Old Debate on Land Conversion Resurfaces in San Jose Amid Hot Housing Market

San Jose, Housing Market,Cupertino, KT Urban, residential real estate news, Wolff Co., San Francisco, City Ventures, Silvery Towers, Silicon Valley
KT Urban’s new proposed project in San Jose

By Neil Gonzales

Housing proposals continue to flood San Jose, where the residential market has traditionally been ahead of the commercial sector but is especially hot these days.

While the city is amenable to housing development in its evolving mixed-use downtown with such tower projects as Cupertino-based KT Urban’s new concept at Almaden Boulevard and Park Avenue, converting land use outside the business core from commercial or industrial to residential is a bit more problematic.

[contextly_sidebar id=”eRaRmBGHiVMzG2Mm5czeUmzCVeKI6pcJ”]“It’s a really critical issue for the fiscal health of San Jose,” said Kim Walesh, the city’s director of economic development and chief strategist. “San Jose does not have enough jobs for the population and housing it has. So it’s very hard to support further conversions.”

On April 14, the City Council is scheduled to take up that very subject during a special meeting. The issue, which the city has wrestled with from time to time over the years, has come to the forefront again as several developers have asked the city to rezone commercial sites for housing.

In years past, the city had little qualms converting swaths of land targeted for jobs to build homes, but nowadays, rezoning requests face tough sledding.

“The council has put strict controls in the General Plan to really restrict and put a lot of difficult hurdles in people’s way to convert jobs land into a residential designation,” city planning chief Harry Freitas said in an interview with The Registry last year. “We are still producing tons of housing, just not at the densities that some developers would like to build it.”

In recent weeks developers submitted General Plan amendment requests for about 40 acres of commercial or industrial land to be rezoned residential.

Among the requests, Arizona-based Wolff Co. seeks the conversion of roughly 7 acres at 2829 Monterey Road while San Francisco-based City Ventures wants 10 acres at 641 N. Capitol Ave. to be rezoned. Another 10-acre parcel at 2905 S. King Road has also been asked for a zoning change.

Historically, Walesh said, San Jose has devoted land to housing and limited commercial development whereas other Silicon Valley cities have done the opposite. Part of the reason is housing development filled San Jose coffers with property tax revenue before the statewide initiative Proposition 13 in 1978 reduced the rates on homes, she said.

“After Proposition 13, the city still had to service all those homes,” she said, “but the property tax was capped.”

While job-producing land generates sales-tax and other corporate-related revenue for the city, residential development creates the need for expensive police, fire and other public programs to serve those households.

From the 1990s to the 2000s, Walesh said, “thousands of acres were converted to residential. The prior city councils probably didn’t fully understand the long-term consequences.”

But during Mayor Chuck Reed’s eight-year tenure that ended last year, she said, the city put the brakes on conversions and even returned about 250 acres to a commercial or industrial designation.

Ken Tersini, the principal at KT Urban (formerly KT Properties), weighed in on the rezoning debate: “We think there are a number of sites in San Jose where conversion truly makes an awful lot of sense,” he said, declining to identify those areas to avoid tipping off competitors.

He argued that residential development is still “a true economic driver,” creating jobs during construction, enhancing the city’s tax base and bringing in residents who would patronize local businesses.

In contrast to the rest of the city, downtown has less stringent zoning. Parcels in the city center can be developed for either residential or commercial, Walesh said, “so there’s no need to do rezoning in downtown.”

Residential proposals have gotten traction in downtown as the city has been transforming the area from primarily a business district into a walkable neighborhood with new high-density apartment and condominium projects amid upscale restaurants and entertainment venues.

Among the early bettors on downtown was KT, Walesh said. “They have been here early and have committed to downtown long term.”

KT’s housing ventures downtown include the Axis condo tower, One South Market apartment high rise and 643-unit Silvery Towers, which recently broke ground at North San Pedro and West St. James streets.

The company’s latest proposal for downtown is a 24-story, 264-unit tower at Almaden and Park that could be either apartments or condos, Tersini said.

KT is pursuing other new possibilities downtown, he said, declining to elaborate.

“We have a lot of stuff we’re working on,” he said. “We think downtown San Jose has matured a lot and come of age. It’s beautifully situated to service major employment centers and has connection to Caltrain, light rail and a potential BART station. We saw an opportunity for an urban landscape and urban feel that buyers and tenants desire.”

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