San Jose City Council to mull new affordable housing funding

In an effort to spur San Jose’s dwindling housing supply, lawmakers on Tuesday will consider investing $10 million to flip market-rate apartments into affordable ones and peg 30 percent of any new housing dollars for extremely low-income housing.

Housing officials this week will ask the City Council to add those two new priorities to the city’s affordable housing investment plan.

According to city documents, acquiring market-rate apartments and converting them into low-income units would add affordable housing to the city’s stock — but not increase the overall number of new housing units.

In 2017, Mayor Sam Liccardo set a goal of building 25,000 new units by 2023, with the intention of 10,000 of those units being affordable.

But a review of last year’s housing data shows a bleak picture for building affordable units. The state requires San Jose to build 3,986 new units a year to satisfy the demand. And while the city was almost on track in 2018 for market-rate units, affordable housing fell short with San Jose only permitting 61 percent of its required goal.

With new updates to the plan, the housing department estimates that 1,412 units will be added to the 2,092 units that are awaiting funding, already funded or currently under construction. A total of 3,503 new affordable units are expected to be created, under construction or funded by the end of the 2022-23 fiscal year.

That leaves the city short on its affordable housing goals as officials expect a total of 5,771 affordable units between funding housing themselves and outside efforts by 2023.

“Over $520 million in funding is necessary to fund the gap of 4,229 units to meet the goal of providing 10,000 affordable units,” Housing Director Jacky Morales-Ferrand wrote in a memo. “New funding sources for affordable housing, including creative strategies, must be explored to meet the city’s affordable housing goals.”

In an effort to include some of the city’s lowest earners, Councilmembers Maya Esparza and Dev Davis advocated for increasing the minimum amount of funds invested in extremely low-income housing from 30 percent to 45 percent.

Last year, the city permitted only 62 extremely low-income units – 463 short of the state-mandated goal.

“The lack of affordable housing disproportionately affects extremely low-income households,” Esparza and Davis wrote in the joint memo. “Requiring that a minimum of 45 percent of all new affordable housing funding be allocated to extremely low-income households will allow our city to serve those with the greatest needs and help prevent further homelessness.”

Councilmembers Sergio Jimenez and Sylvia Arenas also signaled support for the initiative from Esparza and Davis.

Ellis Act revisited

The City Council was also slated to review San Jose’s Ellis Act law, but on Monday the item was deferred again. According to Housing Department spokesman Jeff Scott, the department needs more time to “complete its research and analysis.” The issue will be heard on April 23.

Housing officials will be revealing research gathered from developers and other stakeholders on the city’s Ellis Act law, which aims to protect and preserve limited rent-controlled apartments.

Earlier this year, Liccardo and Vice Mayor Chappie Jones issued a memo citing anecdotal evidence that the current law is making development unviable.

Under the current law, which was updated last year, developers who demolish or remodel an existing rent-controlled apartment must 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.

The report on developers’ reactions to the Ellis Act was unavailable Sunday. However, the Housing Commission pushed back on the city making any sudden change, calling the process “rushed and flawed.”

“The care and study that went into creating the current ordinance is being tossed out by the hastiness displayed in the council’s current decision,” Commission Chair Andrea Wheeler wrote in a letter. “If this policy is to be revisited, (the commission) needs more than anecdotal evidence to support changes.”

Esparza, who lives in a rent-controlled apartment, will be allowed to participate in the discussion, according to City Attorney Rick Doyle. During the February meeting on the topic, Esparza was forced to recuse herself.

Doyle said that the Ellis Act hearing does not directly affect Esparza.

The City Council meets 1:30 p.m. Tuesday inside the council chambers at City Hall, 200 East Santa Clara Street in San Jose.

Follow Grace Hase at [email protected] or follow @grace_hase on Twitter.