☆ SJ housing expert: Builder's remedy mitigates supply-side issues, bypasses “stupid” City demands

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Jerry Strangis, San Jose land use consultant since 1975, comments on the City's attempt to get its Housing Element certified. Hand-wringing City officials worry—should the State reject their plan—developers will keep using the “builder's remedy” loophole to avert zoning restrictions. Strangis praises SJ's efforts toward a compliant Housing Element, while recognizing key economic benefits of the builder's remedy. An Opp Now exclusive.

I was born and raised in San Jose (and in fact, I've never lived or worked farther than five miles from where I was born). In 1975, I got licensed as a real estate agent and have facilitated real estate transactions and land use consulting since then. Also, I began lobbying work in 1986 and am still going strong. I'm very close to SJ's housing situation, on both the developer and government sides.

This is an interesting and complex issue. With the city not currently having an approved Housing Element (and I assume someone within SJ's Planning Department is to blame), there are opportunities for projects that normally wouldn't have any chance of getting through to move forward and get done. This option is called the “builder's remedy.” A lot of developers have been taking advantage of it, completely bypassing the city's ability to deny projects based on zoning regulations (particularly when it comes to higher-density developments, which are typically difficult to move forward). This is a real screw-up on the city's part, not getting their Housing Element passed. It's a big hit on the city to have all their zoning policies arbitrarily taken away.

Yet at the same time, there's no question that the builder's remedy does make it easier to develop housing stock. And that's the thing: SJ has significant demand for housing, just no supply. That's the bottom-line issue. A developer can avoid the stupid stuff the city wants them to do and actually get a project to pencil by either downzoning or dropping density (in a way that isn't officially compliant with city regulations). This can make it a lot easier financially to make a project work.

Financing these projects is a big deal here in SJ and Silicon Valley, the most expensive area of the world. I'm in the market here; I deal with many developments all over the city. The reality now is that extraordinarily high construction costs are preventing a lot of projects from going forward. For some projects, if the owners own the property and don't have much debt, they can absorb the rising costs (because housing demand isn't diminishing). However, this is the exception, not the norm.

Related:

• SJ Flea Market owners use builder's remedy to avert “infeasible” office project

• Housing experts: Mere threat of “builder's remedy” fast-tracks affordable housing development

• Housing law expert: San Jose CMs bite their nails over “builder's remedy”—for nothing

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