San Jose housing commission questions homebuyer loans, granny unit subsidies

San Jose’s Housing and Community Development Commission on Thursday asked probing questions about two proposals the City Council is expected to consider in the coming months — a down-payment assistance program for first-time home buyers and a subsidy for homeowners who build secondary units or so-called granny units to rent to low-income residents.

Five commissioners were absent from the meeting, including Chairwoman Andrea Wheeler, leaving the minimum of seven members required for a quorum. But each raised concerns about the proposed programs with city officials, and ultimately, the commissioners offered nuanced recommendations to the City Council.

Housing Development Officer Korey Richardson explained that the down-payment assistance program — as it is proposed — would offer an average of $125,000 loan to moderate-income, first-time home buyers to cover their down payment. With a budget of $4.5 million, as many as 36 families could get help financing the purchase of their home.

Commissioner Justin Lardinois praised the city for including home ownership in the discussion about affordable housing. However, Lardinois and fellow Commissioner Ryan Jasinsky urged staff to consider increasing the maximum value of eligible homes from $800,000 and include mobilehomes, which passed on a 6-1 vote with Commissioner Nhi Duong dissenting.

Richardson said housing staff would take the commission’s proposal to the City Council in early 2020.

Also Thursday, Housing Director Jacky Morales-Ferrand warned commissioners of risks associated with offering subsidies to homeowners who build accessory dwelling units (ADU), or granny units, on their property. The intent, Morales-Ferrand said, is for the city to incentivize the creation of new rental housing for low-income individuals. But, she said, it’s difficult for the city to ensure the unit isn’t used as an Airbnb or market-rate rental — and there’s no guarantee it would be built after the city shelled out money to help pay for it.

Several commissioners also raised concerns about the potential for fraud and abuse.

The initiative was part of a plan unveiled by Mayor Sam Liccardo earlier this year to speed up the approval process for granny units, and reduce fees and regulations. Morales-Ferrand said the ADU loan program would have a $5 million budget and each forgivable loan would be up to $20,000 to cover planning, permitting and other predevelopment costs for a legal ADU.

But it’s possible that after the loan is made, Morales-Ferrand acknowledged, that the homeowner won’t finish building the unit or will rent it out at market rates, instead of leasing it to low-income residents. And there is no way for the city to recoup the loan money or penalize the homeowner.

So, commissioners voted 4-3 to recommend the City Council add penalties for property owners who abuse the proposed subsidy program. Commissioners Duong, Barry Del Buono and Victoria Partida dissented.

The commission also unanimously approved several reports from San Jose officials Thursday on the city’s housing laws.

Fred Tran, manager of the city’s rent stabilization program, presented a quarterly update with statistics on various aspects of the city’s rent control program. Tran reported that the city had received 22 complaints from tenants during the most recent quarter, but only one for an illegal rent increase — most of the complaints involved maintenance concerns, such as broken household appliances or elevators.

Tran gave a separate update on the city’s rent registry, which he described as “an essential tool in the tracking and prevention of unpermitted rent increases, overcharging during tenancies and unlawful evictions and vacancies.”

A total of 31,497 or 81% of all rent stabilized apartments have registered in the rent registry by the end of September, Tran added. More than 2,200 households were evicted for non-payment of rent between July and September of this year, the report found.

He had previously noted that only about 8 out of 10 rent protected units are actually on the registry, but Tran said the city is working to increase compliance.

The city sent more than 1,400 letters to landlords and Tran estimated that increased compliance by 8%.

Although city officials said 6,453 tenants living in rent-controlled units would not see rent spikes because their landlords did not register their property at City Hall, Tran said a dozen tenants said they received rental increases — including one who reported a rent increase of 13% in the last 6 months, way above the city’s 5% rent control cap.

Housing analyst Theresa Ramos gave a similar report on the city’s rent stabilization program as is applies to residents of mobilehome parks.

Ramos detailed some of the challenges San Jose’s mobilehome park residents face.

She said residents at the La Buona Vita, near McKee Road, claim their water bill soared and they were hit with new fees after the park owner sold the property to Rutherford Investments. Rutherford blamed “administrative errors” from a third-party billing company and said they’re working to get tenants their money back, city officials said.

Contact Adam F. Hutton at [email protected] or follow @adamfhutton on Twitter.