For months, some San Jose lawmakers have wanted to amend the city’s Ellis Act ordinance by tweaking how many units would have to be put back under rent control after redevelopment — a move spurred by a fear that the current law’s requirement is halting housing production in the region.
Now, the City Council on Tuesday will consider amending the law after some elected leaders say the 50 percent rent-control mandate disincentivizes developers from building, instigating conflict with housing advocates who say the move will displace low-income families and communities of color.
Right now, the Ellis Act requires developers who demolish or remodel an existing rent-controlled apartment to put at least half of the new units or the number of old apartments taken off the market – whichever number is greater – back under rent control.
This requirement has stirred worry for some pro-development councilmembers for months, notably Mayor Sam Liccardo and Vice Mayor Chappie Jones, who asked city staff back in February to study whether the city’s Ellis Act was impeding development. They said they hadn’t seen any new Ellis-relevant housing development proposals emerge for the more than ten months, and claimed they heard “anecdotally” that developers were not interested in building housing under the requirements.
But the potential change has provoked housing advocates, who argue that weakening rental protections for tenants will open the door to displacing more residents. Last week, top South Bay labor leaders held a Halloween-themed news conference denouncing any changes to the law, calling on local leaders to follow suit. In a memo released late last week, Councilmember Maya Esparza said the law’s purpose was not to increase the city’s housing stock but instead to protect residents — she urged her colleagues to do the same.
“As a city, we talk about the need for equitable development, and we talk about the need to prevent homelessness and protect our low-income communities,” said Esparza. “We spend so much time and effort developing plans and strategies to try to solve these problems. Now we are presented with a very simple course of action that will help address all of these goals at once: we leave the Ellis Act ordinance alone.”
City officials will present their recommendations Tuesday, suggesting the city modify the existing ordinance from the the 50 percent rent-control mandate “to require a cap of no more than seven times the number of withdrawn apartments,” and reduce the amount of rent controlled units from 20 percent to 15 percent of new construction.
For displaced residents, officials suggest a “right to return” policy where tenants can move back into a new building and pay their previous rent, or have the developer find replacement housing elsewhere. In both cases, tenants’ rents cannot be raised by more than 5 percent each year.
Inclusionary housing ordinance
Also on Tuesday, another contentious housing measure – the city’s Inclusionary Housing Ordinance (IHO) – will be discussed and potentially amended to provide developers with fee exemptions in order to make it easier for developers to build and reach the city’s goal of 10,000 new housing units by 2020. A recent analysis by San José Spotlight found the city is severely behind on its affordable housing goal.
The policy today requires market-rate developments with 20 or more units to designate 15 percent of those apartments as affordable — or pay a fee to an affordable housing fund. But now, pro-development groups say the policy should apply only to smaller projects with five units or less. They’re also calling for waiving affordable housing fees for downtown high-rise developments.
City officials recommend applying the law to all projects with five or more units and phase in the in-lieu fee for projects between 5 and 20 units.
Labor leaders are fighting to preserve this housing law without changes, warning against giving developers a pass on paying for affordable housing fees.
Jones, who supports the city’s proposed changes, said the city also needs to make a greater effort to build affordable housing projects faster under SB 35, a bill passed earlier this year aimed at beefing up the state’s housing stock.
But before the city can use this bill to achieve its housing goals, Jones said the city needs to meet certain eligibility requirements including zoning newly purchased land for residential use, without demolishing existing housing units.
“While we continue to fall short of our Regional Housing Needs Assessment (RHNA) goals, it is an opportunity for our city to leverage Senate Bill 35 to encourage rapid production of affordable units,” Jones wrote in a memo. “Developers who are unable to financially justify meeting IHO requirements through incorporating onsite affordable housing could utilize this option.”
Caltrans lease negotiations for tiny homes
After months of deliberations, local leaders on Tuesday will hear an update on the city’s lease agreement with Caltrans, following a tumultuous round of legal battles between the city and its statewide partner.
Nearly a year after the City Council approved a tiny home community for homeless residents on Caltrans land — supported by SB 519, which allows cities to lease up to 10 unused Caltrans parcels for homeless housing for $1 per month — challenges with lease negotiations and legal disputes stalled construction.
No movement had been made to start the construction of the 40 tiny homes next to Highway 101 off Felipe Avenue since the bridge housing community was approved by the City Council in Feb. 2018 and litigation seemed unavoidable. Liccardo confirmed in a recent interview with San José Spotlight that the city and Caltrans have made a deal where lawyers from both sides have “backed off.”
While the city has made progress on its negotiations, officials acknowledged difficulties working with Caltrans on a lease agreement because of conflicting statewide legislation on bridge housing communities, liability and insurance disputes.
“The lease negotiations between the city of San Jose and Caltrans for the Felipe Avenue parcel have been difficult. The extensive negotiations have already delayed the start of construction,” said Jacky Morales-Ferrand, the city’s housing director. “Once the city and Caltrans have completed the lease processes, the path will be open to new opportunities. SB 211 authorizes jurisdictions to access up to ten Caltrans parcels for emergency shelter use. Given the difficulty locating sites, the City Council should take this into account when weighing their direction.”
As a result of the ongoing legal challenges, the City Council Tuesday will decide to either continue pursuing negotiations, despite the ongoing delay of the project, or look for another site for the tiny homes.
The Caltrans site is one of two under development in the city, alongside a tiny homes project on a VTA parcel. A third potential site was eliminated last year in March as the result of a land swap with Santa Clara County, according to housing officials.
The City Council meets 11:00 a.m. Tuesday inside the council chambers at San Jose City Hall, 200 East Santa Clara Street in San Jose.
Contact Nadia Lopez at [email protected] or follow @n_llopez on Twitter
Editor’s note: An earlier version of this story misidentified the author of a memorandum about leveraging SB 35. It was authored by Vice Mayor Chappie Jones. We regret the error.