Open Letter to Mayor Liccardo — Housing Shortage in San Jose

To give some context, Mayor Liccardo is his final mayoral term in San Jose. He is currently the deciding vote on a 6–5 Business/Labor majority on the San Jose City Council.

San Jose Mayor Sam Liccardo’s stances on the environment, bridging the digital divide, advocating for police accountability and more, are all things that all of his constituents can be proud of. However, one issue that Liccardo has had to deal with during his tenure is the high rent burdens and record breaking housing shortages in the South Bay Area city. The way that the housing shortage issue has been tackled has long been a point of contention in San Jose politics.

Recently he published a blog post on his medium account: “Subsidies and Fee Reductions: The Myth of the $67 million Giveaway” where he defends the fee reductions the San Jose City Council recently approved for a small group of real estate developers building in San Jose. He defends the City’s actions to continue the “High-Rise Incentive” program fee reduction first approved in 2007. This program halves typical park impact fees and gives developers the option to delay’s construction taxes until completion.

This is my open letter to our Mayor in response to that post.

Mayor Liccardo,

As a native San Josean and voter of yours, I have some issues with your recent article titled: “Subsidies and Fee Reductions: The Myth of the $67 million Giveaway.”

You, and many on the business majority of the San Jose City Council, have been criticized for voting for extending the High-Rise Incentive program and your post defending this is understandable. You have been quoted as saying this regarding our housing shortage: “We face a straightforward choice: either reduce fees and get housing built, or we sit on our hands and hope for some miracle to solve this housing crisis for us.”

I agree with you on this point. We must find out a way to fix our housing shortage and not sit idly by. However, I argue that there is a more efficient, equitable way, to address this issue and one that I hope that you will be a proponent for.

The High-Rise Incentive Program

Let’s talk about this program from a practical standpoint. The High-Rise Incentive program has been around since 2007. This program halves typical park impact fees and gives developers the option to delay’s construction taxes until completion. What has this fee reduction brought us in the form of housing supply in the past 15 years? 1522 units. A far cry into the estimated 25,000 homes that you personally said we need. That’s a failure by any measure. It’s clear that these fee reductions aren’t working.

In the past five years, San Jose has built just one unit of housing for every six jobs created. Now that this program has been extended to Dec 2023, how can we expect anything different?

Mayor Sam Liccardo breaking ground at 200 Park.

So what’s the answer? The General Plan Task Force’s recently put forward a plan (Thank you, Mayor Liccardo, for putting that group together, by the way.) and voted 22–12 on Aug. 20 to allow multi-units homes into single-family neighborhoods.

Yet, the voices on the business majority of the City Council (Khamis, Davis, Foley, Diep) continue to campaign and rail against this plan every chance they get. These council members continue to bank on developers to be the miracle to solve this housing crisis for us. Whether you like it or not, because of your alignment with them on key city council votes, it is perceived that you are on their side on this issue as well.

You will likely again be the deciding vote on this when it goes to a the city council. An affirmative vote on issue will allow you to deflect all of the pro-developer criticism that you are fighting against.

Regarding Subsidies vs. Tax Breaks

In regards to your point about the difference between subsidies and tax breaks, has been a common debate between economists. Economist David Friedman says that the difference between a subsidy and a tax credit for a given activity is that they “differ only in labeling. They have the same effect..” In other words, it’s all corporate welfare anyways.

Proponents of financial incentives for business argue that tax breaks and subsidies don’t create costs to the a municipality’s budget. Their argument — and yours — is that they will not come to San Jose without the tax break. Following this line of thinking, there is no cost to the city and San Jose does not forgo any tax revenue by issuing the tax break because to avoid the fees, developers would locate elsewhere, which means that San Jose would not receive fees anyways.

This argument, though, hinges on the assumption that San Jose’s fees and financial incentives are the deciding factor in where a developer chooses to locate and build. Even in the report that you mentioned, real estate development’s high costs are attributed to “a combustible mixture of high demand, labor shortages, steel tariffs and rapid economic growth.”

So I get it, your argument is that if these costs are high enough, we should help them out and see if we can reduce their caution for building in the area. However, I point to my earlier point: San Jose’s High-Rise Incentive program has been around since 2007 and it hasn’t worked.

Story regarding lawsuit over NDAs

Finally, in regards to the public’s perceived notion of you and the view of this, the reason why there is contention around how you and the city council are being scrutinized for your cozy relationships are stories that come to light about San Jose’s leaders having closed door discussions with Google, reports of your undisclosed property next to the proposed site or Google signing NDA’s with you and multiple City Council Members and staffers.

San Francisco’s Cautionary Tale

I think it’s pretty easy to draw from historical experience to see what will happen to San Jose if tech companies and developers continue to be “incentivized” to come to San Jose. Look no further than our big brother city to the north: San Francisco.

San Francisco enacted a tax break to encourage tech companies to locate in the city — aka the “Twitter tax break”. Companies located in certain areas could exclude a portion of their payroll tax. It was a tax break that the San Francisco Controller’s office said saved businesses over $70 million since enacted.

So what did it do? Companies came, real estate rents and values prices, created ton of jobs. San Francisco added an average of 24,000 new jobs per year from 2010 to 2017. By the end of 2017, there were 716,900 jobs in San Francisco, 105,000 more than at the city’s previous high in 2000. Awesome!

Inequality in San Francisco is staggering.

But what else happened? Housing shortage increased. Rent became more expensive. Inequality soared. The streets got dirtier. The homeless population doubled. Property crime increased. These are all the issues that your most ardent supporters are concerned about.

Why would we want to follow the same path in San Jose? Do we really want to be like San Francisco?

I was born in San Jose and I love this city. Despite the draw of a more affordable cost of living from other cities, I have decided to make continue to raise my family here and continue to call it my home.

Developers will always look at San Jose city and see “opportunity”. They care little about citizens like me see our city as “home”. We depend on people like you Mayor Liccardo to keep fighting for us, not them.

Let’s start incentivizing citizens like me to stay instead of worrying about which developers will come.

A worried citizen,
Sebastian Wong

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