Agrihood Changes Approved Despite Planning Commission, City Employee Opposition

Despite recommendations from city employees and the planning commission, the Santa Clara City Council approved changes to the Agrihood project, reducing the number of proposed apartments from 160 to 44 for-sale townhouses. The decision, made at the Nov. 10 meeting, has sparked debate among residents and developers alike.

Understanding the Agrihood Project and its History

The Agrihood concept, a blend of residential and agricultural space, initially promised a unique and sustainable living experience for Santa Clara. The original 2019 proposal envisioned a multi-family complex at 1816 Worthington Circle, aiming to integrate urban farming and community gardens within a dense residential setting. The project was intended to address the city’s need for increased housing density while fostering a sense of community and promoting environmental sustainability. However, the project has faced numerous hurdles since its inception, including financing challenges and shifting market dynamics.

What Happened

The council considered a proposal to change the project's entitlement from 160 apartments to 44 for-sale townhouses. Both the city employees and the planning commission recommended denying the proposal, citing concerns about market viability and density. The planning commission’s denial stemmed from a belief that the reduction in housing units did not adequately address the city’s housing needs and potentially contradicted broader planning goals. City employees echoed these concerns, emphasizing the importance of maximizing density to meet state-mandated housing targets.

However, the city attorney and manager argued that the decision was discretionary, highlighting changes in market conditions that make high-rise multi-family developments less viable. This discretionary power allows the council to consider factors beyond strict adherence to existing regulations, such as economic realities and developer feasibility.

Community Reaction

Public commenters were largely supportive of the project, with many emphasizing the importance of homeownership. Linda Leca and Hieu Nguyen, an Agrihood resident, both advocated for the project’s change, stating that it would help alleviate traffic concerns and allow people to establish roots in Santa Clara. The desire for homeownership resonates deeply within the community, particularly among families seeking stability and a long-term connection to the city.

However, not everyone was in favor. Kirk Vartan, who has been advocating for the project for over 20 years, expressed concern that the city was setting a precedent by approving a smaller project. He called for the council to dismiss the proposal with prejudice to prevent developers from resubmitting similar projects in the future.

Kirk Vartan's Concerns

Vartan emphasized, 'Markets change. A rezone is forever. If this building can’t be built today, the answer is time or a builder who will or a better project, not a smaller promise.' He argued that approving the project would send a message to developers that agreements can be renegotiated, potentially undermining future projects. Vartan's perspective highlights a broader concern about the city's commitment to previously approved development plans and the potential for eroding trust between the city and developers.

The Economic Realities Behind the Shift

The shift from apartments to townhouses reflects a broader trend in the housing market, particularly in Silicon Valley. High-rise apartment buildings require significant capital investment and rely on consistent rental demand. Recent economic uncertainties and rising interest rates have made these projects less attractive to investors. Townhouses, on the other hand, often command higher sale prices and can provide a more stable return on investment for developers.

“There are certain market conditions that have changed that make high-rise, multi-family less viable at this time,” City Manager Jovan Grogan stated. He further explained that the city has a buffer for its state-mandated housing number, known as regional housing needs allocation (RHNA), which allows for flexibility in project design. The RHNA mandates that cities provide housing for a range of income levels, and Santa Clara’s buffer provides some leeway in how it meets those requirements.

What's Next

The amended project will return to the city manager’s office for further review and will be voted on without discussion as a consent calendar item at the next regularly scheduled meeting on Nov. 17. The consent calendar is a mechanism for streamlining routine approvals, but it also raises concerns about transparency and public input, as items on the calendar are typically approved without extensive debate.

Mayor Lisa Gillmor and Council Member Kelly Cox were absent from the vote. Their absence raises questions about the council’s full participation in critical decisions impacting the community.

Council Member Kevin Park was the lone abstention, expressing difficulty in moving forward with a new project when the current one is not viable. His abstention underscored the complexity of balancing competing priorities – the need for housing, the concerns of residents, and the realities of the development market.

Developer's Perspective

Chris Neale, president of Core Companies, defended the changes, stating that the revised project offered a realistic chance of construction. He highlighted the financial implications, noting that the original proposal would have resulted in a $30 million loss. Vince Cantore, senior vice president at Core Companies, echoed these sentiments, urging the council to prioritize practical solutions over perfection.

Neale stated, 'We are not asking you to approve less housing, we are asking to approve housing that actually has a realistic chance of being built.' Cantore added, 'It is either moving forward with available townhomes or an empty lot for the foreseeable future.'

Financial Considerations and the $120 Million vs. $90 Million Discrepancy

The figures cited by Core Companies – a $120 million project cost versus a $90 million value – underscore the financial challenges facing the original proposal. This disparity suggests that the projected revenue from the apartment complex would not have been sufficient to cover the development costs, making the project financially unsustainable. The townhouses, with their potential for higher sale prices, are expected to offer a more favorable return on investment.

Next Steps and Community Impact

The next step in the process is for the revised Agrihood project to be reviewed by the city manager's office. It will then return to the city council as a consent calendar item, allowing for a streamlined approval process amid other routine items. The council’s decision has set a precedent for future development projects and has raised questions about local governance and community input.

Despite the approval, some residents remain concerned about the long-term impact on the community. Council Member Kevin Park’s abstention highlights the difficulty in moving forward with new projects when existing ones are not viable. The next regularly scheduled meeting is on November 17, where further developments will be discussed. Residents interested in participating can attend in person or via Zoom, or submit comments electronically.