Concerns abound over rosy outlook and that housing will be
unaffordable
San Jose – The committee directing Coyote Valley growth gave mostly positive reviews Monday to a new report that predicts development will generate huge financial surpluses.
But there are concerns that the study may rely on an overly rosy housing market outlook and that the project could become a place where only the wealthiest can afford to live.
“I have to assume they’re accurate,” Santa Clara County Supervisor Don Gage said of predictions that the finished project will generate at least a $57 million surplus for San Jose. “If the housing market collapses, they’re in trouble. They talk about 20 percent low-income housing, but boy, I don’t even know what low-income housing means anymore. I can’t afford to live there.”
The report, released last week, analyzed five different scenarios for developing the largest rural area that remains on the South Valley floor. The surpluses are largely based on the expectation that the development’s 26,000 homes will provide ample property tax revenue to fund basic city services such as police and fire, and libraries and parks for more than 71,000 people and 50,000 workers.
The city is trying to find a way to price 20 percent of the housing, rental units mostly, at levels considered “affordable,” but there will likely be thousands of homes priced at near or more than $1 million. The cheapest single family homes will hit the market near $800,000, and homeowners may be tagged with a basket of assessment and homeowners’ fees in addition to their mortgages because each of the scenarios begins with deficits that last as long as 17 years from the start of the project.
Kerry Williams, who represents a group of homebuilders and developers with substantial property interests in Coyote Valley, said the real news of the report isn’t the deficits or the home prices needed to overcome them, but the long term-result – a Coyote Valley that’s a boon to San Jose’s economy.
“People are missing the forest for the trees when looking at this report,” Williams said. “We have to keep the dollars in context … all of the scenarios start to accumulate huge surpluses for the city.”
Each of the scenarios achieves solvency within 20 years of the start of the project, but the two projected to be most successful are those that allow for houses to be built immediately. One scenario, as proposed last year by San Jose Mayor Ron Gonzales, would allow one house for every two new jobs, another would allow for a market-based buildout with limited job requirements.
To pursue either of those plans the city would have to change its general plan, which currently calls for no residential development in Coyote Valley until the region adds 5,000 new jobs. Williams said the best scenarios are those that allow for more immediate development.
“A faster pace of development will yield returns sooner,” she said. “I think [the report] does support the goal of establishing a sense of place earlier in the plan.”
The report was received much more calmly than was Gonzales’ proposal, though both could lead to significant changes in long-held plans for developing Coyote Valley. But there are some worries that the projections, compiled by Economic and Planning Systems, a Berkeley firm, may prove too optimistic and that Coyote Valley could turn into a drag on city resources.
Craig Edgerton, a task force member and executive director of the Santa Clara County Open Space Authority, said that he’s not comfortable relying on assumptions about economic conditions that extend beyond five years.
“I question the validity of any assumptions, aggressive, conservative or anything,” Edgerton said. “I don’t see the value of this information when you’re going out 20, 40, 60 years.”
Coyote Valley is a proposed development just north of Morgan Hill. Decisions could be made in the next several months to clear the way for homes there.
