Last week, we gave San Jose a copy of the previous blog post on the problem of unrealistic fiscal assumptions
used to make Coyote Valley fiscally responsible, together with the short letter below.
May 8, 2006
Coyote Valley Specific Plan Task Force
Re: Draft Fiscal Analysis for Coyote Valley assumes housing prices will increase faster than income indefinitely
Dear Members of the CVSP Task Force:
The Committee for Green Foothills submitted comments last month on the Draft Fiscal Analysis for Coyote Valley. Please see the attachment that details the reason why a major expense – housing prices – cannot forever increase at a faster rate than the increase in income. The attachment shows that if annual housing expenses started at 33% of household income and increased at 3% annually, as assumed in the Draft, while San Jose household income increased at 1% annually, then after 11 years the housing expense would rise to 40.7% our household income. Clearly, any long-term assumption that housing prices will exceed income is not a conservative assumption as claimed by City staff, but rather the expression of “bubble” economics.
We further note that 1,000 housing units are designated as “affordable” for-sale units. A 3% appreciation rate of future new affordable units, even where deed restrictions govern resale prices, will quickly remove these newly-constructed units out of the “affordable” range. San Jose must adjust the fiscal analysis or acknowledge they will not meet the affordable housing targets.
Please contact us if you have any questions.
Brian A. Schmidt
Legislative Advocate, Santa Clara County