Amid uproar, San Jose approves a new 27-story downtown residential, retail building

When San Jose officials approved the construction of a 27-story residential and retail building in the city’s downtown core Tuesday night, the decision was met with an overwhelming sense of frustration from those in the audience.

For labor groups and union members, it marked another big development subsidized and approved by the city without anticipated wage protections for its construction workers.

For affordable housing advocates, it marked the first project approved under the city’s weakened Ellis Act requirements, which they say will only force more low-income residents out of the city.

In an 8-1 vote, the council approved the 27-story residential and retail building submitted by developer KT Urban at 600 S. First St. Councilmember Maya Esparza dissented and Councilmembers Dev Davis and Lan Diep were absent.

The project — dubbed Garden Gate Tower — will include 4,840 square feet of retail space on the ground floor, 290 condominiums, 232 parking spaces and open space on the building’s rooftop. The condominiums will be a mix of studios, one-bedroom and two-bedroom units and include 28 affordable units, according to staff. The development will replace an office building and an apartment building with four rent-controlled units currently on the property.

“In the depths of a housing crisis, we have an opportunity to increase the number of rent-controlled apartments by a factor of seven while adding nearly 300 new apartments to our housing inventory,” Mayor Sam Liccardo said. “This is an opportunity we should not take lightly.”

The housing development was the first passed by the council since the city weakened its Ellis Act ordinance earlier this month.

Under the city’s old policy, developers that tore down a rent-controlled apartment and rebuilt had to bring back under rent control half the new units or the number of old rent-controlled units taken off the market, whichever was greater. But in a divided 6-5 vote last month, the city council decided to cap the rent control requirement to seven times the number of withdrawn units.

In the case of Garden Gate Tower, KT Urban would have been required to provide 145 rent-controlled units. Instead, the developer has promised to provide the newly-required 28 units at rent control.

Jeffery Buchanan, director of public policy for Working Partnerships USA, said the “rollback of the Ellis Act” means projects like this will only serve the wealthiest in San Jose.

“I think when we look at this particular project and likely projects that follow after it, we’re going to see the result of policy-making where we set ourselves back in producing affordable housing, protecting our tenants and preserving or affordable housing stock,” Buchanan said during the meeting.

But the biggest opposition of the night did not come for affordable housing advocates. It came from construction workers.

A city-commissioned study earlier this year found that typical high-rise developments in downtown San Jose are not financially feasible and would generate a much smaller profit margin for developers than most strive for.

So in September, the city voted to extend a subsidy that offers developers a 50 percent cut of construction fees for market-rate downtown housing towers and proponents argued was critical for downtown high rise projects like the Garden Gate tower to get built.

The major sticking point for construction workers is that a new prevailing wage ordinance passed by the council earlier this summer doesn’t currently apply to builders of downtown high rises, where construction of the project likely wouldn’t happen without a subsidy.

Union members and advocates who spoke Tuesday night voiced concern that the council was moving forward with another downtown high rise because putting an ordinance in place that protects workesr with not only a prevailing wage but also local hiring guidelines, along with guidelines for apprentice programs and hiring disadvantaged workers.

“We are not asking the city to build a rocket and fly to Mars, we are not asking the city to solve global warming or answer which came first — the chicken or the egg,” Tim Saxton, a member of the IBEW Local 332 Chapter said in front of the council. “We are asking that construction workers not be exploited by shady developers and contractors and for the city to do what it promised it would do and enact a wage theft protection ordinance.”

The project site currently includes some historically recognized landmarks, including a Victorian-era four-unit apartment building, the old masonry Garden City Construction property, and an art deco sign that says City Center Motel.

The city is working with Habitat for Humanity on a possible sale and relocation of the apartment building and plans to work with the developer to find a home for the sign. The developer expects to incorporate the old masonry Garden City Construction facade into the ground floor of the building.