo’s policy proposal to implement a “universal fee” that creates a transparent, consistent and simple structure for all development taxes and impact fees.
“The total fee burden for builders is often masked, making it difficult for customers and staff to assess how changes to the project might affect fees and overall project funding viability,” Liccardo said.
Cautioned Milligan: “The universal fee is a good idea, but if overall fee levels aren’t reduced, it won’t help us get projects built.”
All the ideas are being well-received, some more appealing to each investor.
“We need a lot more people living and working in downtown, so we need to build many more residential and office high-rises,” Schoennauer said. “An all-of-the-above strategy is needed to reduce project costs, increase development capacity of sites, and expedite the review process.”
After decades of debate, streamlining the planning process has reached a tipping point.
“The vision is great; the execution is where the future is breaking down,” Milligan said. “We need projects to get built. Period.”