The other day, I shared my initial reaction to California’s proposed Opportunity Zone 2.0 map. San Jose has a significant presence: 15 of Santa Clara County’s 17 proposed tracts are located in the city.
After reviewing those tracts more closely, I believe the important question is not how many San Jose tracts were proposed. It is whether the right ones were proposed.
Eligibility is only the first step
Federal law determines which census tracts may be considered for Opportunity Zone designation.
In a metropolitan area such as San Jose, a census tract generally qualifies as an eligible low-income community if it meets either of two tests:
- Its median family income does not exceed 70% of the metropolitan area median family income; or
- Its poverty rate is at least 20%, and its median family income does not exceed 125% of the metropolitan area median family income.
Meeting one of these tests makes a tract eligible for consideration. It does not automatically mean the tract will or should be selected.
The proposed San Jose tracts may satisfy the federal requirements. My concern is not whether they are eligible. It is whether they are the best choices from the larger group of local tracts that also qualify.
Several proposed tracts appear to offer limited opportunities for ground-up multifamily development. One proposed tract includes both San José State University and San Jose City Hall. Several proposed tracts in the Alum Rock area consist largely of established single-family neighborhoods.
Based on my review, existing land uses, zoning or institutional ownership within these areas appear to limit realistic opportunities to build multifamily housing.
If other eligible San Jose tracts meet the same federal requirements and offer greater development potential, why were these particular tracts proposed?
San Jose should make every designation count
San Jose faces low housing supply and high demand. An Opportunity Zone designation will not change zoning, create available land or guarantee that construction will occur. It can, however, help attract long-term private investment to places where development is possible.
Based on my review, other federally eligible San Jose tracts appear to offer a clearer path to building housing. Some contain underutilized properties, existing development capacity, access to transit and locations where additional housing could help address the imbalance between supply and demand.
When choosing among eligible tracts, development feasibility should matter. If one tract provides realistic opportunities to build needed housing and another does not, that difference should influence the selection.
Housing does not have to be the only consideration. Opportunity Zones can also support operating businesses, infrastructure and other forms of economic development. But in a city with low housing supply and high demand, the ability to accommodate new housing should carry significant weight.
The proposed San Jose map deserves another look
California’s public-comment process allows participants to support or oppose a proposed tract and recommend replacing it with another eligible tract in the same county.
I am submitting comments on several proposed San Jose tracts based on the limited opportunities they appear to provide for ground-up multifamily development. I am also encouraging the state to consider other eligible local tracts that appear to offer a more realistic path to producing housing.
The proposed tracts may meet the federal rules. The question is whether they are the eligible tracts that can best help address San Jose’s needs.
With housing supply low and demand high, San Jose should make every designation count.
