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Commercial Linkage Fee: Sustainable funding for affordable housing in San Jose

Interested in having long-term impact on affordable housing solutions in San Jose? Supporting a new Commercial Linkage Fee is an opportunity to do just that!

New commercial real estate development creates additional demand for affordable housing. A Commercial Linkage Fee (CLF) is a fee paid by developers of offices and retail space to offset some of the additional need for affordable housing created by new commercial development. Revenue from the fee is used to fund the construction of affordable housing. San Jose does not currently have such a fee, and City Council will vote on a new Commercial Linkage Fee on September 1.  A strong fee will help create affordable neighborhoods for all.

Santa Clara County currently has some affordable housing funding sources, but we need to create permanent sources to meet ongoing needs.

The 2016 County of Santa Clara Measure A Affordable Housing Bond has made significant contributions to the development of supportive and lowest-income affordable housing in our community. The bond has already funded 2,416 new homes in 27 new apartment buildings, nearly half of the ten year goal of 4,800. Having an additional and permanent source of funding will strengthen our community’s work to end and prevent homelessness in Santa Clara County.

Other cities in Santa Clara County have a Commercial Linkage Fee already.

San Jose is the largest city in the County without a Commercial Linkage Fee. Other cities have the fee already, including Cupertino, Milpitas, Mountain View, Palo Alto, Santa Clara, and Sunnyvale.

We have a lack of affordable housing that needs to be addressed.

Like most cities in Santa Clara County, San Jose is behind on meeting its Regional Housing Need Allocation (RHNA) affordable housing goals, particularly goals for homes affordable to our neighbors with lowest incomes. As the 2020-2025 Community Plan to End Homelessness shows (see page 5), there are only 34 affordable homes for each 100 renter households with incomes below 30 percent of the area median income in the San Jose Metropolitan Area.

In the 2018 report, Affordable Housing Crisis, Density is our Density, the Civil Grand Jury of Santa Clara County recommended that the City of San Jose complete the necessary Nexus study and enact a commercial linkage fee to create more funding for affordable housing. Now that the required Nexus study is completed, it is time to enact this fee.

A lack of affordable housing increases homelessness.

Many of our neighbors are being displaced because they cannot afford to live here. This is detrimental to our community in many ways, including contributing to new homelessness in our neighborhoods. In the 2019 Homeless Census, for example, 81 percent of respondents lived in Santa Clara County prior to losing their home and experiencing homelessness. Furthermore, 66 percent of respondents reported that rent affordability was an obstacle to obtaining permanent housing.

Data proves that housing does in fact end and prevent homelessness, and we have the opportunity to further our progress by passing a strong Commercial Linkage Fee in San Jose.

Having a Commercial Linkage Fee will help our city be a place of opportunity for all to work, live and thrive.

Many large employers in Santa Clara County have contributed to our work to end and prevent homelessness. The proposed fee will ensure that employers building new commercial space contribute to the increased affordable housing demand created by new jobs. Some fear that a high fee could scare away new business. Despite widespread knowledge of the likelihood a new fee will be enacted, however, the current development pipeline indicates ongoing, strong interest in pursuing new commercial development in San Jose. Without the new fee, it will be more difficult for our neighbors filling newly created jobs to afford to live here.

How to implement a Commercial Linkage Fee: How did we get here and what is next?

Before any city enacts a Commercial Linkage Fee, it is legally required to conduct a “Nexus study” to document the affordable housing demand caused by new commercial development. The San Jose study found, for example, that a fee of $137.70 per square foot of new office space would be required to mitigate all additional affordable housing demand created by the development (and accompanying new jobs).

Though not legally required, the San Jose City Council also decided to conduct a feasibility study to determine the highest fee levels the commercial development market could tolerate without discouraging new business. For new office development, the San Jose study determined a supportable fee level between $10 and $30 per square foot (varying by building height and part of town).

Following these studies, City of San Jose staff have recommended fee levels between $0 and $10 for new office development. City Council will review and vote on final fee levels on Tuesday, September 1.

Take Action

You can help ensure that San Jose is a prosperous and affordable community by asking City Council to implement a strong new fee:

  • Tell your friends, family and neighbors about the proposed new Commercial Linkage Fee. 
  • Share the Housing Ready Communities Action Alert to help spread the word.
  • Show your support at the City Council meeting on Tuesday, September 1. Register here to let us know you plan to attend the virtual meeting, so we can follow up with more specific timing for when City Council will be voting on the Commercial Linkage Fee.
  • Sign up to join the Housing Ready Communities Action Network to stay up-to-date on future action opportunities!

More Resources

Learn more and take action with SV@Home by signing onto their letter, watching their panel discussion, and learning more about fee levels in other cities in Santa Clara County.

This guest blog post is by Marisa Corriea (she/hers/they/them), a Public Health Institute (PHI) Community Health Fellow currently working with The Health Trust and the Destination: Home Housing Ready Communities initiative.