Reports detail Silicon Valley’s housing crisis pre-coronavirus

As the stock market plunges, so may the real estate market. The coronavirus pandemic will shatter San Jose’s ambitious plans for housing growth over the next two years, some officials said.

“We absolutely need to build more housing and we’re not going to make our target (of) 25,000 homes by 2022,” San Jose Councilmember Pam Foley said.

The grim outlook for the housing market is followed by two recent reports that highlight the severity of the housing crisis even before the public health crisis.

With a shortfall of 699,000 homes, the Bay Area has failed to build enough housing from 2000 to 2018, according to a study by urban planning thinktank SPUR. The nine counties in the Bay Area including Santa Clara County built about 316,000 homes that were sold to people with higher incomes. On the other hand, the counties built only 42,500 units of permanent affordable housing, failing to meet the demand for affordable and middle-income housing, according to the report.

Another study published by Construction Coverage shows that the rate of homes being built in California is below the national average. The state built 109,338 new homes in 2019. That’s 27.6 new homes for every 10,000 residents, compared to the national average of 41.9 new homes for every 10,000 residents.

Meanwhile, much of the Bay Area population has gotten wealthier, outbidding others for homes and driving up housing costs. Median household income increased 50 percent from 2000 to 2016, rising from $60,000 to $90,000, according to the SPUR report.

SPUR projects that the Bay Area needs to build at least 2.2 million new homes by 2070 — about 45,000 units annually — to keep pace with the projected housing demand in the Bay Area.

To build more housing, state legislators are beginning to take charge in recent years as local lawmakers are under tremendous pressure from their constituents to restrict developers from constructing houses, Sarah Karlinsky said, who is the author of study and SPUR senior advisor.

“I saw how hard it was to get the entitlements and permits for affordable housing, even if there was support from the councilmember in that district. But oftentimes there wasn’t,” said state Democrat Sen. Jim Beall, who represents San Jose and is a former city councilmember. “There was passive resistance to the projects so those projects that were affordable housing units were very difficult to get approval even in San Jose — let alone all the other cities of the county.”

State Sen. Scott Wiener (D-San Francisco) echoes Beall’s sentiment.

“When you want to change the status quo, there’s a lot of pushback and particularly when it comes to potential change in people’s own neighborhood,” Wiener said.

The coronavirus outbreak will further delay home construction in California. Since counties in the Bay Area ordered residents to shelter at home, construction of market-rate housing has halted while the construction of affordable housing continues because it is considered an essential service.

But lawmakers and advocates worry about the future of affordable housing. Developers may be less incentivized to build below-market-rate housing during an economic slowdown.

That’s why Measure E, which levies a tax on the sale of San Jose properties worth $2 million or more and passed in March, is crucial to encouraging homebuilders to continue building affordable housing, Foley said. The coronavirus pandemic will affect property tax revenue. And people are less likely to buy real estate during the economic downturn, potentially resulting in loss of tax revenue, Foley said. Nonetheless, Measure E is expected to generate $22.1 million during a recession year, according to a previous projection conducted by city officials.

“I think we can recover and get to a point where we meet demand and build affordable housing,” Beall said. “If we do that, we’re going to have a pretty good economy because we’ll have housing for everybody and we’ll reduce the number of homeless.”

Beall hopes state legislators will restructure the state budget and prioritize building affordable housing. He was among nine lawmakers who sent a letter to the Legislature on April 7, urging legislators to invest up to $2 billion for Senate Bill 795, which will fund the production of affordable housing units.

Another housing bill in the Legislature is SB 902, authored by Wiener with a “lighter touch” compared to his controversial SB 50, which would have mandated more housing units in single-family neighborhoods and near transit stops. SB 902 allows construction of duplex, triplex and fourplex residential units without additional government approvals. Ten-unit apartments would be exempt from environmental review after a vote by the council in cities with populations over 50,000.

“Once we move past this health emergency, we will continue to have a housing crisis which will probably be even worse,” Wiener said. “So we can’t ignore housing. We have to continue to move forward with a pro-housing agenda.”

Contact Nicholas Chan at [email protected] or follow @nicholaschanhk on Twitter.