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Jobs are Plentiful, Homes are Not: Effects of Silicon Valley Housing Shortage Spread over Vast Region

A proposal from Cisco Systems to build a 6.6 million-square-foot campus for up to 20,000 workers in south San Jose has focused attention on the Silicon Valley's housing shortage. Cities and counties south of San Jose feel threatened by the continued industrial development in Silicon Valley because more and more technology employees are commuting from places like Hollister, Salinas and Santa Cruz. The City of San Jose, however, says it has long carried more than its fair share of the housing load and the city needs more jobs. And regional planners predict the Bay Area will create 400,000 jobs — but only 100,000 new homes — during the next 10 years. In the meantime, the housing market continues to tighten. The median single-family home price in Santa Clara County rose 38% in one year to $540,000 in March, according to California Association of Realtors. In a seven-county Bay Area region, the median hit $447,000 in March, a 28% jump. Although incomes are high for professionals, the National Association of Homebuilders now says that the five least affordable housing markets in the United States are in or adjacent to the Bay Area. The effects spiral outward from Silicon Valley to San Francisco, the far reaches of the Bay Area, the San Joaquin Valley and rural areas south of the Bay Area. The real estate prices — combined with traffic congestion created by people forced to commute long distances — are getting the attention of state lawmakers. Now it appears that Silicon Valley's skewed jobs-housing picture is driving much of the land-use policymaking occurring in the state Capitol. Coyote Valley calls Computer networking giant Cisco Systems has proposed a 6.6 million-square-foot campus on 688 acres in North Coyote Valley. The land is within the City of San Jose's urban growth boundary (called the Greenline) but has remained mostly agricultural. Cisco would construct the $1.3 billion project over five to ten years, and 20,000 people would work on the site at build-out. Cisco has applied for a rezoning to allow compact development — and retain nearly 300 acres of open space. A draft environmental impact report has been circulated and could go before the City Council this month, said Joseph Horwedel, San Jose deputy planning director. Cisco planners say they picked the site because the area has been designated for industrial growth since 1983, transit is available, the site would spur a "reverse commute," and new houses are planned nearby within San Jose. "We chose the North Coyote Valley for several reasons, one of which is that it was planned precisely for this type of project many years ago through a community and public process," said Cisco spokesman Steve Langdon. "And it is well-situated for public transit, with Caltrain on one side of the site and light rail planned on the other side." The reverse commute comes about because so many people now live in San Jose and head north every morning to the job-rich cities of northwest Santa Clara County, such as Sunnyvale, Mountain View and Palo Alto. Cisco would be the first major employer to locate south of most residential areas. But it is Cisco's location in south San Jose that has neighboring jurisdictions worried. The Cisco EIR estimates that only 20% of the workers will live south of the campus, and only 5% south of Santa Clara County. "We've already seen that that's not true," responded Salinas Mayor Anna Caballero. "Add 20,000 jobs 10 miles closer to us, and it's a natural commute. If you go north [of Cisco] and housing prices are twice as high as if you go south, you're going to go south." Salinas has long provided housing for Monterey County farm laborers and the coastal tourism industry's service workers. But Monterey County's median income is about half that of Santa Clara County's, unemployment is double-digit, and many workers are underskilled. The result is that Salinas locals are getting priced out of the housing market, Caballero said. Salinas and other members of the Association of Monterey Bay Area Governments (AMBAG) contend the Cisco EIR is inadequate. The Cisco project qualifies as a "project of regional significance" under the California Environmental Quality Act, according to Kate McKenna, AMBAG special projects manager. However, the EIR says little about regional impacts. Planners to the south also note that although San Jose has set aside land for 30,000 additional homes in the Mid-Coyote Valley Urban Reserve and the nearby Almaden Urban Reserve, San Jose has no near-term plan to permit that housing development. San Jose officials, however, appear unsympathetic. They defend San Jose's long-range planning and suggest that outlying towns can choose how fast they grow. Moreover, they point to the city's $100-million-a-year housing program, which plays some role in the development of one-quarter of all new units in town, as evidence that the city cares deeply about sheltering its people. San Jose has 0.8 jobs per employed resident, San Jose planner Horwedel said, while cities in northwest Santa Clara County offer 1.5 to 2.5 jobs per employed resident. San Jose needs a bigger employment base to solve some long-standing budget problems, he said. The city will allow housing development in the urban reserves when several triggers are met: freeway improvement projects are underway, the city's budget is balanced for a projected five years, municipal service levels hit certain levels, and 5,000 jobs are created in North Coyote Valley. "Had we not put those triggers into the general plan, we would have long ago built that out with single-family residential, and that would not have solved anything," Horwedel said. The city continues to approve 3,500 to 5,000 new homes a year, two-thirds of which are in multi-family structures, he added. But Rob Mendiola, planning director for rural San Benito County, about an hour south of Silicon Valley, said San Jose is relying on 17-year-old general plan policies that are no longer valid. "What they are successful in doing if they implement that plan is pushing their problems off on other jurisdictions," Mendiola complained. "It seems fairly irresponsible to continue to build tens of thousands of jobs and not have a corresponding housing supply. It was irresponsible for the Mountain Views and Palo Altos to do that to San Jose years ago. They should certainly understand what they are pushing off on other jurisdictions." Technology workers have driven up housing prices in the Hollister area to the point that people who work in San Benito County must commute from small towns 50 miles away in the Central Valley. The county has responded to the growth pressures by making it difficult to increase building densities on land designated for agriculture. The Board of Supervisors also is considering a 2% annual growth cap. But there is little in the way of north-south negotiation. "It's very adversarial, which is unfortunate," added Salinas Mayor Caballero, who has sought assistance with transit and job training. "We have a totally different economy, and we're not even in the same county, so we have no pull." The new growth pressures in San Benito, Monterey and southern Santa Cruz counties are only the latest signs of the economic boom in Silicon Valley, where seven jobs have been created for every one housing unit constructed since 1995. Earlier indications can be found on Altamont Pass, which separates the Central Valley towns of Tracy, Manteca and Modesto from the Bay Area. Those three cities have grown to a combined population of nearly 300,000 while serving primarily as bedroom communities for Silicon Valley, up to 100 miles away. Not even San Francisco is immune. An estimated 500 Internet-related companies — with 40,000 employees — have set up shop in San Francisco. Those new companies, which are desperate for office space, combined with highly paid Silicon Valley technology workers who want to live in a hip atmosphere, are gentrifying some of San Francisco's grittiest neighborhoods. Business, lawmakers take notice Many of the Silicon Valley's big technology companies participate in various planning efforts, including the 175-member Silicon Valley Manufacturing Group and Joint Ventura Silicon Valley. According to SVMG President and CEO Carl Guardino, member CEOs say the biggest obstacle to continued economic growth is "homes that are affordable to working families. Almost completely tied with them is a working transportation system." To help meet those needs, SVMG spearheaded a $20 million housing trust fund (Cisco is a contributor) to assist first-time homebuyers, develop and rehabilitate affordable rentals, and shelter homeless people. On the political front, SVMG has a grass-roots Housing Action Coalition that uses "smart growth" criteria to lobby for residential developments, and a leadership council that inventories land and meets with city leaders to champion housing. The group has also led successful campaigns to raise the Santa Clara County sales tax to fund highway and transit projects. Guardino concedes that the large number of high-paying jobs has skewed the housing market. But he argued that California's government financing system — which caps property taxes at artificially low levels, gives the majority of property tax revenues to schools, and forces cities and counties to rely heavily on sales taxes — is as much to blame as anything. "We penalize cities that provide housing," Guardino observes. "Even HP is a revenue-neutral proposition for local government, even though those are tremendously high-paying jobs." More than ever before, elected officials at the local and state level appear to recognize the impacts of what is popularly called the "fiscalization of land use." The Capitol is full of bills that address land use practices, and proposals to reform local government financing are everywhere. Notably, representatives from the Bay Area's fringes are leading much of the discussion. Assemblyman Fred Keeley (D-Santa Cruz) said that what happens in Silicon Valley drives the policy debate because Silicon Valley is seen as the prime component of the state's economy, and because the technology entrepreneurs are largely apolitical. "People," said Keeley, "chase both values — a high paying job in the new economy, and an affordable house." But the political, social, economic and environmental consequences of people living two hours from the office are enormous, he said. In the Legislature, the nine bills backed by the broad-based, bipartisan Jobs-Housing Coalition appear to be a direct result of the Silicon Valley imbalance. (See CP&DR, April 2000.) The bills provide regulatory changes and financial incentives for local government to approve more housing near job centers. Other bills have been introduced that encourage transit-oriented development and require that regional housing plans contain one residence per 1.5 jobs. And Assembly Democrats have proposed a $1 billion housing package to help first-time homeowners and provide affordable rentals. However, most observers expect no systemic changes to the land-use planning process unless Gov. Davis makes the issue a priority, which he has not thus far. Local elected officials talk about transportation and they have convened regional transit meetings in recent months. They and Silicon Valley business leaders appear to have influenced Davis's recently released transportation plan, which favors the Silicon Valley over any other region of the state. But few local elected officials are willing to broach the topic of housing. Mostly they argue about regional projections for housing demand and say new houses should be built elsewhere. What's the answer? One solution would be for technology companies to spread outward to places like Salinas and Modesto. But companies show little interest in leaving Silicon Valley because that is where the talent pool and start-up companies are concentrated. Gary Patton, executive director of LandWatch Monterey County, which bills itself as a land-use watchdog, said housing subsidies and creative approaches by expanding companies are necessary. "The answer is, obviously, requiring a city to specifically tie approval of new jobs to construction of adequately priced housing in the jurisdiction that gets the new jobs," Patton said. University of California, Berkeley, City and Regional Planning Professor John Landis, who has studied the region extensively, offered an even simpler answer: Build many more housing units. "There's only one way to get out of this, and that's to build our way out of it," Landis said. "No amount of ‘good planning' or transit-oriented development is going to solve the problem. We just need more housing production, and that's a hard thing to say if you are an elected leader." Cities in northwest Santa Clara County are mostly built-out. Jurisdictions that have land available have little political will to allow large-scale housing development, Landis said. If Silicon Valley is going to house the workers, it probably means addressing the amount of land reserved as open space, Landis added. Contacts: Joseph Horwedel, San Jose planning department, (408) 277-4576. Anna Caballero, Salinas mayor, (831) 758-7201. Rob Mendiola, San Benito County Planning Department, (831) 637-5313. Kate McKenna, Association of Monterey Bay Area Governments, (831) 883-3750. Fred Keeley, Santa Cruz assemblyman, (916) 319-2027. Steve Langdon, Cisco Systems, (408) 525-1499. Carl Guardino, Silicon Valley Manufacturing Group, (408) 501-7864. John Landis, UC Berkeley, (510) 642-5918.