On Tuesday, the San Jose City Council voted unanimously to give developers a large financial benefit by effectively delaying the implementation of the city’s Inclusionary Housing Ordinance (IHO).
Years ago, San Jose passed an Inclusionary Housing law to require market-rate housing developers to build a portion of their projects to be affordable to low-to-moderate income families. However, that ordinance was tied up in litigation for many years, and only with the passage of AB 1505 (“Palmer Fix”) was the city cleared to implement the long-delayed law.
After AB1505 was signed, San Jose adopted a modified version of its Inclusionary Housing Ordinance that would require developers to either set aside 15% of units at Below Market Rates (BMR) or comply by paying a per-unit fee for 20% of the total units. The inclusionary Housing ordinance would replace the current Affordable Housing Impact Fee (AHIF) of approximately $17 per square foot.
The effect of the change from the AHIF to the IHO is to increase the amount of responsibility that developers have for mitigating their housing impacts. It also creates an incentive to place units on-site, promoting high-opportunity, mixed-income communities, as the alternative to on-site units is a higher fee requirement. The current in-lieu fee is set at $125,000 per unit, but even that number may be too low to achieve the overall goals of having integrated, diverse communities.
The policy just approved takes San Jose even further from these objectives by effectively giving a number of projects (potentially hundreds or thousands of units) a pass on their inclusionary housing responsibilities. This will allow developers to qualify more projects as transition projects, making them eligible for AHIF pipeline exemptions. It will do so in the following ways:
- Changing the standard of completeness needed to qualify as a transitional project. Currently projects need to have all building permits approved for a project to qualify. Now, projects will only need to have final approved plans by the deadline of June 30, 2020
- Allowing Downtown High Rise developers who do not meet the Certificate of Occupancy standard by the deadline of the exemption of the AHIF deferral on January 30, 2021 to pay the old Affordable Housing Impact Fee instead of having to abide by the Inclusionary Housing Ordinance.
By adopting this policy, council is allowing millions of dollars that could have gone to affordable housing development to be lost. Moreover, large numbers of inclusionary housing units that could be built in our growing and vibrant neighborhoods will not be available to the working families that are now experiencing displacement in San Jose.
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