Chuck Reed interviewed by Pierluigi Oliverio about the state of San Jose's housing market (1 of 3)

Ex-Mayor Reed and current Planning Commissioner Oliverio dig into the roots of our housing crisis, and Reed offers innovative ways the state can incent cities to build more housing. (This is the first of a three-part interview between the two).

Pierluigi Oliverio: Almost every conversation in San Jose politics seems to be centered around how expensive it is to live here and the role of sky-high housing prices. How do you see this problem?

Chuck Reed: I start at the broadest, highest level: the law of supply and demand has not been repealed. And if you look at California over the last 40 years—and San Jose in the same time period—you’ll see that we have not built enough housing to satisfy demand. Just in round ballpark numbers, California is a million houses short of what it needs to satisfy the demand. San Jose has built an enormous amount of housing and has provided housing for Silicon Valley for decades. But we in San Jose, by ourselves, cannot meet the demand created by the constraint of housing in the region or in the state. And the result of all the housing we have built is a jobs/housing imbalance unlike any other major city in the country.

PO: So why aren’t we building the housing?

CR: In California, we say that it’s horrible people have to pay so much for housing. It’s horrible that people have to live in substandard housing. It’s horrible that multiple families live in a single house. So we really feel bad about that as a state—but not bad enough to actually do something about it. It always seems to be down there around number eight on the priority list, below things like keeping the unions happy, keeping the environmentalists happy, having more greenbelt, saving the farmland from the expansion of housing.

If you look at California—and SJ I think is typical—you see the government is trying to build affordable housing. Look at the headlines from this last week, “Facebook is giving $150 million for affordable housing.” Well, how many units can they build for $150 million dollars? What’s the price per unit? We have subsidies that are being required to build affordable housing that are in the hundreds of thousands of dollars per unit. So you divide Facebook’s $150 million by $500,000 a unit, you get 300 units. How wonderful, but we’re still a million units short. So government and companies that are putting money that addresses the issue are doing important things, but it’s not going to solve the problem.

PO: What are some things we can do to start to fix the problem?

CR: I spent 14 years as a planning commissioner—city and county combined—and 14 years as an elected official, council and mayoral combined. I sat through roughly a thousand hearings on housing. I sat through a lot of hearings where the elected officials really wanted to build a housing project, but the neighborhood opposition restrained them. And even if we decided as a political matter that we were going to approve the housing project, then they’ve got to litigate it. The California Environmental Quality Act (CEQA) is structured to make it really easy for anti-housing advocates to litigate.

So my number one recommendation for the state of California: do something about the ease in which CEQA can be used to block projects and particularly affordable housing projects. My recommendation would be to eliminate the private cause of action under CEQA for housing projects, affordable housing projects in particular, so that the government would still be doing CEQA analysis; they would still be looking at environmental impacts; but once you’ve been through that, you don’t have to worry about one or two people thwarting the will of the local government to build local housing projects.

The second thing is to look beyond San Jose, to the other governments around the Bay Area. And to look at how housing policy affects their fiscal health. Cities have to supply services to residents, and they can’t do that without money. If you add housing at the wrong densities, it’s going to cost you more in services than the taxes generated out of the housing. This is a big impediment to governments who are trying to put their constituents first, which is the job of local governments.

So I would say to the state of California: for every new housing unit that a local jurisdiction makes, you need to give them more money. You need to give them a larger share of the property tax, because now the share of nothing is zero. We’re going to increase the property tax for everybody by building another unit of property. So my recommendation is that the state give the city of SJ and all other jurisdictions $2,000 per year out of the future property taxes for each new unit that gets built, and then that really takes away the reluctance to build housing because of the fiscal impacts.

PO: On your idea of splitting what cities get from housing as far as percentage of the property tax, I think that would be something that would alleviate cities’ fears of fiscal impact, but I think then wouldn’t all the other players that get a portion of that property tax have a concern, whether it be the county, school district, etc.?

CR: They’ll all have concerns, but right now, the property tax they’re getting is zero, so we’re talking about splitting future revenues, which makes it a lot easier because 100% of zero is still zero. So the big percentage of property tax revenues goes to the state, which they then use to fund the schools. The state could change the allocation percentage, and everybody would come out ahead. Because when you build more housing, the total revenues out of property taxes is sufficient to pay for the services that you might need—much more so than the 11% that the city or 20% the county might get out of it. (This scenario assumes the new low-income housing development is not exempted from property tax in perpetuity, as is the case for almost all low-income housing developments in San Jose.)

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Images by Matt Bruensteiner and Peter S. Carter