Consultants justify big housing fee increases
Council looks to double affordable housing fees on commercial development
In a city soon to be flooded with building proposals from Google and Intuit, council members said Tuesday that commercial developers of commercial buildings should pay more towards affordable housing.
In a study session Tuesday, Nov. 13, council members showed support 5-2 to double the fees commercial building developers pay towards subsidized housing projects, such as the 50-unit family home project under construction at the corner of Evelyn and Franklin streets. Members Tom Means and John Inks were opposed.
In a presentation, San Francisco-based consultants from Keyser-Marsten painted a portrait of a growing "affordability gap" between low-wage workers and most office workers in the city. Consultants said their 25-year-old model showed justification for some maximum fees that were quite surprising, most notably a hike from $2.47 to $243.61 per square foot for the development of retail and entertainment buildings above 25,000 square feet. They said it was because such workers' wages had risen the least amid rising costs of housing in Silicon Valley, creating a higher need than ever for low-income housing.
"All of us who prepared this asked ourselves, 'How did this come out so high?" said Kate Funk, senior principle for Keyser Marsten. "We don't recall anything like this in the past."
Despite a big increase in median income, from $74,000 to $105,000 since 2000, the wages of low-income workers in Silicon Valley remained relatively stagnant, and are the same as those who live in lower rent areas like Sacramento and Los Angeles.
"You are in the Silicon Valley and you have two to three families living in one bedroom — that is some of my neighbors," said Elaine Pacheco, a teacher and member of Rengstorff neighborhood group Community Action Team. "It is pretty sick to think we are in such an incredibly wealthy place and we have people that are so poor."
Despite the numbers supporting higher fees, council members expressed support for merely doubling existing fees in light of what cities like Palo Alto and Menlo Park were charging. The study said the council could justify a jump from $7.43 to $59.32 per square foot for most office development and a hike from $2.47 to $44.69 for hotel buildings.
Members supported $15 per square foot for office and tech development over 10,000 square feet and $5 per square foot for retail, entertainment and hotel buildings over 25,000 square feet. Palo Alto charges a housing fee of $18.44 a square foot for all commercial development, while Menlo Park charges $14.71 a square foot for office and $7.98 a square foot for retail, hotel and hotel buildings.
The new revenues would add to funds generated by fees paid by housing developers.
"To me, it make a lot of sense to do this fee on the commercial side," said member Margaret Abe-Koga. "The commercial side is creating buildings that create more jobs and create a need for more housing."
In light of the numbers, council members and affordable housing developers admitted that they could never meet what council member Jac Siegel called an "insatiable demand" for affordable housing.
"In my career I've never seen a jurisdiction that could produce as much affordable housing as it needed," Funk said.
Former Mayor Matt Pear spoke against the fee, saying that the solution was to allow the development of "micro apartments" that would be "very affordable."
Also expressing support for such housing was outgoing council member Means, an economics professor at San Jose State University.
"We always have a shortage of affordable housing," Means said. "There's always a shortage of things that are price controlled. You could say there's a shortage of affordable Ferraris. If people think there is a shortage of housing, the solution is to let people build those houses."
Means expressed impatience with the consultants and grilled them on their methodology and what he saw as their proposed fees, which they insisted were not proposals.
"You are suggesting we should," Means said about charging the maximum fees supported by the study. "I don't think there's anything in this analysis that says 'should,'" Funk replied.
A vote on a new fee on rental housing development was set for Tuesday, but was delayed to Dec. 11 so that it could be considered along with the commercial development fee in the same meeting. Council members have supported a new fee equal to 3 to 6 percent of the assessed value of an apartment building.
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