Housing Crisis To Worsen If San Jose Gets Amazon HQ2
San Jose and the Bay Area could face rental increases over the next 10 years if the region wins the Amazon HQ2 bid. San Jose joined the great Amazon HQ2 race, pitching the downtown corridor and North San Jose and areas in developable land in South San Jose, according to the Silicon Valley Business Journal. It will not be offering any subsidies or financial incentives, outside of what California’s governor plans to offer in tax incentives.
San Jose's bid, which is separate from a combined Bay Area bid from five cities, faces significant competition with over 200 bids submitted. Paddy Power gives San Jose odds of winning the bid at 18-to-1, similar odds as Salt Lake City. Even with tough odds, San Jose is still adding significant tech employers within its city limits.
San Jose is already planning a large campus from Google that would bring up to 20,000 employees into downtown. Adobe also plans to add 3,000 workers near its San Jose headquarters. With Amazon’s potential 50,000 employee count, San Jose could face an even worse housing shortage.
These workers would likely have to look elsewhere in the Bay Area for housing, adding to traffic and housing problems in other cities. San Jose's mayor has called for 25,000 housing units over the next five years, which could help speed up housing development, but still falls short of what would be needed if Amazon moves in.
The city met only 46% of its Regional Housing Need Allocation requirements for 2007 to 2014. Out of 34,771 permits needed to fulfill its housing needs, it issued 16,029 permits, most of which were for above-moderate-income housing. It met only 2% of the moderate-income housing requirements, issuing 144 permits out of 6,198. It is currently meeting 17% of its RHNA requirements for the 2015 to 2023 period, most of which has been for high-income housing.
San Jose has reported a 57% increase in rents from 2005 to 2015, according to ApartmentList. The city added 3.2 jobs for each new building permit during that period. If Amazon were to come to the city, that figure would grow to 4.7 jobs per new building permit.
Rents could rise another 1% to 1.6% with Amazon, and this is not counting the increases that will be felt when Google moves in to its planned campus. The city has the lowest vacancy rate of the 15 metros ApartmentList analyzed, meaning there is little room for new workers.
Construction on Google’s 6M SF to 8M SF campus is expected to begin in 2025, according to The Mercury News, and is already facing significant community opposition by groups concerned with rising rents and housing prices and no clear plan to add affordable housing. A potential Amazon HQ2 would result in an initial phase in 2019 and last 10 years with both projects possibly delivering around the same time, which would create an even tighter housing market.