San Jose Reallocating Voter-Approved Affordable Housing Funds To Homeless Services

An early release of the San Jose City Manager’s budget proposal drew controversy over the weekend. More than half of the $70 million Measure E funds set to go toward affordable housing in the coming year are being reallocated to homeless services instead under the guidance Mayor Matt Mahan.

The fight over the additional affordable housing funds dates back to 2019, when the San Jose City Council first put Measure E on the ballot. With the city having one of the worst affordable housing markets in the country, the Council proposed a bill to raise property taxes by .75% on properties valued between $2 million and $5 million, 1% for properties valued between $5 million and $10 million, and 1.5% for property valued over $10 million. In the March 2020 election voters in San Jose narrowly passed Measure E in a narrow 53.4%-46.6% vote.

With the Measure bringing in around $70 million a year,  former Mayor Sam Liccardo generally kept most of the funds allocated towards affordable housing, despite the funds being a listed as a general tax. In his last budget, Measure E still had 75% of it’s funds going towards affordable housing projects.

However, since the beginning of the decade, homelessness also quickly shot up, overwhelming some resources and putting a strain on the city. In particular, the rate of homeless 18-24-year-olds in San Jose surpassed even New York and Los Angeles in that demographic, shocking many. As a result, funding for homeless services, as well as crime, ate more of the city budget, including the entire projected $30 million surplus this year. With more funding being needed, newly minted Mayor Mahan looked toward different avenues of fund reallocation, including eyeing Measure E.

In March, Mahan hinted at a major funding shift when he proposed that Measure E funding should pay for a new mental health facility. While he stressed that it would go toward affordable housing, he ultimately had to put down that proposal after citizens protested the decision, saying that it was just a backdoor way to fund what was clearly a project centered on homelessness. Despite being called out on it, the new proposal for May, to be formally announced later this week, showed that $38 million of the $70 million in Measure E funds would be redirected to homeless initiatives, including $20 million allocated for interim housing for homeless people, instead of the promised affordable housing for residents.

Many in the city blasted the plan on Monday, noting in particular that Measure E is one of the few funding sources for affordable housing in the city.

“We definitely need emergency interim housing, but we also need to make sure that we’re dedicating dollars for the development of affordable housing,” said Councilman Peter Ortiz in a statement. “Measure E is one of our only sources for that. The Council is going to be split on the Measure E spending proposal when it’s released.”

Despite the voters sending a clear message in 2020 that they waned the money to go towards affordable housing only, many in the Council confirmed on Monday that they could be more flexible on the funds going to homeless initiatives in the city instead.

Major reallocation of Measure E funds proposed by Mayor

“I would say let’s evaluate if the current percentages are giving us the results that we want. If it’s not giving us results, then we need to say why not?,” added Vice Mayor Rosemary Kamei “What I do know is that cost of things are going up—production and new materials—so we have to evaluate.”

Councilman Sergio Jimenez also said, “I am open to exploring any possibility that helps alleviate the crisis that we have on the streets, so I am not married to the current formula.”

City budget experts noted on Monday that while the city could direct Measure E funding elsewhere, redirecting money from one crisis to another would only end up making both worse, and could hurt many in the next election.

“What San Jose is trying to do never ends up well for those doing the reallocating,” explained Elena Reyes, a city and county budget financial advisor, to the Globe on Monday. “Now, this sort of thing happens all the time. You know, you have, say, a stadium tax put in place, then the new stadium is built, so you have extra tax money from it as a result and then reallocate it somewhere else. That’s one of dozens of ways.”

“But reallocating funds that voters themselves passed for a specific purpose is never a good thing. Yeah, the funds can technically go elsewhere, but by doing that, you go directly against the voters wishes. I mean, look at that outrage a few months ago when they initially tried to pull that.”

“Now, some of it had been allocated in the past, but the city took the time to explain it beforehand and, most crucially, never topped a large percentage of it going elsewhere in the budget. So voters saw it as being a temporary spackle in a few areas for a small amount. Not a big deal. But now, it is just blatant, and people are not happy.”

“Voters are going to remember this, and you get bet that their opponents will too, especially if the affordable housing crisis in the city gets worse because of it, which, with less money going to projects, it likely will. You also have to remember that funding for homeless services is not a popular button for taxpayers, especially when the money is going to interim housing rather than ways that can more definitely solve it in the long-term. Voters who are struggling to pay high rents right now who could become homeless soon if they can’t get affordable housing may also have some things to say.”

“But, at the end of this all, it just shows how bad in shape San Jose is despite having a budget surplus. They have huge issues, and the fact that they need to fight to take money going to solving one crisis to fund one in even worse shape at the risk of worsening that first one is telling at how dire it all is.”

Next year’s San Jose budget proposal is expected to be officially released later this week, with a Council vote on the budget due to come up next month.