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Building for Dollars

The global economy, local zoning decisions and California's tax revolt bear responsibility for skyrocketing rents and housing scarcity

By Eric Johnson

L.L. "VIC" VICTORINO is an unlikely housing activist. As executive vice president of one of the most successful companies in the world, he could afford to live pretty much anywhere. He could, if he chose, set his family up in a Tuscan villa or tropical paradise--but then he'd have a killer commute, even by Silicon Valley standards.

Victorino has lived in the valley since joining the Lockheed Corporation in 1967 and has headed the local office since soon after the merger that created Lockheed Martin in 1995.

One of the highest-paid executives in the world, he feels the pinch of the valley's tight rental market. Lockheed's workers, after all, need places to live.

Victorino is co-chair of a task force set up by the Santa Clara Valley Manufacturing Group. This elite organization, which advocates the interests of the local computer industry, is mobilizing around the issue of affordable housing. It isn't charity work. The pain caused by the superheated housing market here is no longer being felt only by low- and moderate-income folks. With a vacancy rate hovering between 1 and 3 percent and monthly rents up $200 to $400 over the past three years, even big business is hurting.

The average entry-level software engineer, who makes about $55,000 a year, might think the rents are OK, at least until forced to write a check for $4,050 just to cover first and last month's rent and security deposit for the average two-bedroom house. The boss ultimately gets to hear about that.

County Supervisor Joe Simitian, who co-chairs the housing task force along with Victorino and U.S. Rep. Zoe Lofgren (D-San Jose), says the situation is restricting the computer industry's ability to grow.

"This has become a major economic issue for the valley's industrial leaders," Simitian says. "They can't attract and retain employees if those employees can't find or afford housing."

Dubbed the Housing Leadership Council, the industry-group task force has assembled representatives from local government agencies, nonprofit groups, environmental organizations and area businesses. Over the past four months, the council has put together five work groups to tackle a number of problems confronting home builders and first-time home buyers.

This is the latest in a series of attempts to marshal local resources from the area's 15 local municipalities and myriad interest groups to provide affordable housing. Previous efforts have met with only spotty success, as evidenced by astronomical rents and scarce available homes.

Job Nobbing

MEANWHILE, MASSIVE FORCES have colluded to drive rents skyward--the most powerful being the industrial boom which has seen the valley produce 1,200 new jobs a month, on average, for the past two years.

"There are global economic factors that cause these high-tech jobs to increase," says Jim Derryberry, director of the city of San Jose's planning department. He says plain logistics also play a major role in restricting access to housing. "Intel and HP can create 100 new jobs each in a month, but we can't build 200 new apartments in a month. That's just the way it is."

Nevertheless, Derryberry does not absolve local policymakers from responsibility for allowing the situation to develop.

While municipal governments don't have much say over the factors that produce job growth, he points out, they make zoning decisions that either maintain a livable community or promote industrial growth that inflates property values.

Local politicians may have little choice, however. When deciding between a software company's expansion and an apartment complex, cities are all but forced to go with the industrial development. Proposition 13 and subsequent tax laws have made it so residential neighborhoods do not pay their own way. So cities look to commercial development--from strip malls to software firms--to pad their tax coffers.

"It's not that cities are just out to grab commercial development," Derryberry says. "They are forced to maximize revenue because there are so many constraints placed on them."

Residential developments also cost cities more to maintain. "Industrial areas don't need parks and schools and libraries," he points out. "And they don't need police and fire services because they have their own internal security and fire-suppression people."

Lenny Goldberg, a longtime fair-housing activist, calls this trend "the fiscalization of land-use policy."

"Cities make land-use decisions on the basis of how the different uses influence tax revenues," he says. As long as the tax code favors commercial and industrial development over housing, he says, renters and would-be home buyers of moderate means will suffer.

For a number of years, Goldberg worked to offset the damage by advocating rent control. Now, as executive director of the California Tax Reform Association, Goldberg is attacking the problem at what he believes to be its source.

"We have a situation in California where property taxes are not high and land costs are outrageous," he says. By bringing property taxes in line, he believes, the jobs-to-housing ratio can be brought into balance.

Home Base

SAN JOSE IS THE ONLY one of Santa Clara County's 15 cities in which there are more homes than jobs. "In effect, San Jose exports labor to the rest of Silicon Valley," Derryberry says. While the rest of the valley built chip plants and then software-development campuses, he says, "we became a bedroom community 25 years ago."

Rather than engage in tooth-and-nail competition for jobs with its neighbors, San Jose is aggressively working to build housing that can be serviced efficiently. Derryberry describes a system of high-density units located within areas that already have city services, linked by light rail to job centers and downtown. It sounds like a utopian vision, but it's already partially built.

"We've brought almost 5,000 units on line over the past 10 years," he says.

Mark Sherwood, director of the California Tenants Association, says that's all well and good for people who can afford these places, which he says are overpriced.

Sherwood believes that the government has helped create an imbalance that favors property owners, and that renters now need the government's help to achieve basic fairness. His group, which was formed seven months ago and claims a membership of 4,800, is circulating a statewide renters' rights initiative.

The tenants' initiative calls for "good-cause" eviction laws--which forbid landlords from throwing tenants out of their homes for no reason--and also would require landlords to give 60 or 90 days' notice to renters before eviction. It would also limit rent increases and force landlords to place security deposits in a trust, rather than use the money for their own purposes, which the law now allows.

"We believe housing is a right and should receive at least some protection under the law," Sherwood says. He's hoping to stir a movement among the state's 5.2 million renters to demand that right.

Lenny Goldberg, veteran of numerous rent-control battles, still believes that is a fair and reasonable way to go. But he seems to be placing his hopes on Silicon Valley's boom economy to bring the market in line with renters' needs.

"The biggest constraint on growth in Silicon Valley today is a lack of affordable housing," he says. "People who work in the valley have to live in Modesto. That can't last."

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From the Oct. 30-Nov. 5, 1997 issue of Metro.

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