Housing policy expert considers opposition to SJ development incentives spurious

This week, the San Jose City Council will debate extension of the Downtown High Rise Incentive Program, which waives certain fees so developers can build desperately needed new housing downtown with some semblance of profit. Local progressive and labor advocates inaccurately call the waiver a "subsidy," and oppose it. Scott Beyer is the founder and publisher of the highly regarded Market Urbanism Report website and podcast, and widely acknowledged as one of the nation's foremost experts on the city planning issues. He provides Opportunity Now with an exclusive interview regarding his perspective on this local debate.

Why is it too expensive for developers to build new housing in San Jose?

A: This is a problem decades in the making. Restrictive zoning ordinances have made it virtually impossible to find places to build new housing, even as new jobs have been being added. And then beginning in the 1970's environmental laws and regulations came into effect--with good intentions. But by preserving land for open space, these environmental laws further limited the amount of available space for new housing, thereby increasing the price of new housing even more. And on top of that, cities added impact fees and regulations--California has probably the highest fees in the nation. These fees are really a type of extortion--they basically charge developers fees so they can give goodies to various special interests. The whole situation has metastasized to obscene levels such that there's no way to build new housing and make a profit. So the cities start to waive the fees to incent new development, and the extraction debate begins, and we end up with the situation San Jose is seeing this week.

* Aren't all these added impact fees redundant? Isn't that the point of property taxes?

A: California politicians like to blame Proposition 13 for low government revenue regarding property, and how that forces them to charge high impact fees. The rationale is questionable: California tax receipts are booming, and property tax revenue is soaring, also. That's because Prop 13 has a built-in 2% annual increase, and soaring home prices have generated a windfall for the state, as a home's assessed value is pegged at its sale price. {Editor's note: Dan Walters at CalMatters concurs: "Overall, taxable property values are up by more than 6% to about $6.5 trillion, which will translate into about $75 billion in revenue. On average, property-tax revenue has increased by more than 7% a year since 1978, and overall revenue has expanded 15-fold since then."} The real issue is simply that cities want ways to generate more revenue. And there's this sentiment that new people who move into a city are takers, because they will be an added user of services. So the cities say we need to add new revenue sources to take care of new residents: it seems spurious to me.

* Are the building codes and regulations that drive up costs really that necessary?

A: There's this global regulatory phenomenom of bueracrats saying: there needs to be minimum standards for everything and it applies to every building, no matter where it is or who it's for: minimum lot size, room size, construction quality and so on. This makes housing more expensive. The way San Francisco has effectively banned of microunits (dormitory-style housing) and coliving arrangements is an example of how these regulations stop the market from developing housing that would be less expensive and more affordable. The fact that the cities are okay with waiving these fees tells us all something about how important the cities really think they are.

* Some local Silicon Valley affordable housing non profits are opposing the building of new housing if they include a fee waiver. How does that make sense?

A: The fee process, which is really an extraction process, is often called "community benefit agreements." This is where the proceeds from the fees go to a bevy of organizations and non profits associated with parks and housing, etc. If the fees are waived, the special interests don't get their money. So it's not surprising that affordable housing non profits will act like a special interest and oppose anything that curtails their handout from the city, even if it results in more housing.

Further innovative city planning content from Scott Beyer can be found here.