State ruling on San Jose-owned land sales may hit other cities harder
Mayor Sam Liccardo on Wednesday launched the Social Progress Index in San Jose, becoming the first U.S city to use of the data tool. Photo by Katie Lauer.

A ruling this week by a state appeals court on how California cities must sell their surplus land to prioritize affordable housing may have been tailored to San Jose, but the decision will likely affect other cities more, according to the city’s mayor.

“San Jose has very little city-owned land that is developable, and for the most part, those parcels move through the development department for affordable housing,” Mayor Sam Liccardo said in an interview Wednesday. But he acknowledged the ruling “might have huge impacts on other smaller cities” that do own more land.

The Sixth District Court of Appeals ruled Tuesday that the largest Bay Area city doesn’t have the right to create its own guidelines for selling municipally-owned land and must instead follow a state law that requires the land be prioritized for affordable housing development. The City Council in 2016 adopted a policy that prioritized housing on publicly owned land, but allowed San Jose a handful of exceptions, including breaks for downtown high-rise developments and one-off sales to spur economic development with other types of real estate projects.

The city was quickly sued by a pair of renters who said the policy is illegal.

San Jose has argued that as a charter city, it has more power to govern its local affairs, including how to dispose of excess property — an argument with which a trial judge agreed, but the appeals court overturned. The housing crisis is so intense that the state “has a more substantial interest in the subject than the charter city,” according to the ruling this week.

The decision is an important one for the entire state because it touches on some of the most critical issues facing California today, including land use policy, a dearth of affordable housing and the balance of local versus state control on those matters.

Some local experts, however, are skeptical the state bill is the best option to manage surplus city-owned land to spur more housing.

“Obviously the state of California is in a housing crisis and every community should continue toward producing housing,” Erik Schoennauer, land use consultant with The Schoennauer Co. said Wednesday. “But it either should be thoroughly local control or include more extensive criteria that allows a range of options depending on the location of the land, the size of the land and other factors.”

As it stands, San Jose’s policy on selling land doesn’t deviate significantly from the state’s policy, City Attorney Richard Doyle said.

“It does give a priority to housing, but there an exception … for economic development,” he said. “We think we are best suited to decide what sites should be used for economic development … as opposed to the one-size-fits-all approach that Sacramento takes.”

But other local land use experts say the state is left in a difficult spot in the wake of a housing crisis more than a decade in the making.

“When you have a housing tragedy like this, a one-size-fits-all is all legislation like this can do,” said Bob Staedler, principal of land use consultancy Silicon Valley Synergy. “They don’t have time to deal with nuance, and the bad actors in California have hurt the good actors who are trying to build housing.”

Doyle did not say whether the city, which led the fight to defend the policy along with support from the League of California Cities, will appeal to the California Supreme Court.

The state law, the Surplus Land Act, requires cities to seek out buyers for city land with developers who want to create low-income housing with at least 25 percent of it considered affordable for 55 years. If no buyer can be found under those conditions, the city can seek out other buyers, but if more than 10 homes are built on the site,15 percent of those must be considered affordable to lower-income households, according to the state law.

San Jose’s policy deviates from state law by creating the exemption for downtown high rise developments and economic development opportunities. The city also took a more liberal view than the state of what would be considered affordable.

San Jose is one of 121 charter cities in the state, so unless the case is appealed and overturned again, the ruling sets a precedent that any city aiming to sell land must follow a strict set of requirements that prioritizes affordable housing development above all else.

City officials have 60 days to decide whether to appeal the ruling and councilmembers will provide guidance on how to proceed in the coming weeks, Doyle said.

Liccardo didn’t say whether an appeal would be filed, but said he plans to “vigilantly defend local rule, like any city will, because there are a host of many other issues that come up under the category of local rule and we have had some really painful battles in the last decade.”

Notably, Liccardo is a supporter of some state bills that would supersede local control, including SB 35, which was passed in 2018 and streamlines housing projects meeting certain conditions. He also supports SB 50, which, if passed, would effectively upzone land near high-frequency transit stops.

But he’s not sold on the bill to govern how charter cities sell their surplus land, he said, adding “the specifics of how that principle is applied matter, and they matter a lot.”

Contact Janice Bitters at janice@sanjosespotlight.com or follow @JaniceBitters on Twitter.

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