As San Jose Boosts Job Growth, The Challenge Will Be Where To House New Employees
With the potential for Google to add around 15,000 employees at its planned 8M SF Google Transit Village, San Jose is presented with an ongoing challenge: How can a city grow jobs in a largely undersupplied housing market?
In the next 10 years, San Jose will benefit from more development and have a vastly different skyline, but also increase its population.
He said in the next 10 years, downtown and the immediate area around Diridon and Midtown from Valley Fair and Santana Row to Downtown will be more crowded with people.
The current pipeline has 6,000 units nearing or waiting for entitlement with 4,000 units under construction.
“There is a demand for those 10,000 units today,” Burroughs said. “If Google builds and adds 15,000 employees where are they going to live? We have a constant need for housing.”
In addition to the impact Google would have on the multifamily market, panelists discussed rising interest in the North San Jose and Milpitas office and mixed-use market and the benefits of investing in those markets. The Bisnow event was held at DivcoWest's Century Plaza office complex in Foster City.
Swenson is currently working on a 260-unit off-campus student housing project near San Jose State University. Burroughs said what makes the project naturally affordable is that students pay by the bedroom instead of by the unit.
One of the biggest challenges developers and cities face is ongoing opposition to much-needed housing.
“There needs to be a paradigm shift with the way people look at [development]. Everybody is pro-jobs. Nobody is ever opposed to building more jobs,” The Rincon Group principal Casey Wright said. “People are often opposed to building more housing because they don’t want the congestion. They don’t want to gentrify the area.”
He said Santa Clara County added 34,000 jobs last year and about a third of that number in housing. In San Francisco about 60,000 new jobs will come online through new development in the next few years, but only 8,000 new residential units are in the pipeline.
Since 2010, rents in San Jose have gone up 54% and the city is among the highest in the nation in terms of rent increases, he said.
Rising rental prices also have led to a statewide push to repeal Costa-Hawkins, which would open up cities to pass their own rent-control laws, which could restrict rent growth on newer product.
“I think there might be a mass exodus out of California if rent control changes,” Wright said.
He said the change won’t happen immediately since it will only allow cities to make their own rules, but it will be very dramatic when it happens. He said owners will have little upside in rentals.
The ongoing lack of supply and high demand also has helped create the affordable housing market.
As market-rate developers struggle with long entitlement processes and issues with financing, more affordable housing deals have been going through, Borelli Investment Co. Chairman Ralph Borelli said.
“That’s a new force in the marketplace that everyone should keep an eye on,” Borelli said.
He said unlike market-rate developers that have a year and a half to get entitled or they don’t get financing, affordable housing developers can look at a site, get financed relatively quickly and close deals much easier.
“The affordable housing guys have zero market risk,” he said.
Borelli said one of the biggest challenges is how long it takes for projects to get done. He said he started a project next to the future Berryessa BART station in San Jose 13 years ago.
His company has been overseeing land sales and the development of a mixed-use transit-oriented development at the former flea market next to the future BART station. Western National is currently building 551 units of rentals and KB Homes is working on 449 for-sale townhomes.
Now that the Safeway-anchored retail and 1,000 units of housing are underway, his company has been working with the city to plan the south side of the project, which now falls under the city’s village plan.
San Jose’s villages each must contain a mix of jobs and housing. He said his company has been working with the city to figure out how best to accommodate the new office requirements, infrastructure and housing needs.
“There are a lot of forces pulling and tugging at it, and as a result, it slows things down,” Borelli said.