technology

Google’s Growing Empire May Transform Biggest City in Bay Area

  • Alphabet in talks to buy 40 acres of land for San Jose campus
  • Opponents fear affordability hit in already-pricey area

Apple, Google and Amazon Seem Unstoppable. Now What?

Far more people sleep in San Jose than work there, a challenge for the California city’s tax coffers. Now officials are hoping a massive property sale to Google will change that.

The San Jose Diridon train station

Photographer: David Paul Morris/Bloomberg

Google parent Alphabet Inc., already Silicon Valley’s biggest property owner, is negotiating to buy 40 acres of city-owned land for a new campus near San Jose’s SAP Center and Diridon train station. It would bring as many as 20,000 jobs over the next 10 to 12 years. Even more important, it would include thousands of residential units -- with 15 to 20 percent deemed “affordable” -- to a region starved for housing.

It’s a deal that may transform the San Francisco Bay area’s largest city, which has been a cheaper alternative to the Silicon Valley boom towns such as Palo Alto or Google’s nearby home of Mountain View. The prospect of a Google influx into San Jose is stirring backlash by residents who fear the throng of new workers will push housing even more out of reach, while proponents say it will attract even more development and bring the city a new source of growth as a thriving tech hub.

San Jose Mayor Sam Liccardo

Photographer: Rob Urban/Bloomberg

“We’ve often been the bridesmaid and not the bride for large tech companies,” San Jose Mayor Sam Liccardo said in an interview. “We’re the only major city in the United States that has a smaller daytime population than nighttime population.”

The Bay Area led California and the nation with an inflation-adjusted gain in gross domestic product of 5.2 percent in 2016, more than three times faster than the national growth rate. Silicon Valley produced almost 300,000 new jobs in the past seven years, while housing inventory remains low, and is growing at less than 3 percent per year, according to an index produced by the Institute for Regional Studies.

Most Expensive

The boom has sent the median price for an existing single-family home in the San Jose metropolitan area, which includes parts of Silicon Valley, to $1.27 million -- making it the most expensive region in the country, according to the National Association of Realtors. Homelessness is soaring. Non-tech workers, including contractors in such jobs as security guards, food-service employees or gardeners at Google, Facebook Inc., Apple Inc. and other big companies, often commute for two hours or more each way from California’s Central Valley, where housing is more affordable, or live in recreational vehicles parked on city streets. 

See also: America’s Priciest Housing Market Shows No Signs of Cooling

The Diridon Station is key to the Google plan, as it will be expanded and add regional and local lines, including the BART to San Francisco, in an attempt to help solve another of the region’s persistent and worsening problems: traffic.

Some in San Jose oppose the Google deal, or argue it should include much more housing, because of concerns that bringing in that many high-paying jobs will just drive real estate prices higher.

Civic Meetings

On Wednesday night, San Jose hosted the first of nine civic meetings on the proposal. Thirty-eight representatives from local groups were each asked to name their hopes and fears for the project, what one resident there called “Googleville.” They named rising housing prices and displacement, weighing those against a desperate need for development. “For a city of one million, our skyline is pitiful,” said Reginald Swilley of the Minority Business Consortium.

Others complained that public participation and information about Google’s plans was long overdue.

Empty lot off Park Avenue in San Jose.

Photographer: David Paul Morris/Bloomberg

San Jose’s City Council last month approved pricing for another set of government-owned properties that would also be part of the project. The nine parcels would be sold for $67 million. The price on the 40 acres near Diridon Station hasn’t yet been determined and the entire process, including the public meetings, would take at least a year to conclude, while the project wouldn’t be completed for a decade or more.

Google said it sees housing as an essential component of development in the region, and both the company and San Jose officials say it isn’t getting any economic or tax incentives from the city to locate there. The public’s input will be important in helping to shape the development, the company said.

“As this multiyear engagement process begins, we look forward to hearing feedback on our proposed development and working closely with the community and city of San Jose to create a shared vision for a vibrant, mixed-use, transit-oriented destination,” Javier Gonzalez, Google’s community affairs manager for the South Bay, said in a statement.

Homeless Problem

Housing costs in San Jose are still lower than many other cities in Silicon Valley. In Palo Alto, where Stanford University is located, the median home price soared 63 percent in the last four years to above $3 million, more than twice San Jose’s median.

St. James Park

Photographer: Rob Urban/Bloomberg

A few blocks from San Jose’s modern city hall, designed by architect Richard Meier, about 30 homeless people lounged in St. James Park last week, hanging their clothes on benches and fountains to dry and sleeping in the daytime, because they say they are often rousted at night.

Elizabeth Valdivia, 58, who grew up in Mountain View, works two or three part-time jobs, including one as a security guard at a high-rise office building in San Jose. She is responsible for the care of an autistic brother, and sleeps most nights in her car, a 1997 Mercury Tracer.

Elizabeth Valdivia

Photographer: Rob Urban/Bloomberg

Encounters with the authorities are often surreal, said Valdivia, who studied English at college.

“Every time they pull me over, the first thing that they ask me is, are you homeless? And the first thing I tell them is no and they let me move on,” Valdivia said. “They are told they can’t be heartless, but they also don’t want people camping in the city, so they try to keep us moving. If you say you are homeless, they give you a number to call for services.”

Tax Limitations

San Jose’s resources are limited because the city has built housing while failing to attract the biggest tech employers, which would pay taxes and require fewer services than residents. California’s Proposition 13 limits local governments’ ability to raise property taxes on residences.

"Houses do not accrue enough revenue to the cities compared to the expenditures the cities make on serving these houses, such as expenditures on libraries, parks, social services and cultural amenities that residents need,” said Shishir Mathur, a professor in the Urban & Regional Planning Department at San Jose State University. “If cities attract offices and commercial, they still get their taxes but the expenditures are less."

That’s why San Jose sees Google’s proposal as a means to help solve its housing crisis and other issues.

“What’s been driving up housing costs in San Jose is tech companies who are building on the other side of the city limits, so we get the traffic, we get the housing costs, and we get none of the revenue to be able to put cops out in the neighborhoods,” said Liccardo. He admits there are legitimate concerns about housing costs and income disparity, but those issues need to be solved by the whole region, not just his city. Turning down a big company like Google won’t solve homelessness and will just leave San Jose poorer, he said.

The city plans to build as many as 25,000 housing units in the next five years, with 10,000 of those rent-restricted, Liccardo said.

Two Google staff were in attendance at the Wednesday meeting in San Jose. But some residents voiced frustration about being in the dark on the full extent of real estate developments in the city. “There’s a lot of information,” John Pastier, a 12-year San Jose resident, said during the public comments. “We haven’t been apprised of any of it.”

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