2007 Silicon Valley Projections - Silicon Valley Leadership Group

Housing
The Biggest Barriers to Success…
There are many barriers to building more homes but there are
a few that are most significant, namely, how local governments
are financed.
In every decision that we as individuals make, cost is usually
a factor. The same goes for cities. When considering a land use
permit, an important question the city must ask itself is what
kind of financial impact the future development’s needs will
have upon the city. Demands on city services, schools and
infrastructure, all of which must be maintained at some cost,
are associated with housing construction and to a lesser extent,
office parks or big box retail. As a result, fiscal considerations
have become a major barrier to building homes. These considerations
were made more acute five years ago when the State
government decided to balance its budget, in part, by taking
local government money.
Percent of Regional Housing Needs Allocation
(RHNA) Permitted
County Very Low Low Moderately Total
Income Income Low Income
Alameda . . . . . . . . . .24% . . . . . . .38%. . . . . . . . . 20% . . . . . . .65%
San Mateo . . . . . . . . .19% . . . . . . .45%. . . . . . . . . 16% . . . . . . .58%
Santa Clara . . . . . . . .55% . . . . . . .98%. . . . . . . . . 17% . . . . . . .75%
Regional Total . . . . . .34% . . . . . . .70%. . . . . . . . . 29% . . . . . . .80%
(9-County region)
Source: Association of Bay Area Governments
Proposition 1A was passed in 2004 to protect local governments
against future State “raids” and to provide local governments
with much-needed financial certainty from year to year.
Housing advocates also hoped this certainty would lead to more
favorable outcomes when considering housing permits.
However, the allegation that housing doesn’t pay for itself still
persists. Residents wary of a decline in city services and quality
of life continue to express concern over new home construction,
especially if those homes don't mirror the ones they live in.
This is a problem that is difficult to solve. Cities are
entrenched in the way local governments are financed and any
talk of change makes them very uncomfortable. For example,
cities such as Gilroy have worked hard to grow their revenue
base through outlet stores. Any changes to how local governments
are financed would need to respect those decisions.
It is unrealistic to expect substantial change to how local
governments are financed. However, there are ways that we
can provide a work-around solution. Very simply, cities and
counties should be rewarded for good land use planning and
the resulting housing production.
Programs such as the Metropolitan Transportation
Commission’s Transportation for Livable Communities are an
excellent example of a way to reward cities. The program
awards grant funds to cities that meet certain housing production
requirements at specific densities near transit. So far,
23 housing developments have been awarded $7 million to
create nearly 2,700 new housing opportunities throughout the
Bay Area. MTC expects to provide up to $30 million to qualifying
projects in the upcoming round of grants. This success
should be expanded locally, regionally and statewide.
Another huge challenge in meeting the need for more homes
is community opposition. Rarely does a community open up
its arms to welcome a developer. Instead, developers are seen
as people who wish to bring unwanted change to a neighborhood,
change residents fear will decrease the quality of
schools, increase traffic congestion, and add demands for existing
city services such as parks and libraries.
The end result of systematic community opposition can be
found in reduced densities, heights and the overall number of
homes being built. Council by council, project by project, our
ability to meet the demand for homes with the limited land
available is whittled away through a reduction in the number
of homes ultimately approved for construction.
A good illustration of this is the Hyatt Rickeys site in Palo
Alto. The applicant originally sought 304 homes. The
surrounding community did not like the proposal for a number
of reasons and at the end of the day, a significantly scaled
back version was approved by the council for 181 homes. In
essence, the opportunity to house 123 additional families on
that site was lost.
This story is played out all across the State every week as cities
approve developments that squander housing opportunities.
Couple this with recent research out of UC Berkeley on infill
capacity statewide and the problem is magnified. The study
projects that 25% of the need for more homes can be accommodated
through infill, meaning 75% will be sprawl, leading
to the consumption of valuable open space, farmland and
requiring heavy taxpayer investments in new infrastructure to
serve sprawling communities.
To make matters worse, there has been an increase locally of
citizen backed measures to control or stop growth. Last year,
three initiatives in Cupertino that would have made it infeasible
to build condominiums and publicly funded affordable
homes qualified for the ballot. All three were defeated but the
this year some Cupertino residents qualified two more initiatives
to rescind the approval of two condominium proposals
near Vallco shopping center. In 2003, Palo Alto citizens tried
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