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San Jose’s Public Planning Debacle

How did a sleepy town turn into congested city where only the rich can afford some elbow room?

By 11.1.07

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Through the Envision San Jose 2040 community workshop, the city of San Jose is asking residents to present plans for the next three decades. A new vision is certainly needed, as the current one has stifled growth, produced unaffordable housing, worsened traffic congestion, and created a woefully inequitable community.

In 1970, the San Jose urban area was about half as dense as Los Angeles. Shortly thereafter, city planners drew an urban-growth boundary to achieve compact development. As a result, San Jose is 85 percent as dense as L.A., making it the third-densest urban area in America. The law has also made housing unaffordable by restricting the amount of land available for new homes. As Harvard economist Edward Glaeser shows, "land-use controls play the dominant role in making housing expensive." When such controls are applied to growing regions, says Joseph Gyourko of the Wharton School, "high-income families outbid others for scarce slots."

As the tech industry sprang up, land-use legislation accelerated the growth in housing prices, and it continues to push low- to moderate-income families out of the region today. Many make long commutes from California's Central Valley, but others have simply left the state. Silicon Valley's affordability problems are a major contributor to the decline in the region's black population, as described in the San Jose Mercury News earlier this month.

Census data show that the San Jose and Phoenix metropolitan areas each house about the same number of families earning $100,000 or more per year. But Phoenix houses almost three times as many families earning $50,000 to $100,000 per year, and more than three times as many earning under $50,000.

Phoenix's income distribution is similar to that of the United States as a whole, while San Jose's is skewed towards families earning more than $100,000 per year. Of course, $100,000 doesn't go far in San Jose, where housing is four times as expensive as it is in Phoenix.

In effect, San Jose has become like an exclusive country club, open only to the very wealthy. While its members may enjoy its amenities, everyone else is either denied access or forced to pay an extremely high price just to peer inside the club's gates.

San Jose's artificial land shortage also increases costs to businesses, stifling growth. As home to fast-growing high-tech industries, Silicon Valley should be one of the nation's fastest-growing urban areas. Instead, it is one of the slowest. Between 1990 and 2006, the number of jobs in the Phoenix metro area grew by 75 percent, while jobs in the San Jose area actually declined.

It wasn't always this way. When San Jose-area housing was affordable in the 1960s, its population grew by more than 5 percent per year. The new vision's regulations dampened annual growth to 2.0 percent in the 1970s, 1.4 percent in the 1980s, and a depressing 0.7 percent in the roaring '90s.

Of course, San Jose isn't alone. Thanks to a unique California institution known as the local area formation commission, or LAFCo, many other cities and counties in the state also have urban-growth boundaries, which is why California has the nation's least affordable housing.

LAFCos have packed almost 95 percent of Californians into just 5.1 percent of the state's land, making California urban areas 80 percent denser than those in other parts of the country. If California had allowed cities to expand at the densities people prefer, they would occupy 8.5 percent of the state, and housing would be affordable. Is saving 3.4 percent of the state from development worth the exorbitant prices Californians must pay for housing?

Historically, the American dream of home ownership has been key to California's prosperity. San Jose's current vision threatens that dream, stifles growth, and is particularly unfair to low- and moderate-income families.

This would mean allowing developers to build outside the existing urban-growth boundary. Since California is nearly 95 percent rural open space, developing a few thousand acres of marginal farm and rangelands will not hurt the state's economy or its environment.

This new vision for San Jose will improve the city's livability for all present and future residents, not just wealthy elites.

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About the Author

Randal O'Toole is a senior fellow with the Cato Institute and author of the book Reforming the Forest Service and a recent Cato paper titled "The Perfect Firestorm: Bringing Forest Service Wildfire Costs Under Control."