The news that Apple had pledged to give $2.5 billion to address housing needs in the San Francisco-Silicon Valley region and California in general – on top of $1 billion each previously promised by Google and Facebook – led to praise from politicians as well as from civic groups and housing nonprofits. Gov. Gavin Newsom called the announcement “proof that Apple is serious about solving this issue.”

But news analysis pieces prompted by the announcement were downbeat on the likelihood that it would bring any significant relief to a housing market that is so expensive that nearly half of Bay Area residents say they want to move – much less “solve” the crisis.

Leslye Corsiglia, executive director of the San Jose-based housing advocacy group SV@Home, told the San Francisco Chronicle, “It’s really great to get all this land and money, but in order to get units under construction and moving forward, we need to get project approvals. That does require policy and advocacy work to get the votes to move forward.”

Getting projects approved can take many years

The difficulty of getting projects approved in the Bay Area and Silicon Valley was cited in virtually all coverage of Apple’s pronouncement. Some cited the fate of the Vallco mall in Cupertino, less than a mile from where Apple opened its $3.6 billion headquarters in 2017.

Developer Sand Hill Property Co. acquired the mostly vacant 58-acre mall in 2014. But despite the region’s housing shortage, Sand Hill faced bitter opposition from the Cupertino City Council and local activists to its plans to build 2,400 residential units (half considered affordable), 400,000 square feet of retail space and 1.8 million square feet of office space on the site.

The $4 billion project was rejected first by local planners and then by voters in 2016. In early 2018, after state officials listed Cupertino as one of the hundreds of cities in California that had not built enough housing, Cupertino Mayor Darcy Paul defiantly said his city would not be pressured to respond to a housing crisis that he suggested was exaggerated.

City officials finally gave approval to the project a year ago after an analysis concluded that under Senate Bill 35 – the measure by Sen. Scott Wiener, D-San Francisco, that bars cities from rejecting certain projects that are properly zoned and include affordable housing – they had no choice. But because of further foot-dragging and legal threats, demolition of the main mall building was delayed until Oct. 2018 – four years after Signal Hall bought the property.

‘Affordable’ housing costs $700,000 in Bay Area

The second reason that Apple’s pledge was downplayed has to do with the extreme cost of building even what’s considered affordable housing in the Bay Area. While the average cost for a subsidized housing unit in California is about $420,000, housing officials say the cost is about $700,000 in the Bay Area and Silicon Valley.

If all $4.5 billion pledged by Apple, Google and Facebook were spent on such housing, that would add about 6,300 homes. Housing advocates say at least 54,000 such units are needed in the region – and far more if there is going to be enough supply to actually bring down rents that average more than $2,500 for small studio units.

Apple plans to provide a $1 billion line of credit for affordable housing projects. It also will set up a $1 billion fund to help first-time home buyers with down payments.

“We know the course we are on is unsustainable, and Apple is committed to being part of the solution,” Apple CEO Tim Cook said in a statement.

Nonetheless, the view that Apple was addressing a problem its explosive growth helped create was common – especially among progressives who see tech giants as a malign force. Sen. Bernie Sanders, the Vermont independent who is running for the Democratic presidential nomination said Apple’s announcement  “is an effort to distract from the fact that it has helped create California’s housing crisis.”

But despite these obstacles, the Vallco Town Center project has obtained a crucial go-ahead from the city of Cupertino – providing perhaps the most telling example yet of the power and scope of Senate Bill 35, the measure by state Sen. Scott Wiener, D-San Francisco, that was enacted last year with the goal of spurring new housing construction.

The developer Sand Hill Property Co. plans to build 2,400 residential units, 400,000 square feet of retail space and 1.8 million square feet of office space at the mostly vacant 58-acre Vallco Mall property (pictured), which the company acquired in 2014. Half the residential units would fall in the affordable category.

SB35 requires cities that have lagged in meeting guidelines for new housing construction to approve properly zoned projects that have at least 10 percent affordable housing units, that pay union-scale wages to construction workers, and that meet other obligations. Cupertino is one of the nearly 98 percent of state cities that have not complied with housing construction obligations and are thus subject to SB35 fast-tracking, state officials said earlier this year.

On June 22, city planners notified Sand Hill that at the end of the initial 90-day review of the project provided for under SB35, it had been found “eligible for streamlined, ministerial review.” The developer must provide additional information during a second 90-day review process, but this is considered pro forma, and Sand Hill plans to begin construction in September.

Project may spur wave of makeovers of empty malls

The project may be a harbinger of more than just SB35’s usefulness in speeding up housing approvals. It could also signal a wave of makeovers of large shopping malls in California that were the centers of local commerce and social activities for decades but which have been hollowed out by the huge growth in online retailing.

The Vallco mall, which opened in 1976, long had nearly 200 tenants. Now only a few remain, including two restaurants, a bowling alley, skating rink and fitness center. Like many other declining malls in California, it is easily adaptable to housing and multi-use conversions because it has adequate parking and already-built infrastructure linking it to roads and mass transit. The mall is next to Interstate 280, on the other side of the freeway from Apple’s immense “spaceship” headquarters.

Even by Silicon Valley standards, Cupertino is among the most expensive cities for housing. Zillow’s latest data put its average home price at $2.36 million. Average apartment rents in May were $3,398, according to Rent Jungle.

Wiener told the San Francisco Chronicle he was “thrilled” to see the Cupertino project advance. It is likely to at least triple the number of housing units considered “affordable” in the 13-square-mile city of 64,000 residents.

Nevertheless, Cupertino Mayor Darcy Paul mostly stuck to his critical views of the project in a recent interview with the San Jose Mercury-News. He defended his comment in his February State of the City address that the housing crisis was exaggerated as being “technically” correct, lamented any reduction in local control of planning and said that his opposition was in sync with his constituents.

On a related front, Paul and other City Council members have expressed interest in imposing unique per-employee taxes on Apple to help cover the costs borne by the city because of the company’s massive long-term growth. Cupertino residents may be asked to vote on the tax next year.

A similar plan made national headlines in Seattle in May when the City Council voted unanimously to impose unique taxes on large employers like Amazon and Microsoft. Council members backed off last month after a backlash from both the business community and local residents.

Senate Bill 35 – the 2017 measure authored by state Sen. Scott Weiner, D-San Francisco, that was billed as the most far-reaching response to California’s housing crisis – could be about to get its first major test in Silicon Valley, the region with the state’s most severe problem with extreme housing costs.

Under the law, cities that have failed to build enough housing to honor their obligations under state law to respond to public needs must approve properly zoned housing projects that meet certain conditions, such as having 10 percent “affordable housing” units and paying union-scale construction wages. State housing officials reported in February that nearly 98 percent of cities would be affected in some ways by SB35’s requirement that housing be fast-tracked.

Weiner’s bill was hailed by many activists, housing experts and think tanks as a potential “game changer” that could address California’s emergence as the state with the nation’s highest effective poverty rate because of the high cost of shelter. But many local elected officials have reacted with anger and dismay to their apparent loss of control over construction permitting, with a Brown administration housing official taking withering fire at a meeting with city leaders in San Diego County in early March.

Now the question of how much say local authorities still have over housing in the SB35 era is about to be addressed in Cupertino.

Voters rejected 800 housing units; now far more may be built

Last Tuesday, officials with the Sand Hill Property Co. announced that they will seek to use provisions of Weiner’s law to compel Cupertino officials to allow their company to build more than 2,400 homes on a lot that now holds the Vallco Mall. Opened in 1976, the mall – shown above in a 2017 photo – was once a vibrant commercial hub, with nearly 200 tenants. Now it has fewer than a half-dozen.

Sand Hill had proposed a multi-use project at the mall site, but Cupertino voters in 2016 rejected the plan out of fears that its housing component of up to 800 units would strain local schools and roads. Now the company wants far more housing, especially less expensive options. Its plan calls for about 1,200 of the proposed residential units to be “affordable housing” – meaning they would be set aside for families making about $85,000 or less a year. A San Jose Mercury-News analysis said this single project “would increase Cupertino’s affordable housing stock fivefold.”

“It has now gotten to a point where we do not have any confidence that this process can come to a conclusion in a timely manner,” Reed Moulds, managing director of Sand Hill, told the Mercury-News. “This housing crisis needs to be resolved in a manner that actually provides near-term solutions, and sites like this have an opportunity to do a lot of good for the housing situation.”

The project also would include 2.2 million square feet of office and retail space.

But SB35 or not, local activists are gearing up to try to persuade Sand Hill to sharply downsize the project. The Better Cupertino group has fought development of the Vallco Mall site for years. Its website bristles at attempts to limit local control of planning and even challenges the widely held view that suburban malls such as Vallco are doomed, given the steady growth in online shopping.

But the tone, at least, of city officials seems to reflect an assumption that times have changed. Cupertino Councilman Barry Chang told the Mercury-News that he didn’t see how his city could reject the application, at least if it met the standards set out by SB35.

Cupertino, home to Apple’s headquarters, has a median home price of $2.3 million as of late February, according to data from the Zillow real-estate information company. Zillow said home values have soared by more than 25 percent in the last year alone. The Rent Jungle website said that as of February, the average monthly rent of an apartment in Cupertino was $3,114.