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Updating San Jose’s 2040 Plan: What We Need to Get Right

San Jose's Envision 2040 plan calls for lots of jobs, but the market for commercial property is not as strong as the housing market. One South Market, one of downtown San Jose's new residential towers, is filling up with residents but its ground floor remains empty. Photo by Sergio Ruiz.


When San Jose adopted its general plan, Envision 2040, it was a game changer, signaling a major pivot toward an urban future. Every four years, San Jose will take a fresh look at the city’s progress toward its goals and makes mid-course adjustments as necessary. This year will see the first review since the adoption of the plan in 2011.

As we’ve written about before, San Jose’s general plan is a nationwide example for cities looking to retrofit their suburban pasts — and getting it right is key to the city’s future. In November, San Jose convened the first meeting of its review task force, which will meet through April 2016 and make recommendations for policy changes to the general plan. As a member of the task force, SPUR sees this review as a chance to adjust a few things to make the plan easier to implement. Here are some of the big issues we will need to address:

San Jose has a longtime fiscal imbalance and wants to close the gap by planning for lots more jobs. However, the general plan’s job targets can’t be met in the near future.

For over a decade, San Jose’s budget has been on an economic rollercoaster. Tough choices and fiscal reform have helped stabilize costs, but it’s still tenuous. To deliver the high-quality public services it wants to provide, San Jose will need more revenue. One of the ways the city aims to achieve a healthier fiscal balance is by carefully managing its land use. Jobs contribute more revenue to the general fund than housing does, though the city’s recent fiscal impact study found that both new high-density housing and jobs can be fiscally positive. In land use terms, this means that industrial, commercial and other employment uses are more productive than residential uses. Consequently, the general plan aims to build capacity for 470,000 new jobs and achieve a ratio of 1.3 jobs for every employed resident by 2040. The underlying logic is that if jobs outnumber residents, the city will have enough revenue to keep the libraries open, fill the potholes and so on.

Looking back, it’s become clear that the number of jobs that San Jose is planning for is unattainable. Today, San Jose has 0.8 jobs-to-employed residents and would need to grow much faster than the Bay Area as a whole to get to 1.3. To update its jobs projections for the review, San Jose hired the Center for Continuing Study of the California Economy. The center's analysis shows that as of 2013, San Jose had about 413,300 jobs — and it’s possible to reach up to 597,600 jobs total by 2040. Even under that scenario, the city would only be able to reach a ratio of 0.9 jobs to every employed resident. While it’s great to be aspirational, this too-high target is embedded in many other general plan policies, making it challenging to achieve some of the plan’s development goals.

Although San Jose may not reach its jobs targets by 2040, the city still needs to plan for a lot more jobs — and in the right places. This is no small task. Since 1980, the city has converted 2,300 acres of employment land to residential uses, leaving only about 15 percent of the city’s land for jobs. Currently, the general plan assigns the 470,000 new jobs into growth areas, including urban villages. However, not all urban villages have the market to support the number of jobs that were assigned to them, while other urban villages may be able to accommodate more jobs than originally planned. In the long run, the general plan will need to leave land for jobs even if job growth is lower than anticipated.

If San Jose can’t reach a healthy fiscal balance by increasing the number of jobs, the city may have to consider other ways to raise revenue. While this is outside the purview of the general plan, it’s an issue that SPUR is looking into. In the past few months, we’ve analyzed San Jose’s fiscal position relative to its neighbors in Santa Clara County and California and will release recommendations to help turn the tide later this year.

There are only a handful of places in San Jose that are workable for housing right now.

Some of San Jose’s growth areas are booming, like downtown and north San Jose. However, San Jose’s urban villages — where the general plan focuses most of the city’s future growth — are lagging behind. The city has not issued any housing permits in urban villages to date because development within an urban village is restricted until it has a completed and approved urban village plan.

New office and other employment uses can be built in an urban village at any time. But new residential development can only be developed once an urban village plan is approved. Further, residential development is phased over horizons. The general plan includes two exceptions that can allow development to occur in urban villages prior to the adoption of the general plan or outside of its horizon. One exception is a signature project, which can be a commercial or mixed-use project but must incorporate the capacity for a high amount and density of jobs. However, while the market could support housing in urban village areas, it can’t support the amount of jobs required of a signature project. A combination of general plan policies and the market have effectively stalled development in many parts of the city.

The need for affordable housing is growing at a time when there are fewer tools to make it economically feasible.

San Jose is a longtime leader in building affordable housing. However, since the dissolution of state redevelopment agencies, San Jose, like all California cities, has had to get creative about finding sufficient tools and resources to build affordable housing. Last year, the city adopted an affordable housing impact fee on new market-rate housing construction to raise money for affordable housing, but the needs are large.

Without the resources that redevelopment agencies provided, many people are asking cities for more support for affordable housing. As mentioned above, the construction of new housing is tied to the achievement of the city’s fiscal goals (i.e., the jobs-to-employed residents ratio), and these, as currently set, are not attainable. In addition, under the general plan, housing cannot be developed on industrial lands. However, industrial lands are generally less expensive and help make affordable housing economically viable. These factors, coupled with high land costs and diminished financing tools, have made it challenging to build affordable housing in San Jose.

The chance to revisit the general plan is an opportunity to make it more implementable while maintaining the overall urban vision for the city. We look forward to working with the city and task force members to answer these key questions and more.