San Jose works out deal to build thousands of homes

San Jose and a developer have reached a tentative agreement officials hope will ensure plans to build thousands of homes and possibly millions of square feet of commercial space at the sprawling San Jose Flea Market site.

The deal looks likely to head off a potentially arduous and lengthy legal fight over the 61-acre property near the Berryessa BART station, where San Jose leaders have long envisioned creating an “urban village” in partnership with the Bumb family, which owns the site.

“I think both parties agree it’s in everyone’s best interest not to go down an adversarial litigation path,” District 4 Councilmember David Cohen, who helped broker the deal, told San José Spotlight. “My primary objective has always been that we don’t sacrifice what’s really important at this key transit hub, having an urban village there with density and commercial space.”

While the San Jose City Council approved a plan in 2021 from the Bumb family for nearly 3,400 homes and up to 3.4 million square feet of commercial space on the site, the developer recently tried to claw back much of that plan.

In the fall, the family took advantage of a state housing law provision known as the “builder’s remedy” to propose a much smaller version of the project, with only 940 homes and a significantly scaled back commercial space element.

Builder’s remedy allows developers to bypass local zoning and development standards to get projects swiftly approved, if a city’s long-term housing plans, known as a housing element, are out of compliance with state law. San Jose got its housing element approved in late January, a year past the state deadline.

In response, the city in late January told land use consultant Erik Schoennauer, who represents the Bumb family, and other developers trying to make similar changes to their projects that they would deny such proposals, setting up the potential threat of a lawsuit.

“Builder’s remedy was never intended to reduce the number of housing units the city has,” Cohen said.

Under the new agreement, the city will set up a commercial financing district for the Berryessa site that would levy a special tax on property in the area of the new development to help fund roughly $100 million in needed infrastructure improvements, Schoennauer said.

“Roads, sidewalks, sewers, street trees, traffic signals, two bridges, it’s a very significant infrastructure burden,” Schoennauer told San José Spotlight. “The flea market owners just believe we can make better progress working collaboratively with the city, so that’s the path that they’ve chosen.”

As part of the deal, Schoennauer will withdraw the application for the shrunken version of the project.

Cohen’s office also promised to listen to ideas about what other kinds of businesses could be allowed in the commercial areas of the project. Instead of just office space, retail, hotel or restaurant uses, Schoennauer said assisted living facilities or affordable housing are some examples of what the developer might prefer to build, depending on economic conditions.

In the wake of the pandemic shifting workers to remote or hybrid schedules, and the subsequent tanking of demand for office space, coupled with high interest rates making new construction difficult, the original project became unviable, Schoennauer said.

“No one is going to build an office building for a very long time, if ever at this location,” Schoennauer said.

However, Cohen said while many commercial spaces might not be economically feasible to build right now or in the near future, he isn’t writing off the possibility of a rebound years from now.

“I think we believe as a city there are options for that property. As I’ve said all along, long-term land use decisions for very strategic sites shouldn’t be made on short-term economic conditions,” Cohen said. “It’s better to wait and do it right, than it is to move fast and underbuild.”