New report: Google campus will lead to $235M more in rent spikes

With Silicon Valley residents already sacrificing health to pay their rent, a new report says living in the region is about to get much more expensive for local renters.

Google’s proposed mega-campus will hike local rents up, causing tenants to pay five times more in rent than the city expects to collect in tax revenues when the tech giant finally sets up shop near Downtown San Jose’s Diridon Station, according to research from Silicon Valley-based community organization, Working Partnerships USA.

After Google expands into San Jose, tenants will collectively be hit with a $235 million yearly rent hike by 2030, according to the new report, which also notes Google and the city can curb the rent hikes by subsidizing and producing 5,284 affordable homes and 12,450 market-rate units. This should include 1,000 housing units for extremely low income renters, which should include preference for residents in neighborhoods directly at risk of displacement, according to the report.

“We’re working closely and collaboratively with the city and many community groups on our future development in San Jose,” said Javier Gonzalez, Google’s South Bay public affairs manager. “As we do so, we know that housing is a vital issue and we’re committed to investing in new housing in the area, including affordable housing.”

Here outside city hall where @JRBinSV is talking supposed rent hikes coming to San Jose with Google's incoming downtown campus. A new report by @wpusanews details $235 million in higher rent by 2030. There's a need for thousands more affordable homes, they say.
More @SJSpotlight pic.twitter.com/cGk49jaW2I

— Kyle Martin (@Kyle_Martin35) June 12, 2019

While Google plans to bring more than 20,000 jobs to San Jose, the report, conducted by Beacon Economics and commissioned by WPUSA, says that Google’s plans do not include enough housing to save the residents living in the city now from paying massively higher rents in the coming years. It asserts that existing tenants will take on an additional average of $765 per month on rent — or about $11,750 more in rent per year for every additional employee the tech company brings to the city.

“Santa Clara County has severely lagged in supplying housing even as the economy has grown in conjunction with the current boom. This study found that the proposed Google development would lead to increased rents unless adequate amounts of new homes are built,” Robert Kleinhenz, economist and executive director of research at Beacon Economics, said in a statement. “The good news is that, with a reasonable investment in housing across levels of affordability, Google could prevent these impacts and avoid replicating Silicon Valley’s pattern of housing underproduction, mega-commutes and displacement.”

Mayor Sam Liccardo said in a statement Wednesday that he’s “glad that Working Partnerships is on board with the housing goals I set more than a year ago to build 25,000 new homes — 10,000 of them affordable.”

“We’ve long prioritized affordable housing as a core pillar of our Diridon Station Area Plan, and Google has already committed to several of the report’s recommendations — including affordably rent-restricting 25% of the Diridon area’s housing, paying a commercial linkage fee, and providing millions in community benefits that will help build affordable housing,” Liccardo added.  “However, San Jose can’t solve our region’s housing crisis alone, so we welcome Working Partnership’s support in encouraging our wealthier suburbs – which are adding thousands more jobs annually than San Jose – to build their fair share of housing.”

The city’s housing department declined to comment on the newly-released report.

The silicon valley organization, the area’s chamber of commerce, called a news conference Wednesday to dispute the report’s findings. Eddie Truong, director of government and community relations for the organization, called portions of the report “fundamentally flawed.”

“I don’t think that the stark reality presented in the report is realistic, nor something we can expect to happen in the next 8 to 10 years,” Truong told San José Spotlight, but acknowledged the housing crisis “will certainly get worse if job growth outweighs housing production.”

According to the report, Santa Clara County has built about 6,500 homes per year since 2010, most of which were multifamily units.

And while there are more jobs in the area, the report says wages grew at a far slower rate than rents have from 2010 through 2017. In that period, median wages in the region increased 21% from $50,078 to $60,812 — but rent prices increased 69% from $1,506 to $2,538.

Downtown Councilmember Raul Peralez declined comment through a spokesperson.

According to a 2019 county health rankings report, almost 20% of the county’s renters are paying over half their income on housing.

“This research confirms that unless Google helps build enough affordable homes alongside its huge new mega-campus, the company will be pushing enormous costs onto the families who can least afford it, likely leading to more families facing eviction and pulling communities apart,” said Jeffrey Buchanan, policy director for Working Partnerships USA. “Google needs to take responsibility and partner with the city to build the affordable housing we need to prevent these rent hikes and ensure San Jose’s working families can remain in their communities and schools.”

The report also said renters won’t see most of the proposed benefits from the proposed Google mega-campus because “nearly three out of four rental units in San Jose are owned by corporations and investors based outside the city.”

In order for the massive development to be sustainable, the report calls on the city and Google to come to agreement on some demands including developing additional affordable homes, adopting a commercial linkage fee to fund low-income housing and focus on preventing displacement and gentrification near the campus. To combat displacement, the report says the city should adopt a policy granting the right to legal counsel for all tenants facing evictions.

“If the city gets this right, San Jose can set a new standard for tech development that spreads opportunity, no matter what one looks like or what’s in ones’ wallet,” the report concludes. “It’s time to end the trail of tech-driven gentrification, evictions and destabilizing inequality, so all San Jose families have the freedom to remain and thrive as Google grows.”

Contact Kyle Martin at [email protected] or follow him @Kyle_Martin35 on Twitter.