High Density or Low Density? Understanding how we got into our housing crisis (part 1 of 3)

San Jose and surrounding communities muddle through another election cycle talking about housing affordability but offering nothing substantial to fix the problem. Randal O'Toole of the Thoreau Institute explores the historical roots of the current mess in Santa Clara County in this exclusive three-part series for Opportunity Now.

High-density, mid-rise and high-rise housing is more costly to build and most homebuyers and renters consider it less desirable than single-family homes. Yet San Jose and other cities in Silicon Valley are eager to promote the construction of such high-density housing projects. San Francisco Senator Scott Wiener has introduced bills in the state legislature that would abolish any limits to such projects in major transit corridors which, maps indicate, pretty much includes all of San Francisco, Oakland, Berkeley, and other Bay Area cities.

There are at least two reasons why government officials favor high-density housing projects. The first has to do with tax policy: a fifty-unit condominium will generate less taxes than fifty single-family homes, but the taxes generated per acre will be much higher.

A more important reason has to do with the sixty-year-old debate over urban sprawl and the laws that were passed in response to that debate. Unless these laws are repealed, Silicon Valley effectively has no choice but to build high-density housing projects even though those projects mean housing will simultaneously be less affordable and less desirable to potential residents

The Debate over Annexation

Though San Jose is California’s oldest city, it was quickly eclipsed by San Francisco, which by 1950 had eight times as many people while Oakland had four times as many. In that year, the San Jose city council hired a former automobile executive named A.P. “Dutch” Hamann to be city manager. Some say Hamann set a goal of making San Jose the biggest city in the Bay Area, a goal that was eventually reached though not in his lifetime.

The first thing he did was to build a sewage treatment plan that had much more capacity than San Jose needed. Then he went on an annexation spree, growing the city from 17 to 136 square miles by persuading property owners to join the city so they could receive (and help pay for) sewer and other city services.

The annexations were mostly voluntary but became controversial because San Jose’s aggressive annexation led it to take land that other cities believed should be within their spheres of influence. The other cities complained to the legislature and in 1963 the legislature passed a law creating Local Area Formation Commissions (LAFCos) in each county. Commissions consisting of representatives of various local governments had the power to approve or reject annexations, the incorporation of new cities, and the creation of new service districts such as sewer and water districts.

Initially, LAFCos did not slow down San Jose’s growth. In fact, the city did more annexations in the 1960s than the 1950s. But the legislature’s creation of LAFCos unintentionally created the vehicle that slowed San Jose’s growth in the 1970s.

The Debate over Urban Sprawl

At the same time the legislature was debating annexation, some San Jose residents were beginning to raise concerns about urban sprawl. The late 1950s and early 1960s saw a backlash against the suburbs with publication of books like The Crack in the Picture Window (1956) by John Keats and the popularization of songs like 1962’s Little Boxes (which, ironically considering the song’s references to “doctors and lawyers and business executives,” was inspired by a then-affordable working-class neighborhood in Daly City). A growing environmental movement worried that sprawl was destroying valuable farmlands and open space. In addition, taxpayers worried that they were being forced to subsidize growth.

In 1962, Virginia Shaffer became the first dissenter to A.P. Hamann’s vision to be elected to the San Jose city council. The 1968 election saw advocates of slower growth win the majority of the council. When they took their seats in 1969, Hamann gracefully resigned and later died in the 1977 Tenerife air disaster.

Before the 1963 law creating LAFCos, San Jose had no authority over land outside of its borders. If the city council imposed strict growth limits, such as the growth controls adopted by Petaluma in 1972, then growth would simply take place outside of the city limits. This created a tension: cities wanted the tax revenues that came from growth, but the city council didn’t want the environmental impacts of that growth.

LAFCos enabled them to resolve that tension. In 1974, the region drew an urban-growth boundary around all of the cities in Silicon Valley, enforceable via the Santa Clara LAFCo. That boundary forced most or all new growth, and the taxes it generated, to take place within the borders of San Jose and other cities.

In 1970, the legislature had passed the California Environmental Quality Act, which required preparation of draft and final environmental impact reports, with public review, for any action that could have a significant environmental impact. A subsequent court decision found that any boundary changes approved by a LAFCo would require such an environmental impact report, and other legal decisions made the preparation of such reports extremely costly. The cities weren’t interested in paying this cost, so few expansions to the boundary were ever considered.

One such proposed expansion was of one of the last areas annexed into San Jose by Hamann, Coyote Valley, an agricultural area in the southern part of the city. Even though it was in the city limits, the city excluded it from the urban-growth boundary in the 1974 General Plan, calling the valley an “urban reserve” that would be added to the boundary when necessary and when “the City’s fiscal condition is stable, predictable and adequate” to support development of the valley.

Nearly three decades later, a developer proposed to build homes in Coyote Valley and spent $17 million on the draft environmental impact report that would be necessary to expand the urban-growth boundary. The Sierra Club announced it would support the expansion only if the developer put up $100 million to preserve land from development elsewhere. The developer couldn’t afford that and, since the Sierra Club seemed to have the ears of the San Jose city council, it gave up and never wrote a final environmental impact report.

The Rise of New Urbanism

In short, Silicon Valley has seen nearly five decades of growth with no increase in the amount of land available for that growth. This has been justified by recent planning movement called the New Urbanism that argued cities would be better off growing “up, not out,” that is, growing denser rather than sprawling across the landscape. Such density was supposed to be particularly important in transit corridors as the construction of mixed-use (residential and commercial) developments near transit stations would allow people to walk to shops and take transit to work, thus saving them the cost (including environmental impacts) of driving an automobile.

New Urbanists would ask people, “Would you rather live in a compact neighborhood where you can walk to a Starbucks and a grocery store and take a light-rail train to work, or a single-family home in a suburban neighborhood where you would have to drive everywhere you go?” Many people would answer the former, leading New Urbanists to conclude that there was a “pent-up demand” for high-density housing.

In fact, there is and was no such pent-up demand, which New Urbanists would have learned if they had asked the question honestly: “Would you rather spend $400,000 for a 1,100-square-foot condominium within walking distance of a high-priced, limited-selection grocery store or $250,000 for a 2,200-square-foot, four-bedroom, two-and-one-half bath home within easy driving distance of three major supermarket competing for your business on the bases of both price and selection?”

Despite this, urban plans that called for denser housing and limits on low-density development came to be known as “smart growth.” Anyone who favored low-density development was castigated as favoring “dumb growth.”

Next week, Part 2: How the county's slow growth policies backfire.

Randal O’Toole is a land-use and transportation policy analyst with the Thoreau Institute and author of “American Nightmare: How Government Undermines the Dream of Homeownership.”

Follow Opportunity Now on Twitter @svopportunity